PhRMA President and CEO Billy Tauzin
State of the Industry Address

Pharmaceutical Research and Manufacturers of America
2008 Annual Meeting
Second General Session
March 29, 2008

We celebrate our 50th anniversary today, not my anniversary, not one of your individual anniversaries, but the 50th anniversary of this industry coming together in this association to make a case for itself here and around the world, and to represent the interests of the patients we serve.

It’s important that on this day of our anniversary we remember the first Chairman of the PhRMA Board, Mr. George W. Smith of Johnson & Johnson, who brought together the industry and a common purpose, to speak with one voice on behalf of the thousands and thousands of researchers and men and women who gather every day with the same kind of passion and love for this country and for our citizens, all of whom are patients sooner or later, in the attempt to make their lives more fulfilling and longer and more comfortable.

And so to George Smith and J&J, and we salute you for the leadership 50 years ago, and we salute all of our companies during those 50 years who have been a part of the PMA [the Pharmaceutical Manufacturers Association] and now PhRMA over those years.

It’s also my third anniversary as President and CEO of PhRMA. I left Congress not looking for a job; I left Congress to go fight for my life. And it was this industry that gave me a second chance. And so in the last three years I’ve had the privilege and honor of working for the people who saved my life. That’s not a bad gig. That’s pretty cool, and I’m honored and I’ve been thrilled to have that opportunity.

I want to thank Miles White, the first Chairman I served with at Abbott, and his staff for all they did to make that first difficult year when I was still under chemotherapy ‑‑ to make that first year possible and to take me through it, and to build, along with me, an enormously creative and competent staff at PhRMA.

I want to thank Bill Weldon for his contributions as the second Chairman I worked with, and the great leadership and the great mentoring he provided for me, for all of our staff at PhRMA.

I remember Peter Dolan and the great time we shared together. It wasn’t long enough. I remember traveling with him in Tokyo and meeting with the Japanese Prime Minister and the members of the cabinet there, and coming out of one of the meetings and telling Peter, “You know, Peter, you’re a great leader of a great company. I’m a politician. So I hope you’re not offended, but I’ve got to tell you, the Japanese legislature is not called the “Dye-ette,” it’s called the Diet.” And Peter kind of looked at me and said, “Well, while we’re at it, the name of my company is not Bristol-Myers Squid, its Bristol-Myers Squibb.”

And I particularly want to thank Kevin Sharer, who brought us to this incredible venue today for our annual meeting, and who provided the leadership over an amazing year last year.

Last year, as we gathered in our strategic session and witnessed the change of leadership in Washington, Dick Clark rose at the board meeting and said, “You know, a crisis is a terrible thing to waste.” And Kevin, in his leadership, Dick, alongside him, provided us with an incredible capacity to face the challenges we faced last year, and to do some pretty extraordinary things together.

In Washington, we saw the reenactment of the most critical piece of legislation to our industry and America’s patients – the reauthorization of [the Prescription Drug User Fee Act], negotiated with the help of all our companies and our staff and our team, and executed through the Congress in a bipartisan fashion, a recognition of America’s bipartisan commitment to the advance of science and the advance of discovery on behalf of America’s and the world’s patients.

We saw the reauthorization of pediatric exclusivity, a recognition in our country that there is a special need to make sure our medicines are tested for children and their young bodies, and to make sure that those medicines are dosed properly for the children of America’s families, and that that research occurs and that a mechanism of reward is provided for companies willing to do that great work.

We saw our companies come together in a bipartisan fashion to advocate and successfully pass the reauthorization of the [State Children’s Health Insurance Program], a program critical to bring insurance coverage to children who I hope never to see on this stage talking about battling a chronic disease that with insurance coverage they could have avoided. And our hope this year is that we work together to make sure that the five million children still eligible for that program get enrolled and get the hope of that kind of coverage.

Last year we saw the launch of the [Partnership to Fight Chronic Disease]. Those of you not acquainted with it, get with it. Hundreds and hundreds of partners coming together across America, making the case that it’s time not just to insure every American, it’s time to make sure the insurance provides an incentive for early prevention, intervention, disease management in its early stages, instead of wasting 75 cents out of every health care dollar in America on the damage done by disease that could have been prevented, could have been managed, if America only saw our medicines and our work as a solution rather than a problem to what ails our healthcare structure.

