Speeches
Leadership in Life Sciences:
From Promise to Progress
Kevin Sharer, President and CEO, AMGEN
Chairman, PhRMA
PhRMA Annual Meeting
March 15, 2007
Good afternoon. It’s really great to be here with you today. I want to share with you something that happened to me the other day that I believe illustrates why we all like to work in this industry.
I was at the Kennedy School of Government at Harvard University fulfilling a long-time commitment to speak about leadership. There was a lunch with 60 or so young people from around the world, and as you know, the Kennedy School is full of people who are interested in moving ahead in government. So you would suspect that this audience would not be the friendliest audience that I ever faced as CEO of a large company and part of the biopharmaceutical industry.
The first person stood right up and said, "I have been waiting 13 years to talk to you." I didn't recognize this person, which I thought was probably a good thing. And what was going through my mind was “Okay. I guess I signed up for this. So here it comes."
The person, a woman in her forties, then proceeded to tell me a very emotional and heartwarming story about how an Amgen product had helped her years ago. I know that virtually every one of us in this room has had the privilege of hearing a story like this. She said that a medicine Amgen made 13 years ago Neupogen®, a white blood cell product, had enabled her to be given chemotherapy for a disease that at the time she was almost certain to die of, according to the statistics.
The other thing she mentioned is that she received the medicine in a compassionate use situation, as it had not yet been approved. She was able to get the medicine for free at a time in her life when she could not have afforded it.
I had just joined Amgen at the time she received Neupogen®. I, of course, had nothing to do with that product development or approval personally. But it was the privilege of being able to receive that message from her that really brought home how what we do allows us to answer life's most important question – what did you do that mattered? What we do matters very much to many people.
Before I start the rest of my comments, I’d like to acknowledge the other CEOs in the room. Wall Street likes to see us as in competition with each other. Sometimes we see ourselves that way as well. But at the end of the day, we’re all competing against disease. And I am proud to call you partners in that fight.
I’d also like to recognize the PhRMA staff here today. Every company in this room is indebted to you. But I owe you a particularly large debt because of the work you have done to make my accelerated transition into the Chairman’s role as smooth as possible. Thank you.
And finally, I’d like to thank the patient and disease advocates who are with us. Your passion not only inspires us, it makes our work possible. Thank you.
I. THE PROMISE OF OUR INDUSTRY VS. THE STATUS OF OUR INDUSTRY
The worst conversation in the world is the one in which a doctor tells a patient that there is nothing more that can be done. We’ve tried everything. The only thing left to do is to minimize your pain.
It’s a horrible conversation, and it takes place all the time. As an industry, our goal is to keep that conversation from happening. Meeting this goal requires good science. But it also requires an environment that facilitates the expensive and risky process by which that science is turned into new medicines. I want to talk with you today about how we can sustain and strengthen this environment in the United States and preserve our leadership in the life sciences.
To understand why this is so important for tomorrow, just look at the progress we have made leading up to today:
Since 1990, our industry has discovered and brought to market over 300 completely new biopharmaceutical medicines that treat over 150 conditions.
We are also finding new paths to cures. Our growing knowledge of human genetics has given us a new understanding of how diseases work and new ways to try to stop them. More than 400 of the 2,000 new medicines in development are biotechnology medicines. As the head of a biotechnology company, I’ll be the first to acknowledge a bit of a biologics bias… but I think we all can agree that biologics have opened up an important – and growing -- new front in the battle against disease.
Today, there are more than 2,000 medicines in development – 646 for cancer, 146 for heart disease and strokes, 77 for AIDS, and 56 for diabetes.
Any one of those 2,000 medicines in development – pill or protein therapeutic – could change the world. And I’m confident that more than one of them will.
But, in this business, finding one treatment just means that it’s time to move on to finding another. And again, that is why the environment in which we operate is so important to the gains we seek to make.
Take one example. It’s been just over a century since Alois Alzheimer first noticed protein tangles and plaques in the autopsied brain of a patient who had lost her memory. Since then, tens of millions of people with Alzheimer’s disease have been told by their doctors that there is no way to stop this devastating and ultimately fatal disease.
Today, four and a half million Americans have been diagnosed with Alzheimer’s disease. One in ten senior citizens has the disease. One in two people over the age of eighty-five. Altogether, one in three Americans knows someone living with Alzheimer’s.
Economists have given us some ways to try to quantify the extraordinary damage that the disease does. The average lifetime cost of care for a person with Alzheimer’s, they tell us, is $174,000. Medicare spending on Alzheimer’s will be $160 billion by 2010, 75% higher than it was in 2005. By 2050, it will be more than $1 trillion, nearly half of the total Medicare budget.
But we know that even the biggest numbers cannot express the costs that come with Alzheimer’s – the burden it places on families, the pain – for both the patient and the family – of seeing a lifetime of memories snatched away in a matter of months.
