On November 14, 2016, Carolyn Johnson posted “Trump just dropped a big hint to the pharmaceutical industry” in a wonkblog for The Washington Post. I shared the article on LinkedIn (receiving over 415 views) noting, “It is very early days, so let’s not get too excited or too concerned. But let’s be aware and strive to be part of the solution for helping patients.” This seemed like a natural fit to share considering a large percentage of my network have close ties to biopharma, and the industry seems to have always been pretty closely linked to politics. This fact was never more apparent than at the industry conference I recently attended.
Partnering For Cures (November 13 – 15) wrapped up its eighth successful conference with educational content that delved into a variety of healthcare topics, including policy and politics. High-level players from industry (e.g., Pfizer’s chief medical officer, Dr. Freda Lewis-Hall) as well as government (i.e., NIH Director Francis Collins, FDA Commissioner Dr. Robert Califf) transparently shared their points of view with the audience. And though it remains to be seen how the election outcome will impact certain economic sectors, for those holding government appointed posts (e.g., Collins and Califf), the aftermath is pretty clear. It seems both Collins and Califf (along with many others) fully expect to soon be looking for employment opportunities beyond that of public service. But neither is acting like the world is coming to an end, unlike some of the post-election protests and social media posts we have recently witnessed.
So now that we have had time to take a deep breath and relax, rather than pontificating on what we may or may not see over the next four years, let’s instead focus on what we hope to see and what might be best for our industry. For this I invited my colleague Ed Miseta to share his thoughts, not as the chief editor of Clinical Leader, but instead tapping into his experience as a former instructor of economics at the Pennsylvania State University. I asked him, “What three things do you hope will happen that could be good for the biopharmaceutical industry?”
Free markets provide incentives for companies to produce the goods most needed by society, which I believe is good for the economy as a whole. Anything we can do to push the economy back in that direction would be a win. I hope we can start with the following:
1. Reverse Our Declining Level Of Economic Freedom.
While the U.S. has always been called the land of the free and home of the brave, the free part has been getting dimmer, most notably over the last 15 years. As recently as 2000, the U.S. was ranked number one among OECD (Organization of Economic Cooperation and Development) nations in the Economic Freedom of the World index. It was third overall, behind Hong Kong and Singapore, a position held since 1980, when the index was first produced. Unfortunately, the U.S. has been falling ever since, hitting number 16 in the 2016 report. That places the U.S. behind developed western countries such as Canada, Australia, and Ireland. Shockingly, that also places it behind the United Arab Emirates, Qatar, Chile, Jordan, and Lithuania. The index measures several aspects of economic freedom, including trade, regulation, sound money, size of government, and more. But the fall of the U.S. was most precipitous in two areas: legal system and property rights, and freedom to trade internationally. Since drug development is a global endeavor requiring the legal system (most notably patents and IP protection), we can scarcely afford for this drop to continue.
2. Much Needed Corporate Tax Reform
With a federal rate of 35 percent, 39.1 percent when combined with state taxes, the U. S. has one of the highest corporate tax rates in the world. In 2014 it was the highest of the 34 countries in the OECD, a dubious position it has led or tied every year since 2005. That is not good for pharma or any other industry. The tax rate entices firms to build overseas, move production facilities overseas, or consider inversions to place headquarters in other countries. Unfortunately, they also cause companies to leave profits overseas. In 2012, GE and Microsoft alone had $100 billion sitting in offshore accounts. All U.S. companies together had three-quarters of their cash ($2.1 trillion) sitting overseas. Innovation is good, but even better when done domestically. For that to continue to happen, corporate tax reform is vital.
3. An End To Burdensome Government Regulation
While some government regulation is necessary to protect citizens and the environment, too much regulation will stifle job growth and slow innovation. The argument could be made that the U.S. is drowning in regulation. According to an article in the November 1, 2016 issue of Fortune magazine, in 2000 the U.S. government had 176,000 full-time employees engaged in regulatory activities. Today that number is 279,000. Burdensome regulation is now the number two threat to business (according to CFOs), behind only the threat of recession. It is also the top cost pressure facing companies. In the first seven years of the Obama administration, 560 major regulations, having an economic impact of $100 million or more, were published. Under George Bush, the number was an equally onerous 494. To understand what that regulation is costing businesses, consider this: The Cleveland Clinic now has 90 full-time employees overseeing regulatory survey readiness. The innovation stifling effect is of greater concern than outright costs. Nonfederally-funded R&D by firms with 10,000 or more employees has been falling, going from 73 percent in 1985 to 54 percent in 1998 to just 51 percent in 2006. Startups per 100,000 Americans are also plunging, falling from 257 in 1977 to just 129 today. With R&D and startups both playing a vital role in innovation, these are trends that must be reversed.
Will a Trump administration do anything to reverse these trends? It is too early to say. But for now we can set aside the panic and do what I do after every election: Hope for the best, deal with the results, and look forward to the next election. This has been a tough election cycle. Let’s band together and push for those changes that will best help biopharma bring new medicines to patients in need.