So we celebrate 50 years today, and we turn a chapter in leadership at PhRMA. And I welcome the appearance of Dick Clark as our new Chairman, and his extraordinary leadership at a great American company, 117 years old, once –– seven years in a row the most respected American company, not pharmaceutical company, the most respected of all the companies of our country. We’re going to get back to that position. We’re going to work for that kind of position again in the hearts and minds of Americans.

The good news is that more and more Americans are beginning to see us in a better light. More and more of them are beginning to support our work, believe it or not. And I’ve been trying to think through, why are we having that modest success? Why have we moved that needle from the dismal numbers we saw in 2005 to the place we are today? We’re about 50/50, a lot better than Congress, a lot better than the President, but not good enough.

But how did we get at least this success? Bottom line, I think we got as far as we’ve gotten so far because we finally have the courage to show the American public our hearts. The profound message inside the [Partnership for Prescription Assistance] that we recognize we don’t make products like ice cream and things that people can live without. We make products that people cannot live without.

And when you make that kind of product, you have to have a social conscience. You have to have the obligation to make sure that that kind of a product reaches every citizen who needs it, whether they can afford it or not.

When the industry made that profound statement, and when that profound statement resonated through our PPA efforts over the last three years, I think it began to cut through all the clutter of criticism and complaints, and Americans began to see, yes, we did have good, strong, and warm beating hearts, and we really cared about our patients. And it’s beginning to make a difference.

We’ve also worked really hard over the last three years at building alliances with patient groups and healthcare advocates around America, alliances that surprise people in the political world.

But whether it’s those new alliances, whether it’s our work for making our DTC ads more professional, whether it’s our work in making sure that the “Help is Here Express” bus rolls through every town in America, as Ken Johnson says, or whether it’s the fact that we are finally being for good policy instead of just against bad policy, or whatever it is, our standing is improving.

And I want to stress again that it didn’t happen because we bought it or borrowed it or rented it. We’re beginning to earn it, and that’s the most encouraging thing I can report to you on this 50th anniversary.

So we’ve shown them our hearts. Now I think it’s time to show them our smarts, and so I ask you, is it smart to have only one consistent face on television, the face of our DTC ads, alongside soap powders and soft drink commercials? Or is it time for us to put a different face on television? The face of our real patients, for example, amazing research scientists, the face of courage and hope you saw on the stage today.

Is it smart to let our critics define us? I can tell you in politics that’s a sure recipe for losing. Is it smart to allow one negative myth, a negative misconception, to stand unchallenged in the face of powerful and positive data to the contrary?

Is it smart to always be on the defensive, always looking over your shoulder, wondering where the next sneak attack is going to hit our industry, whether it’s in a state or the federal government or on some foreign shore?

Look, we’ve got some bad news. The bad news is that Americans continue to think of us as less than truly innovative, certainly less than the hot and popular bioscience companies whom they think we’re not a part of, although we certainly are.

We are being seen by Americans as the biggest cost driver of American healthcare costs when we are most certainly not. We are still burdened by stories of bad behavior that have long ago been deemed inappropriate in our PhRMA codes, and, of course, we are still burdened and battered very often by more recent stories of safety concerns and misconduct that some in our society, particularly the trial bar, hype up and seize upon and hurt us in the eyes of so many Americans.

I also know that many consumers pay a higher share of the out-of-pocket cost of our products than any other medical service in America, and paying that higher cost has got them pretty frustrated and offended. We know, too, that politicians who see the injustice of patients paying a higher out-of-pocket cost for our services often encourages otherwise clear thinking politicians to speak pretty harshly of us, in pretty negative tones sometimes.

But understanding all of that, I think we have to ask ourselves at this great 50th anniversary several very important questions:

Whose job is it to correct these negative impressions of us? When one of the three remaining candidate for President stands up in a nationally televised debate and actually says that it’s the American taxpayer who through the [National Institutes of Health] pays all of the costs of all the medical research and all of the clinical trials leading up to a new drug, why shouldn’t Americans believe that?

Whose job it is to tell them that that’s just not true, that the biopharmaceutical companies last year invested a record of $58.8 billion in R&D in this country, more than twice the total budget of the NIH? And, by the way, that includes all of NIH’s non-R&D spending.

Who will tell them that our biopharmaceutical companies invest more of our profits into R&D than any other American industry – approximately $70,000 to $75,000 per employee?

When we know what incredible lengths we go to make sure that every product we make is as safe as science can tell us, whose job it is to tell that story?

When we know that drug spending in 2007 grew by only 3.6 percent, the lowest growth rate since 1961, despite much higher utilization rates, when drug prices grew in the last 12 months by only 1.4 percent compared to a 4.4 percent increase in all other types of medical services, whose job is it to correct the record when anyone else sends a press release to The Wall Street Journal that we’re driving health care costs?