There are four medicines available to treat the symptoms of Alzheimer’s, but the average Alzheimer’s patient still dies roughly a decade after diagnosis. Imagine what a cure could mean for public policy? A treatment that could delay the onset of Alzheimer’s could reduce the overall projected number of people with Alzheimer’s disease by 38 percent in 2050, from 13.4 million to 8.1 million. That’s hundreds of billions of dollars Medicare wouldn’t have to spend. Millions of families whose suffering would be diminished. When you look at it this way, the interests of patients, payers, and pharmaceutical companies are entirely in alignment, and that’s a recipe for progress.
II. THE PREREQUISITES FOR PROGRESS
The potential of our industry is huge, no question. When I talk to our scientists, I am constantly amazed by the sophistication of their work, and their confidence that it will yield results that will improve lives. When I talk to them, I’m not worried about whether there will be new discoveries in the future.
What I do worry about is whether we will have the environment in the future that allows us to turn those new discoveries in laboratories into new medicines on pharmacy shelves. Will the environment change? And will it change to push us towards new medicines or to hold us back?
This was essentially the question I was asked during a conversation I had last year with a European Minister of Health. [Names and countries have been omitted to protect the innocent.] He was a really impressive guy; in fact he’s since been promoted to higher office. He told me that he was impressed with the biotechnology work going on in the United States and asked me: “What can I do to move my country to the forefront of life sciences, to create a strong national biotech industry?”
It’s not a hugely complicated formula, I told him. There are four pillars of progress. One, access to capital. Two, support for the innovation process at every stage from research and development (R&D) to world class and science-based regulation. Three, a strong intellectual property regime. Four, a free market that facilitates receipt of value for innovation.
That sounds pretty straightforward to most of us in this room. But by the time I had gotten half way through my spiel, the Health Minister’s eyes had glazed over. It wasn’t boredom. It was defeat. He knew his country could never meet those criteria.
If we are going to realize the promise of the exciting new medicines of the future, we need to do everything we can to maintain and strengthen each of these four pillars – here in the United States and also, where we can, abroad. I’ll address them one-by-one.
III. ACCESS TO CAPITAL – FUNDING MECHANISMS
Today, for most of us, the process of innovation goes like this: If we are lucky enough to develop a medicine that is safe and effective, we bring it to market. We earn profits from the sale of that medicine; we reinvest these profits in R&D; our R&D helps us to discover new medicines; then we bring those medicines to market and the process starts all over again.
That is, of course, a gross simplification that conveniently ignores the tens of thousands of avenues of inquiry that don’t yield new medicines, but the basic point is: done right, it’s a virtuous cycle.
But that cycle has to start somewhere. And for most of us, it started with capital. In the case of biotechnology companies – like Amgen – venture capital.
Life sciences was the number one investment sector for venture capitalists last year, accounting for 28 percent of all venture capital invested. That translates to $7.2 billion in venture capital spread over 731 deals – about a billion dollars and a hundred deals more than in 2005.
Certainly, this applies less to those of us in this room now than it once did, but we should remember that an entrepreneurial culture and access to venture capital are significant and necessary prerequisites for progress for so many companies that are just starting out – that 25 or 30 years from now might be the next Merck or the next Amgen.
IV. R&D INVESTMENT AND STRONG SCIENCE-BASED REGULATION
Another pillar of an innovation-friendly society is the combination of strong R&D investment and strong science-based regulation.
The pharmaceutical industry is one of the most R&D intensive businesses in the United States. Last year, America’s pharmaceutical and biotechnology companies invested $55.2 billion in biopharmaceutical research. That is $3.4 billion higher than the previous record of $51.8 billion set in 2005. Nearly 80% of that spending and nearly 100% of that growth in spending was by PhRMA member companies.
According to the Congressional Budget Office (CBO), the pharmaceutical industry is one of the most research-intensive industries in the country, investing as much as five times more in research and development, relative to their sales, than the average United States manufacturing firm. Altogether, the pharmaceutical industry invests more than 8 percent of its revenues in research and development – that’s 8 percent of revenues, not of profits. And PhRMA member companies spend nearly double that amount on R&D.
And we’re going to have to keep spending at this rate as we attack more complicated diseases and conditions.
That’s why it’s so important that Congress temporarily extended the R&D tax credit. But we need to make that tax credit permanent, to give us the certainty we need to make longer-term research investments.
It’s also in the public interest for there to be increased public investment in life sciences R&D as well. The NIH budget doubled between 1996 and 2003 to nearly $27 billion, but in 2004, it stopped growing. As I pointed out with the example of Alzheimer’s, the public and private sectors should both be interested in new cures and should both invest in the process of discovery.
One of the Government’s most important roles is as a regulator, however – and we need it to be both effective and efficient.
Altogether, the Food and Drug Administration (FDA) oversees roughly 25 percent of all consumer spending. This includes foods, drugs, vaccines, medical devices, animal foods and drugs, biotechnology, and cell therapies. FDA-regulated firms employ 1.5 million workers and represent 13 percent of manufacturing shipments in the United States – and that number is growing.
And yet, FDA funding has consistently lagged behind appropriations for other public health agencies over the last two decades.
