By Billy Tauzin President and CEO, Pharmaceutical Research and Manufacturers of America (PhRMA)
What is the 2010 outlook for America’s pharmaceutical research and biotechnology companies? Well, there’s no easy answer. What we can say is that 2010 looks to be a critical year that could help determine the future course for the industry for years to come. America’s biopharmaceutical research companies have a long history of developing medicines to help patients live longer, healthier, more productive lives. As companies in the business of helping to improve health, they have also been long committed to efforts to improve patient access to needed care, as well as maintaining and even enhancing the economic and regulatory environment that inspires and rewards innovation and risky investment in new research and development.
Looking ahead to 2010 and beyond, there are significant challenges that our industry must meet, as well as a new operating environment that we must adapt to. First, the healthcare reform effort — if Congress completes its work, and if President Obama signs the legislation into law — will have a profound short- and long-term effect on the healthcare sector and will help improve access for millions of patients. But passage of reform is only the beginning. Implementing reform will take time, and every healthcare stakeholder will begin adjusting to the changes to federal healthcare programs like Medicare and Medicaid as well as changes affecting how healthcare is paid for. In short, we will all be learning how to function in a new and evolving environment.
Second, any implementation of reform will be taking place amid the backdrop of the current weakened economy. The hope is, of course, that the evidence of a recovery will continue to grow, but nothing is certain. America’s pharmaceutical research and biotechnology companies are not immune to the difficult economic conditions currently confronting all major industries, and 2009 was a particularly challenging year. Companies have had to make many difficult decisions regarding the size of their workforces, their business focus, their operations, and the future of critical research and development projects.
In short, there is a lot riding on what transpires in 2010. The ability of the biopharmaceutical research sector to meet these challenges may help determine the future success of the industry in this country.
THE NEED FOR PREVENTATIVE HEALTHCARE
Pharmaceutical research and biotechnology companies have constructively contributed to the healthcare reform debate. They have actively partnered with other critical healthcare stakeholders and have worked with lawmakers to support reform to help achieve two critical goals.
From the outset of the healthcare reform debate, the Pharmaceutical Research and Manufacturers of America (PhRMA) committed itself to the process of helping find solutions to the healthcare problems we face in this country. We did so because it is increasingly clear that our healthcare system no longer works well for a growing number of patients.
The unfortunate reality is that today in the United States we spend 75 cents of every healthcare dollar to treat patients suffering from oftentimes manageable or preventable chronic conditions such as diabetes, heart disease, and conditions related to obesity. In addition, a significant percentage of the cost of treatment is incurred because patient care is delayed or otherwise poorly managed. One result is that we as a country end up spending a great deal of money, time, and resources on providing patients with pretty good sick care rather than on good healthcare.
In other words, our system is designed to reactively pay for expensive surgeries, hospitalizations, rehabilitative services, and long recovery periods rather than focusing first on prevention and good chronic disease management.
We simply must do a better job of helping patients to prevent disease where we can. For example, we must do more to promote healthier eating and more exercise. We must find ways to prevent the onset of obesity, which plays a huge role as a precursor to chronic diseases such as diabetes and heart disease. In addition, we must do a better job of identifying treatable chronic conditions early enough so that we can more effectively intervene and provide access to the medicines and treatments patients need to help them live longer, healthier lives and limit healthcare costs.
Our industry is working hard to address these challenges, joining a diverse group of stakeholders as part of the Partnership to Fight Chronic Disease (PFCD). The collective goal of PFCD is to help community leaders learn about existing programs that are making a difference in improving the health of Americans in communities across the country. In addition, PhRMA member companies have worked through their corporate patient assistance programs and the national Partnership for Prescription Assistance (www.pparx.org) to connect patients unable to afford their medicines with programs that provide medicines for free or nearly free.
These partnerships and joint efforts have been especially important in these difficult economic times. Currently, more than 46 million Americans have no health insurance, and millions more find themselves underinsured. They are understandably concerned about their ability to access basic healthcare and their ability to make high copayments for services and medicines. As a result, far too many choose to forgo needed care until a crisis or a deteriorating health condition forces them to seek help. Clearly, this is not the optimal method for improving health or controlling healthcare costs.
Additionally, it seems clear that our national efforts to rebuild our economy over both the short and long term will suffer if we do not do a better job of getting healthcare costs under control. Today, healthcare spending dominates an ever-growing share of our economy. In 1970, health spending was 7.2% of our Gross Domestic Product (GDP). By 1990, spending rose to 12.3% of GDP, and in 2008, overall healthcare spending reached $2.3 trillion, or 16.2% of GDP. Looking ahead, healthcare spending is projected to nearly double to $4.3 trillion by 2016 — 19% of GDP.
A PATH TO INNOVATION
Clearly, reforming our healthcare system and building one that is both more affordable for patients and that promotes health — as opposed to reflexively treating illness after it occurs — is critical to both improving patient care and to long-term economic health.