Whose job it is to make sure that every American and every elected and appointed representative of theirs in this country focuses on the real cost drivers within our health care system – preventable, untreated, unmanaged chronic disease?

When we understand that insured patients have to pay out of pocket about a third of their total medical bills, of their medicine bills, compared to just one-fortieth of their hospital in-patient costs, whose job is it to work with those patients and the payers to achieve better insurance coverage?

When our 500,000-plus American employees believe passionately in their mission to discover, test and bring to our patients the most effective and safest medicines in the world to help them fight their personal battles against disease, whose job is it to tell them that we’re on their side fighting for them?

Whose job is it to tell our great patient stories? Yeah, I know we’re publicly traded companies for the most part. We have got an obligation as such to serve the best, realistic expectations of our investors – and very often those are pension funds and ordinary Americans – and we’ve got to continue to be financially successful if we’re going to continue to invest $58.8 billion in the R&D.

But you and I know, and somebody else has to learn, that the central mission of our companies is and will always be to achieve the best medical outcomes for the patients who count on us. So I ask you: if we’re so misunderstood, if we’re so burdened with all of these myths and misconceptions, whose job is it to correct it?

I hope you’re just as tired as I am of always playing the victim, of trotting out one excuse after another every time somebody in the press asks me ‘why do people view you so negatively?’ I believe it’s time for us to accept our own responsibility to correct the entire record, to realistically but proudly declare who we are, to stand resolutely with our patients and defend our right to do what we do so well and, yes, do it better; to be more professional in all of our relationships – and we’re working on it; to be more transparent – and we’re working on it; and more willing to change when we must. It’s time, I believe, to make sure that every American patient knows that we are today and will always be their best hope, their best advocates, and ultimately their best friends.

Now, I’ve learned in the hardest of ways that time is precious, and when something’s time has come, you’ve really got to seize it. You’ve got to recognize the power of that moment, and you’ve got to do something meaningful with it.

Well, I’ve concluded – I hope you will conclude with me – it’s time for our industry to tell our own story, to adopt a clear and honest statement, a credo, if you will, of who we are, what we do, and more importantly, what we can do for America’s patients if we are simply given the chance.

It’s time to broadcast that message across America in a voice as stirring as John Kennedy’s call for us to enter the Space Age, to follow our destiny and place our feet on distant shores. It’s got to be that good.

It’s time for America to see us again as her best hope to tame and eventually conquer that long list of beasts that confront us all in the form of one retched disease after another, to help us lead, as Dr. Zerhouni has pointed out to us, the great transformation from symptom management and curative treatment to preempting disease at its very source.

Now, to make that message resonate, I believe we need to put our scientific face back on, you know, the one that compelled us to put the word “research” into our name. Americans need to see and to know the 80,000 great research scientists we employ, to feel the passion of their work and the majesty of their mission.

To that end, I believe it’s time we step boldly into the world of bioscience, not just in our labs as we have already ventured, but in our public personal. It’s time for Americans to recognize the enormous contribution our companies are already making, will continue to make in the quest for the new and complex, power biomedicines that befit the ever-expanding knowledge of genetic and molecular forces that drive disease at its most basic level, that picture you saw from Dr. Zerhouni yesterday.

We ought to give Americans a real mind-blowing trip behind the pill, behind the infusion, into the fantastic world we’re about to explore within the codes that govern the progress and decline of the human body, an awe-inspiring look, if you will, at the next generation of miracle medicines that will give us and more and more Americans the chance, the second chance at life that I’ve been given.

I also believe it’s time we finally put to bed, completely dispel the notion that our industry has or deserves any political enemies. We will always have critics. Sometimes we deserve them, and we ought to listen to them. But we cannot succeed in a world where we’re surrounded by so-called enemies.

We have our views. We have our principles, but they’re not defined in reds and blues. They’re defined in the radiant white light of the hope that comes and that inspires our search for new cures and treatments.

For whom? For the patients who as far as I know never sign into a hospital as Democrats or Republicans or liberals or conservatives. They sign in as sick Americans, desperate for us to succeed, anxious beyond patience for the next miracle medicine that’s going to help them or someone they love.

And so I call upon all of you who believe otherwise to put aside the old political mantras with the sure knowledge that we are ready to work with anyone who is ready to work with us on behalf of our patients. Hurt us gratuitously and you only hurt them whom you, too, are committed to serve.