That’s why it is so important for Congress to both increase FDA appropriations and reauthorize the Prescription Drug User Fee Act (PDUFA), which provides essential funding for the FDA to recruit, hire, and retain the scientific reviewers who evaluate our therapies and advance the FDA’s critical mission.
I’d like to see the reauthorization of this legislation done independently of other, more contentious, political and regulatory issues. This is vital both to stopping the attrition of staff and erosion of morale at this critically under-resourced agency and to making sure that there is no disruption of the review process that could delay the introduction of new medicines.
In addition to PDUFA and FDA appropriations, Congress is now grappling with two other issues: (1) drug safety; and (2) a pathway for follow-on biologics.
On drug safety, two PhRMA companies, Johnson & Johnson and Wyeth, have testified in Congress in favor of the general direction being taken by Senators Kennedy and Enzi. Now the detailed work will start to perfect the pending legislation.
On the important issue of follow-on-biologics it is our hope and expectation that Congress will make sure that the rules that FDA applies to these products are oriented towards patient safety and based on sound science. Experience to date in Europe establishes some basic principles:
V. A STRONG INTELLECTUAL PROPERTY REGIME
As I told that Health Minister, the third pillar of an innovation-friendly environment is a strong intellectual property (IP) regime.
A robust IP system is crucial to our success in developing innovative new medicines. Without it, our industry wouldn’t exist and neither would our products.
That goes a long way towards explaining why the United States, which has the strongest intellectual property laws in the world, produces 70 percent of the new drugs that enter the market each year. And it explains why the size of the American biotech industry is five times that of Europe, and fifteen times that of the Asia-Pacific region, which includes India, China, and Japan.
Other countries are figuring this out. Our friends at Pfizer, for example, did some research a while back and found that after Italy’s IP law was strengthened in 1978, pharmaceutical R&D increased by more than 600 percent. Japan underwent a similar transition. There, pharmaceutical companies were primarily imitators until its patent law was strengthened in 1976. Today, Japan conducts 19 percent of the world’s pharmaceutical research, second only to the United States.
A strong IP system ensures that innovative companies have adequate incentives to develop new treatments and cures for disease. Without this, innovators would have to protect their intellectual property through secrecy – creating a climate in which scientists from different labs wouldn’t share ideas or results, which would cripple the development of new medicines.
Today, we have effective pharmaceutical treatments for only 10,000 of the 30,000 known diseases. Only the protection of a robust intellectual property regime will allow us to increase that number.
We are now entering a critical moment for intellectual property law. Over the last few years here in the United States, we’ve had a lot of questions about the quality of patents and patent enforcement. As a result, the National Academy of Sciences and the Federal Trade Commission have recommended a set of changes to patent law that would be the most dramatic changes in 50 years. As an industry, we will work with Congress and other industries to come up with a practical set of solutions that make sense for businesses and consumers.
In my view, these solutions should be based on a couple of key principles:
The fourth and final pillar upon which leadership in the life sciences rests is the ability to receive value for innovation.
Our industry produces amazing products. The clinical outcomes are measurable and understandable. What is often missing from the equation, however, is a full understanding of the value of our products. Some would have value defined by a narrow, green eyeshade mentality – what is the value of this product versus this treatment. Or this product versus a similar product.
The preferable approach to valuation is to fully take into account the economic and humanistic characteristics of our products as they are used in the real world. Value based reimbursement or value based pricing is a ways off, but we have a responsibility to our patients and society in general to do a better job of fully articulating the value of our products.
Our medicines improve and extend lives, ease pain and increase productivity. Some of these effects can be measured. Others cannot. Yes, medicines are getting more expensive, but they are also bringing far greater benefits. Indeed, if our medicines don’t improve people’s lives, no one will buy them. When our medicines do improve people’s lives, and people do buy them, we need an environment that allows us to recoup our investment and keep the cycle of innovation going.
Our industry cannot survive without a free market. Investing $1 billion in a new medicine that may or may not make it to market is a big risk. Investing $1 billion in a new medicine that the government will set the price for is a prohibitive risk. One estimate says that price controls in the United States would drive down biopharmaceutical R&D investment by $10 billion a year. That means less discovery and fewer new medicines.
Largely, the market works. But make no mistake: our argument for allowing the market to work is strengthened when we are also working – within the market and outside of it – to make our medicines available to the people who need them.
Medicare Part D is a good example of encouraging the market to work for seniors. The Medicare Part D drug benefit has enrolled 24 million seniors, many of whom had no previous drug coverage. Polls indicate that the vast majority are satisfied.
Meanwhile, Part D premiums now average about 46% less than the Medicare trustees estimated for 2007, and there’s a plan available for less than $20 a month in every state. And the cost of the Medicare drug plan is $265 billion less than was estimated by CBO just a year ago. For so long, the VA plan was touted as the model. And yet 1/3 of retired veterans have switched to the Part D benefit.