This is why the healthcare reform debate currently under way is so important. If we do it in a smart way, healthcare reform will benefit both patients and the economy. However, while PhRMA was an early supporter of healthcare reform efforts, we have been equally clear that reform — and the effort to control costs — should not come at the expense of innovation and medical progress.
If we emerge from the healthcare reform debate in 2010 with reforms that stifle investment and discourage innovation, then reform will ultimately fail patients. Today, and for much of the last 40 years, America has led the globe in researching and developing new medicines. The fact that so many new medicines have been developed in the United States means that American patients often are the first to benefit from new treatments.
Developing new therapies continues to be a time-consuming, risky, and expensive investment. On average it takes anywhere from 10 to 15 years and costs an average of $1.3 billion to bring a new medication to patients. While these costs are enormous, the progress made — especially if you are a patient whose life has been extended or improved as a result of medicines — suggests that it is money and efforts well spent.
What has a strong, innovative pharmaceutical research and biotechnology sector meant for American patients? Here are just a few examples:
According to the CDC, life expectancy in the United States reached an all-time high of 77.9 years in 2007. Indeed, death rates dropped significantly for 8 of the 15 leading causes of death in the United States, including cancer, heart disease, stroke, hypertension, accidents, diabetes, homicides, and pneumonia, from 2006 to 2007. In addition, the overall age-adjusted death rate dropped to a new low of 760 deaths per 100,000 people — half of what it was 60 years ago.
While there are many reasons for declining death rates, new medicines certainly have played an important role. Since 1980, life expectancy rates for cancer patients have increased about three years, and 83% of those gains are attributable to new treatments, including medicines. Cardiovascular death rates fell a dramatic 26% between 1999 and 2005 according to the American Heart Association. And, according to the CDC, HIV/AIDS deaths have dropped by more than 70% since the approval of the highly active antiretroviral treatments.
This is real progress. Medicines have improved the lives of millions of American patients and many millions more around the world. These and numerous other medical advances were driven in large part by U.S.-based medical research and innovation. According to the Tufts Center for the Study of Drug Development, a staggering 75% of all new drugs approved worldwide from 2005 to 2007 were first introduced in the United States.
We also must keep in mind that medical research and biotechnology can play a significant role as an engine for economic development and expansion. The Congressional Budget Office has identified our sector as “one of the most research-intensive industries” in the nation. In 2008, American biopharmaceutical research companies invested a record $65.2 billion dollars on new R&D. Indeed, every day scientists at America’s pharmaceutical research and biotechnology companies go to work seeking new and innovative solutions to the greatest medical challenges we confront.
Further, a study conducted by Archstone Consulting and Dr. Lawton R. Burns of the Wharton Center for Health Management and Economics at the Wharton School of Business helps demonstrate the critical role that innovative pharmaceutical research and biotechnology companies play as engines of a strong, national economy. Specifically, every job created by a biopharmaceutical company supports an additional 3.7 jobs throughout the economy. Nationwide, these companies directly or indirectly support more than 3 million jobs as of 2006, which represent the latest data available. The direct contribution made by the biopharmaceutical sector to GDP in 2006 was over $88.5 billion — more than triple the average of all other U.S. sectors. In fact, on a per-employee basis, the biopharmaceutical sector’s direct contribution to GDP was 71% more than the average for all other U.S. sectors.
Looking forward to 2010, PhRMA believes that we’re on the cusp of realizing an opportunity to implement healthcare reform that will strike that critical balance between improving patient access to healthcare and medicines while sustaining an environment for continued research and medical innovation. As importantly, the pipeline of new medicines already in the late stages of development or the final approval process is a promise to patients that their hope for new treatments or even cures for their conditions can be fulfilled.
Many new and promising treatments are on the near horizon. For example, currently in late stages of research or in the final approval process are more than 860 new medicines to help fight cancers, 145 medicines to fight heart disease and stroke, more than 183 therapies for treating and managing diabetes, and nearly 110 to help those suffering from HIV/AIDS.
These new medicines in development offer great hope to patients fighting some of the major chronic diseases we face today — diseases that help to fuel growing healthcare costs.
For our part, PhRMA is committed in 2010 to continuing to play a constructive and positive role in the effort to finalize and implement healthcare reform. Our goal remains, as it has been from the start of the debate, to advocate for reforms that put meeting patient needs at the top of the agenda, that improve patient access to medicines and other healthcare services, and that maintain the United States’ position as the global leader in the discovery and development of new cutting-edge medicines.
If we are successful, we will achieve a historic accomplishment: smart and fair health reform that benefits patients, our economy, and our nation as a whole. But perhaps just as importantly, our success will mean that the United States will remain the global-leading home of a strong, innovative, and growing biopharmaceutical research sector. That is a result that patients both here in the United States and around the world can, literally, live with.