By David S. Hilzenrath
Monday, May 24, 2010; A17

The rollout of the federal health-care overhaul continued Friday with the Obama administration spelling out how small biotech companies can apply for grants and tax credits of up to $5 million each.

The funds will be awarded to companies that show promise in developing cost-saving therapies, generating or sustaining high-paying jobs and increasing U.S. competitiveness.

In a news briefing, an administration official said she did not know how much it will cost to administer the $1 billion program, which calls for the government to review each application's scientific merits.

The announcement was the latest in a series by the administration explaining how the new law is being implemented and showcasing provisions that deliver tangible benefits to various constituencies.

Earlier, the administration unveiled rules governing tax credits for small businesses that insure their workers, financial aid for companies that cover early retirees and opportunities for young adults to stay on their parents' health plans.

Although the administration has maintained a drumbeat of news about potentially popular provisions, the core elements of the legislation will not take effect until 2014. Then, insurers will be prohibited from turning away people with preexisting conditions, everyone will be required to obtain coverage or pay a penalty, and new regulated marketplaces for insurance will open for business, testing the affordability and overall success of the health-care changes.

The law, signed by President Obama on March 23, gave the government 60 days to establish the tax credits discussed Friday for so-called therapeutic discovery projects. Companies with 250 or fewer employees are eligible. A total of $1 billion in credits and grants can be awarded for investments done in 2009 and 2010.

Other grounds for winning credits include showing potential to treat unmet needs or making progress toward curing cancer.

The tax credits cover up to 50 percent of research costs. Companies without profits and tax liabilities can instead obtain grants. National Institutes of Health Director Francis S. Collins said the program will enable biotech firms to revive projects that were shelved for lack of capital.

The potential value of the tax credits to biotech firms is limited because the companies cannot use the credits to double up on other tax benefits. The $5 million cap on awards to individual firms was not in the legislation.

"We expect the program to be heavily oversubscribed," said Ellen Dadisman, a spokeswoman for the Biotechnology Industry Organization, or Bio, which pressed for the provision. "I think that's an indication of its popularity and its necessity."