Operating in a society that provides value for innovation is a privilege. But it also confers upon us an obligation. If we are serious about easing pain and extending lives, then we need to do everything we can to increase access to our medicines for people who can’t afford them.
That means advocating for greater access to health care coverage overall. It also means providing greater access to our medicines in particular.
The Partnership for Prescription Assistance (PPA) is a great model, and I want to thank the people here who are making PPA work.
In just two years, the PPA has provided a single point of access to more than 475 public and private patient assistance programs and has helped more than three and a half million patients already. In 2005 alone, PhRMA member companies provided more than 36 million free prescriptions to patients in need, worth an estimated $5.1 billion wholesale.
We also need to do a better job getting our medicines to those in need outside the United States, and many of you in this room are doing amazing work in this area.
Merck has pledged to give away Mectizan®, a medicine that treats “river blindness”, for free until the disease is eradicated. They have given nearly 700 million Mectizan® treatments since the program started in 1987.
Last year, Sanofi-Aventis agreed to donate medicines and financial support worth $25 million over five years to the World Health Organization to fight neglected tropical diseases that affect the world's poorest populations.
Abbott developed the “Access to HIV Care Program” to make its HIV treatments Kaletra® and Norvir® more broadly available (at a loss to Abbott) in 69 countries, including all of Africa. The company also provides its HIV rapid test, Determine® HIV-1/2, at no profit.
In 1999, Bristol-Myers Squibb launched its $150 million “Secure the Future®” program to help women and children in sub-Saharan Africa infected by HIV/AIDS.
Providing access to our medicines is a key part of our obligation to society. And we take it seriously.
VII. A FINAL PREREQUISITE – PARTNERSHIP
These four areas – access to capital, R&D and regulatory oversight, a robust intellectual property regime, and value for innovation – are the pillars of a society with a strong biopharmaceutical industry.
If we work together to strengthen these pillars, the cycle of innovation will not only keep going but accelerate. We will prosper and, most importantly, patients will benefit.
If these pillars are undercut, all of our businesses will suffer, as will the millions of patients who depend on us.
And that is why the foundation supporting all four pillars is partnership.
That means engaging within the policy making process on behalf of patients. So many people have asked what the power shift here in Washington means for us. They wonder if it matters whether the Democrats or Republicans are in charge. In some cases, it may. But there are big areas in which we can all work together: increasing R&D funding and access to health care, to name just two.
It also means partnerships between our companies, like the partnership we have through PhRMA. Today, prescription drugs represent about 13 percent of the American health care dollar. We expect that percentage to grow modestly over time, because we believe that medicines that prevent people from getting sick and keep them out of emergency rooms are a smart investment. Again, those places where we are able to align the interests of patients, payers, and policymakers are the places where true progress will be made.
And it means the partnerships between business, academia and government to advance science – generally speaking. So much of what we seek to do in the future depends on establishing a strong science base, here in the United States and abroad. Often, as executives, we look quarter to quarter, or year to year. Taking the long view requires that we recognize that continuing support for innovation requires conveying the excitement of discovery to a new generation.
Together, we’d do a lot of good for ourselves, and generate a lot of good will in the process, if we worked with elected leaders to strengthen the United States and international level of achievement in – and understanding of -- science.
VIII. CONCLUSION – A FANTASTIC JOURNEY
I began by mentioning how I hope that we can banish the phrase, “There’s nothing more we can do” from medical conversations – but noted how hard that will be to do. After all, there are lots of diseases that have been discovered and diagnosed for years and often centuries, but that we still cannot effectively treat.
And yet, I’m incredibly hopeful.
Let’s go back to the example of Alzheimer’s.
In 1999, our scientists identified and isolated an enzyme called beta secretase that is responsible for creating the plaques in the brains of Alzheimer’s patients. That wasn’t easy, but it’s given us a better understanding of the cause. And so now we can work to go after that cause. Already, we are conducting preclinical tests on several beta secretase inhibitors.
This approach holds great promise – it may be the first step towards stopping the progression of the disease. It may or may not work – it’s too soon to tell. But it’s only one of many promising targets for Alzheimer’s that the industry is studying. I know several of you in this room have exciting programs in your pipeline and in your research labs. Sooner or later, one of us is going to hit upon a breakthrough. And those are the moments we all work so hard for. Those are the moments that make it all worthwhile.
Earlier I talked about how biotechnology offers new paths to cures. Those paths lead inward, into cells, molecules, and DNA – the language of life itself. It’s a strange and wonderful journey into terrain that should be so familiar – it’s the stuff our own bodies are made of – and yet it’s astonishing how much we still don’t know and how much there is yet to discover. It’s a journey we are on together, and there’s no group of people I’d rather share that journey with than all of you.
Thank you.
From Promise to Progress
Kevin Sharer, President and CEO, AMGEN
Chairman, PhRMA
PhRMA Annual MeetingMarch 15, 2007
Good afternoon. It’s really great to be here with you today. I want to share with you something that happened to me the other day that I believe illustrates why we all like to work in this industry.