As I pointed out in a recent interview, we will never desert our old friends, but we are ever ready to make new ones. So here’s a commitment:

We are prepared to work with whatever leadership is selected by the good people of our country so long as we can be part of the conversation. We can and we will be a significant part of the solution of what ails Americans’ healthcare systems, and we’re full of good ideas.

For example, some of you remember the old Fram oil filter ads on television. The ad featured an auto mechanic who showed us extensive damage done by an auto engine where the owner had failed to replace the Fram oil filter. He concluded by holding the Fram oil filter up to the camera and he said, “You can pay me now or you can pay me later.”

We know that healthy living and preventative care works, that early detection saves lives. It saves limbs. It saves organs. We know that disease management conducted properly saves untold suffering and cost.

We know, too, that too many American don’t have insurance coverage. We know that without insurance coverage, they rely upon the goodwill of doctors, of hospitals and, of course, philanthropy and our own patient assistance programs.

But we also know that too often the care they get is in the emergency room, the most expensive care in America and not necessarily always the best.

We are also well aware that if insurance is properly aligned to cover preventative care, early detection, early disease management, you’re going to find a much better chance to see those things happen, and it will save this country untold suffering and lost productivities.

So we at PhRMA support efforts to make the level of insured care available to as many in this country as possible, and we will fight alongside anyone who wants to join us in that effort.

We also know from our experience with Medicare Part D that there’s a good model out there for reforming, a model built around government help for the needy-uninsured, combined with private choices and private competition. You would think that when our government built such a program for our seniors, which over-performs to great satisfaction at under-budget costs, that we would be so amazed that we’d learn something from it.

Well, let’s hope we do in this debate on healthcare reform. We’re equally and keenly aware of some other truths which have so far escaped many so-called health care experts in this debate.

One, the cost of medicines are most importantly not now, absolutely never, unquestionably not driving up healthcare costs in America. We know that if you took away all of the profits of all our companies combined, all of the profits completely, they amount to one and a half percent of the American healthcare costs.

If you take them all away from us, all you have succeeded in doing is ending the research and development of new medicines. That’s not a good thing for America.

And we also know that because medicines in 1965 and even today represent only 10 percent of healthcare spent in this country, there’s simply not room for you to go solve our fiscal problems there, but if you really want to see the healthcare cost driver in America, try looking past your belly button. If you can’t see past your belly button, you’ve seen a large part of our problem, and together we had better be about a national effort to do something about it soon.

No, America, medicines don’t drive up your healthcare costs. Medicines used early, appropriately, compliantly can, if you work with us, keep us all out of the poor house and the hospital.

So as we celebrate 50 years of great medical advances, we also ought to ask ourselves, ‘well, what do the next 50 years bring,’ and the answer is, ‘who knows?’ Who could possibly know?

But we do know in the short term that there are some answers coming to some very important questions. One, will our efforts to fight cancer, coronary disease, pulmonary disease, diabetes, mental illness and so many others hit a stone wall of obesity, neglect and misdirected care because we refuse to deal with them?

Will our efforts to extend the life expectancy of our people end up being an unaffordable goal because we focused on the wrong problems?

Will healthcare costs consume our nation’s treasure because we fail to reason together instead of just fighting each other all the time?

Will we be forced to settle for old remedies and treatments, as many people in many parts of the world have had to do because our models of research and discovery are not sustainable anymore?

Will we be outsourcing our investments, our jobs, our research to other countries because they build more efficient regulatory regimes?

Will the great American engine of medical innovation and discovery sputter to a grinding halt in the face of short-sighted political decisions in 2010?

Our answer is that we can’t let our patients down, we will fight short-sighted, wrong-headed solutions every day, but we’ll also advocate and encourage progressive policies, innovative regulatory structures that continue to promote innovation here and protect it around the world.

And we will promote innovation here, right here in American, in the good old USA, the place where immigrants for centuries have come seeking the freedoms and opportunities our nation has so fiercely protected with treasure and blood.

We beckoned scientists from all over the world to come, to join us here, and they have come. They have come to the place where nearly 75 percent of the world’s research is now done on the new medicines for the patients of the world, and we shall not, as the British poet Dylan Thomas admonished us “go gently into that good night,” leaving this work unfinished.

We will be here. We will be here for our patients in the battle of all times against our common enemy – disease – and we’ll continue to try to answer the prayers of patients everywhere that we succeed.

Why? Because it’s not in our nature to do anything less. Thank you very much.