I was at the Kennedy School of Government at Harvard University fulfilling a long-time commitment to speak about leadership. There was a lunch with 60 or so young people from around the world, and as you know, the Kennedy School is full of people who are interested in moving ahead in government. So you would suspect that this audience would not be the friendliest audience that I ever faced as CEO of a large company and part of the biopharmaceutical industry.
The first person stood right up and said, "I have been waiting 13 years to talk to you." I didn't recognize this person, which I thought was probably a good thing. And what was going through my mind was “Okay. I guess I signed up for this. So here it comes."
The person, a woman in her forties, then proceeded to tell me a very emotional and heartwarming story about how an Amgen product had helped her years ago. I know that virtually every one of us in this room has had the privilege of hearing a story like this. She said that a medicine Amgen made 13 years ago Neupogen®, a white blood cell product, had enabled her to be given chemotherapy for a disease that at the time she was almost certain to die of, according to the statistics.
The other thing she mentioned is that she received the medicine in a compassionate use situation, as it had not yet been approved. She was able to get the medicine for free at a time in her life when she could not have afforded it.
I had just joined Amgen at the time she received Neupogen®. I, of course, had nothing to do with that product development or approval personally. But it was the privilege of being able to receive that message from her that really brought home how what we do allows us to answer life's most important question – what did you do that mattered? What we do matters very much to many people.
Before I start the rest of my comments, I’d like to acknowledge the other CEOs in the room. Wall Street likes to see us as in competition with each other. Sometimes we see ourselves that way as well. But at the end of the day, we’re all competing against disease. And I am proud to call you partners in that fight.
I’d also like to recognize the PhRMA staff here today. Every company in this room is indebted to you. But I owe you a particularly large debt because of the work you have done to make my accelerated transition into the Chairman’s role as smooth as possible. Thank you.
And finally, I’d like to thank the patient and disease advocates who are with us. Your passion not only inspires us, it makes our work possible. Thank you.
I. THE PROMISE OF OUR INDUSTRY VS. THE STATUS OF OUR INDUSTRY
The worst conversation in the world is the one in which a doctor tells a patient that there is nothing more that can be done. We’ve tried everything. The only thing left to do is to minimize your pain.
It’s a horrible conversation, and it takes place all the time. As an industry, our goal is to keep that conversation from happening. Meeting this goal requires good science. But it also requires an environment that facilitates the expensive and risky process by which that science is turned into new medicines. I want to talk with you today about how we can sustain and strengthen this environment in the United States and preserve our leadership in the life sciences.
To understand why this is so important for tomorrow, just look at the progress we have made leading up to today:
Since 1990, our industry has discovered and brought to market over 300 completely new biopharmaceutical medicines that treat over 150 conditions.
We are also finding new paths to cures. Our growing knowledge of human genetics has given us a new understanding of how diseases work and new ways to try to stop them. More than 400 of the 2,000 new medicines in development are biotechnology medicines. As the head of a biotechnology company, I’ll be the first to acknowledge a bit of a biologics bias… but I think we all can agree that biologics have opened up an important – and growing -- new front in the battle against disease.
Today, there are more than 2,000 medicines in development – 646 for cancer, 146 for heart disease and strokes, 77 for AIDS, and 56 for diabetes.
Any one of those 2,000 medicines in development – pill or protein therapeutic – could change the world. And I’m confident that more than one of them will.
But, in this business, finding one treatment just means that it’s time to move on to finding another. And again, that is why the environment in which we operate is so important to the gains we seek to make.
Take one example. It’s been just over a century since Alois Alzheimer first noticed protein tangles and plaques in the autopsied brain of a patient who had lost her memory. Since then, tens of millions of people with Alzheimer’s disease have been told by their doctors that there is no way to stop this devastating and ultimately fatal disease.
Today, four and a half million Americans have been diagnosed with Alzheimer’s disease. One in ten senior citizens has the disease. One in two people over the age of eighty-five. Altogether, one in three Americans knows someone living with Alzheimer’s.
Economists have given us some ways to try to quantify the extraordinary damage that the disease does. The average lifetime cost of care for a person with Alzheimer’s, they tell us, is $174,000. Medicare spending on Alzheimer’s will be $160 billion by 2010, 75% higher than it was in 2005. By 2050, it will be more than $1 trillion, nearly half of the total Medicare budget.
But we know that even the biggest numbers cannot express the costs that come with Alzheimer’s – the burden it places on families, the pain – for both the patient and the family – of seeing a lifetime of memories snatched away in a matter of months.
There are four medicines available to treat the symptoms of Alzheimer’s, but the average Alzheimer’s patient still dies roughly a decade after diagnosis. Imagine what a cure could mean for public policy? A treatment that could delay the onset of Alzheimer’s could reduce the overall projected number of people with Alzheimer’s disease by 38 percent in 2050, from 13.4 million to 8.1 million. That’s hundreds of billions of dollars Medicare wouldn’t have to spend. Millions of families whose suffering would be diminished. When you look at it this way, the interests of patients, payers, and pharmaceutical companies are entirely in alignment, and that’s a recipe for progress.
II. THE PREREQUISITES FOR PROGRESS
The potential of our industry is huge, no question. When I talk to our scientists, I am constantly amazed by the sophistication of their work, and their confidence that it will yield results that will improve lives. When I talk to them, I’m not worried about whether there will be new discoveries in the future.
What I do worry about is whether we will have the environment in the future that allows us to turn those new discoveries in laboratories into new medicines on pharmacy shelves. Will the environment change? And will it change to push us towards new medicines or to hold us back?
This was essentially the question I was asked during a conversation I had last year with a European Minister of Health. [Names and countries have been omitted to protect the innocent.] He was a really impressive guy; in fact he’s since been promoted to higher office. He told me that he was impressed with the biotechnology work going on in the United States and asked me: “What can I do to move my country to the forefront of life sciences, to create a strong national biotech industry?”
It’s not a hugely complicated formula, I told him. There are four pillars of progress. One, access to capital. Two, support for the innovation process at every stage from research and development (R&D) to world class and science-based regulation. Three, a strong intellectual property regime. Four, a free market that facilitates receipt of value for innovation.
That sounds pretty straightforward to most of us in this room. But by the time I had gotten half way through my spiel, the Health Minister’s eyes had glazed over. It wasn’t boredom. It was defeat. He knew his country could never meet those criteria.
If we are going to realize the promise of the exciting new medicines of the future, we need to do everything we can to maintain and strengthen each of these four pillars – here in the United States and also, where we can, abroad. I’ll address them one-by-one.
III. ACCESS TO CAPITAL – FUNDING MECHANISMS
Today, for most of us, the process of innovation goes like this: If we are lucky enough to develop a medicine that is safe and effective, we bring it to market. We earn profits from the sale of that medicine; we reinvest these profits in R&D; our R&D helps us to discover new medicines; then we bring those medicines to market and the process starts all over again.
That is, of course, a gross simplification that conveniently ignores the tens of thousands of avenues of inquiry that don’t yield new medicines, but the basic point is: done right, it’s a virtuous cycle.
But that cycle has to start somewhere. And for most of us, it started with capital. In the case of biotechnology companies – like Amgen – venture capital.
Life sciences was the number one investment sector for venture capitalists last year, accounting for 28 percent of all venture capital invested. That translates to $7.2 billion in venture capital spread over 731 deals – about a billion dollars and a hundred deals more than in 2005.
Certainly, this applies less to those of us in this room now than it once did, but we should remember that an entrepreneurial culture and access to venture capital are significant and necessary prerequisites for progress for so many companies that are just starting out – that 25 or 30 years from now might be the next Merck or the next Amgen.
IV. R&D INVESTMENT AND STRONG SCIENCE-BASED REGULATION
Another pillar of an innovation-friendly society is the combination of strong R&D investment and strong science-based regulation.
The pharmaceutical industry is one of the most R&D intensive businesses in the United States. Last year, America’s pharmaceutical and biotechnology companies invested $55.2 billion in biopharmaceutical research. That is $3.4 billion higher than the previous record of $51.8 billion set in 2005. Nearly 80% of that spending and nearly 100% of that growth in spending was by PhRMA member companies.
According to the Congressional Budget Office (CBO), the pharmaceutical industry is one of the most research-intensive industries in the country, investing as much as five times more in research and development, relative to their sales, than the average United States manufacturing firm. Altogether, the pharmaceutical industry invests more than 8 percent of its revenues in research and development – that’s 8 percent of revenues, not of profits. And PhRMA member companies spend nearly double that amount on R&D.
And we’re going to have to keep spending at this rate as we attack more complicated diseases and conditions.
That’s why it’s so important that Congress temporarily extended the R&D tax credit. But we need to make that tax credit permanent, to give us the certainty we need to make longer-term research investments.
It’s also in the public interest for there to be increased public investment in life sciences R&D as well. The NIH budget doubled between 1996 and 2003 to nearly $27 billion, but in 2004, it stopped growing. As I pointed out with the example of Alzheimer’s, the public and private sectors should both be interested in new cures and should both invest in the process of discovery.
One of the Government’s most important roles is as a regulator, however – and we need it to be both effective and efficient.
Altogether, the Food and Drug Administration (FDA) oversees roughly 25 percent of all consumer spending. This includes foods, drugs, vaccines, medical devices, animal foods and drugs, biotechnology, and cell therapies. FDA-regulated firms employ 1.5 million workers and represent 13 percent of manufacturing shipments in the United States – and that number is growing.
And yet, FDA funding has consistently lagged behind appropriations for other public health agencies over the last two decades.
That’s why it is so important for Congress to both increase FDA appropriations and reauthorize the Prescription Drug User Fee Act (PDUFA), which provides essential funding for the FDA to recruit, hire, and retain the scientific reviewers who evaluate our therapies and advance the FDA’s critical mission.
I’d like to see the reauthorization of this legislation done independently of other, more contentious, political and regulatory issues. This is vital both to stopping the attrition of staff and erosion of morale at this critically under-resourced agency and to making sure that there is no disruption of the review process that could delay the introduction of new medicines.
In addition to PDUFA and FDA appropriations, Congress is now grappling with two other issues: (1) drug safety; and (2) a pathway for follow-on biologics.
On drug safety, two PhRMA companies, Johnson & Johnson and Wyeth, have testified in Congress in favor of the general direction being taken by Senators Kennedy and Enzi. Now the detailed work will start to perfect the pending legislation.
On the important issue of follow-on-biologics it is our hope and expectation that Congress will make sure that the rules that FDA applies to these products are oriented towards patient safety and based on sound science. Experience to date in Europe establishes some basic principles:
- Follow-on biologics are not identical to the innovator product;
- Clinical safety and efficacy data are required for approval;
- Post approval surveillance is essential; and,
- Incentives for the development of new products are necessary to achieve a balanced legislative package
V. A STRONG INTELLECTUAL PROPERTY REGIME
As I told that Health Minister, the third pillar of an innovation-friendly environment is a strong intellectual property (IP) regime.
A robust IP system is crucial to our success in developing innovative new medicines. Without it, our industry wouldn’t exist and neither would our products.
That goes a long way towards explaining why the United States, which has the strongest intellectual property laws in the world, produces 70 percent of the new drugs that enter the market each year. And it explains why the size of the American biotech industry is five times that of Europe, and fifteen times that of the Asia-Pacific region, which includes India, China, and Japan.
Other countries are figuring this out. Our friends at Pfizer, for example, did some research a while back and found that after Italy’s IP law was strengthened in 1978, pharmaceutical R&D increased by more than 600 percent. Japan underwent a similar transition. There, pharmaceutical companies were primarily imitators until its patent law was strengthened in 1976. Today, Japan conducts 19 percent of the world’s pharmaceutical research, second only to the United States.
A strong IP system ensures that innovative companies have adequate incentives to develop new treatments and cures for disease. Without this, innovators would have to protect their intellectual property through secrecy – creating a climate in which scientists from different labs wouldn’t share ideas or results, which would cripple the development of new medicines.
Today, we have effective pharmaceutical treatments for only 10,000 of the 30,000 known diseases. Only the protection of a robust intellectual property regime will allow us to increase that number.
We are now entering a critical moment for intellectual property law. Over the last few years here in the United States, we’ve had a lot of questions about the quality of patents and patent enforcement. As a result, the National Academy of Sciences and the Federal Trade Commission have recommended a set of changes to patent law that would be the most dramatic changes in 50 years. As an industry, we will work with Congress and other industries to come up with a practical set of solutions that make sense for businesses and consumers.
In my view, these solutions should be based on a couple of key principles:
- First, it is critical that patents provide sufficient certainty, and be enforced effectively.
- Second, patent rules, generally, should apply across technologies and sectors.
- Third, however, Congress should “do no harm” and recognize that there are differences between sectors, and avoid disadvantaging any particular sector simply to achieve simplicity.
- Fourth, we need to recognize that international patent protection is a shared goal. Without it, drug development – including finding treatments and cures for neglected diseases and diseases of poverty – will be impeded.
The fourth and final pillar upon which leadership in the life sciences rests is the ability to receive value for innovation.
Our industry produces amazing products. The clinical outcomes are measurable and understandable. What is often missing from the equation, however, is a full understanding of the value of our products. Some would have value defined by a narrow, green eyeshade mentality – what is the value of this product versus this treatment. Or this product versus a similar product.
The preferable approach to valuation is to fully take into account the economic and humanistic characteristics of our products as they are used in the real world. Value based reimbursement or value based pricing is a ways off, but we have a responsibility to our patients and society in general to do a better job of fully articulating the value of our products.
Our medicines improve and extend lives, ease pain and increase productivity. Some of these effects can be measured. Others cannot. Yes, medicines are getting more expensive, but they are also bringing far greater benefits. Indeed, if our medicines don’t improve people’s lives, no one will buy them. When our medicines do improve people’s lives, and people do buy them, we need an environment that allows us to recoup our investment and keep the cycle of innovation going.
Our industry cannot survive without a free market. Investing $1 billion in a new medicine that may or may not make it to market is a big risk. Investing $1 billion in a new medicine that the government will set the price for is a prohibitive risk. One estimate says that price controls in the United States would drive down biopharmaceutical R&D investment by $10 billion a year. That means less discovery and fewer new medicines.
Largely, the market works. But make no mistake: our argument for allowing the market to work is strengthened when we are also working – within the market and outside of it – to make our medicines available to the people who need them.
Medicare Part D is a good example of encouraging the market to work for seniors. The Medicare Part D drug benefit has enrolled 24 million seniors, many of whom had no previous drug coverage. Polls indicate that the vast majority are satisfied.
Meanwhile, Part D premiums now average about 46% less than the Medicare trustees estimated for 2007, and there’s a plan available for less than $20 a month in every state. And the cost of the Medicare drug plan is $265 billion less than was estimated by CBO just a year ago. For so long, the VA plan was touted as the model. And yet 1/3 of retired veterans have switched to the Part D benefit.
Operating in a society that provides value for innovation is a privilege. But it also confers upon us an obligation. If we are serious about easing pain and extending lives, then we need to do everything we can to increase access to our medicines for people who can’t afford them.
That means advocating for greater access to health care coverage overall. It also means providing greater access to our medicines in particular.
The Partnership for Prescription Assistance (PPA) is a great model, and I want to thank the people here who are making PPA work.
In just two years, the PPA has provided a single point of access to more than 475 public and private patient assistance programs and has helped more than three and a half million patients already. In 2005 alone, PhRMA member companies provided more than 36 million free prescriptions to patients in need, worth an estimated $5.1 billion wholesale.
We also need to do a better job getting our medicines to those in need outside the United States, and many of you in this room are doing amazing work in this area.
Merck has pledged to give away Mectizan®, a medicine that treats “river blindness”, for free until the disease is eradicated. They have given nearly 700 million Mectizan® treatments since the program started in 1987.
Last year, Sanofi-Aventis agreed to donate medicines and financial support worth $25 million over five years to the World Health Organization to fight neglected tropical diseases that affect the world's poorest populations.
Abbott developed the “Access to HIV Care Program” to make its HIV treatments Kaletra® and Norvir® more broadly available (at a loss to Abbott) in 69 countries, including all of Africa. The company also provides its HIV rapid test, Determine® HIV-1/2, at no profit.
In 1999, Bristol-Myers Squibb launched its $150 million “Secure the Future®” program to help women and children in sub-Saharan Africa infected by HIV/AIDS.
Providing access to our medicines is a key part of our obligation to society. And we take it seriously.
VII. A FINAL PREREQUISITE – PARTNERSHIP
These four areas – access to capital, R&D and regulatory oversight, a robust intellectual property regime, and value for innovation – are the pillars of a society with a strong biopharmaceutical industry.
If we work together to strengthen these pillars, the cycle of innovation will not only keep going but accelerate. We will prosper and, most importantly, patients will benefit.
If these pillars are undercut, all of our businesses will suffer, as will the millions of patients who depend on us.
And that is why the foundation supporting all four pillars is partnership.
That means engaging within the policy making process on behalf of patients. So many people have asked what the power shift here in Washington means for us. They wonder if it matters whether the Democrats or Republicans are in charge. In some cases, it may. But there are big areas in which we can all work together: increasing R&D funding and access to health care, to name just two.
It also means partnerships between our companies, like the partnership we have through PhRMA. Today, prescription drugs represent about 13 percent of the American health care dollar. We expect that percentage to grow modestly over time, because we believe that medicines that prevent people from getting sick and keep them out of emergency rooms are a smart investment. Again, those places where we are able to align the interests of patients, payers, and policymakers are the places where true progress will be made.
And it means the partnerships between business, academia and government to advance science – generally speaking. So much of what we seek to do in the future depends on establishing a strong science base, here in the United States and abroad. Often, as executives, we look quarter to quarter, or year to year. Taking the long view requires that we recognize that continuing support for innovation requires conveying the excitement of discovery to a new generation.
Together, we’d do a lot of good for ourselves, and generate a lot of good will in the process, if we worked with elected leaders to strengthen the United States and international level of achievement in – and understanding of -- science.
VIII. CONCLUSION – A FANTASTIC JOURNEY
I began by mentioning how I hope that we can banish the phrase, “There’s nothing more we can do” from medical conversations – but noted how hard that will be to do. After all, there are lots of diseases that have been discovered and diagnosed for years and often centuries, but that we still cannot effectively treat.
And yet, I’m incredibly hopeful.
Let’s go back to the example of Alzheimer’s.
In 1999, our scientists identified and isolated an enzyme called beta secretase that is responsible for creating the plaques in the brains of Alzheimer’s patients. That wasn’t easy, but it’s given us a better understanding of the cause. And so now we can work to go after that cause. Already, we are conducting preclinical tests on several beta secretase inhibitors.
This approach holds great promise – it may be the first step towards stopping the progression of the disease. It may or may not work – it’s too soon to tell. But it’s only one of many promising targets for Alzheimer’s that the industry is studying. I know several of you in this room have exciting programs in your pipeline and in your research labs. Sooner or later, one of us is going to hit upon a breakthrough. And those are the moments we all work so hard for. Those are the moments that make it all worthwhile.
Earlier I talked about how biotechnology offers new paths to cures. Those paths lead inward, into cells, molecules, and DNA – the language of life itself. It’s a strange and wonderful journey into terrain that should be so familiar – it’s the stuff our own bodies are made of – and yet it’s astonishing how much we still don’t know and how much there is yet to discover. It’s a journey we are on together, and there’s no group of people I’d rather share that journey with than all of you.
Thank you.