John J. Castellani
President & CEO
Pharmaceutical Research and Manufacturers of America
The National Press Club
Thursday, September 20, 2012
Thank you, Keith for that kind introduction. And my thanks to all of you here for joining me this morning.
Let me begin by saying I am not now, nor have I ever been, nor will I ever be a candidate for public office. In other words, this will be one of the few press events before November 6 that does not feature someone looking for votes.
However, though I’m not on any ballot, I am going to be talking about three of the biggest issues now being discussed by Governor Romney and President Obama. These are:
- health care,
- how to spur growth and create jobs, and
- our nation’s fiscal future.
Hearing that, some of you may be worried about hearing a re-hash of campaign rhetoric…Relax. I’m going to focus on long-term aspects of these issues that – sadly – have been largely overlooked by both candidates.
My goal is to begin a public dialogue about solutions, not bumper stickers – or tweets.
I’ve been in Washington a long time, so I know it’s a dialogue that may be drowned out by election rhetoric.
But I agree with President Eisenhower who said, “[no] political campaign justifies the declaration of a moratorium on ordinary common sense.”
Common sense dictates that we have a serious discussion now so that a new Congress and Administration can begin tackling these issues in a truly constructive manner and position our country to live up to its vast potential. And we need that dialogue to protect the lives and health of the American people.
I’ll start with health care.
Despite years of debate and the torrent of words during the campaign, the health care picture is still incomplete. The discussion casts the health care “ecosystem” as consisting of the patient, the doctor and insurers. When medications enter the discussion, they are almost always treated as just a commodity… the price of which is typically the first point raised.
The problem is that this perspective overlooks the vital role biopharmaceutical research plays in the most important aspects of health care – quality, availability, affordability and saving lives. It’s a blind spot that could lead to policies that put the lives and the health of patients and their families in jeopardy.
Now, after two years with PhRMA, I know how complex the biopharmaceutical research industry is. But I’ve also learned that the key to understanding our role in healthcare can be found in the stories of people, people like Jan Lundberg.
Jan is the president of Lilly Research Laboratories, and a leader in Alzheimer’s research. Not long ago, his mother called him to ask him a deceptively simple question: “how do I make pancakes?”
The question was simple, but chilling.
Lundberg’s mother had been making pancakes for 70 years. He feared the phone call meant she had Alzheimer’s. Sadly, he was right. It wasn’t long before he looked in her eyes and saw… nothing. “It was like her soul was gone,” Lundberg says. He is more determined than ever to find ways to cure, treat, or prevent Alzheimer’s—the sooner the better.
There are thousands of “Jan Lundbergs” in our industry – researchers who know why their work is so critical, men and women who are making discoveries in the laboratory and bringing hope to patients every day.
There are a couple of other things you should know about Dr. Lundberg’s story:
- Like every researcher, Lundberg must be resolute and courageous in the face of daunting odds. In the last 15 years, Alzheimer’s researchers have tested 101 new treatments. Only three have been approved to treat patients. That’s a one in 34 chance of success. If we look at all the medicines we develop to fight diseases, and if we go back further in the research process, the odds soar even higher: only one of every 5-10 thousand potential medicines makes it from a discovery in the laboratory to a treatment for a patient.
- To give you some context, finding a new treatment for Alzheimer’s has proved at least as difficult as the Mars Curiosity mission. Both require about a decade or more of research, cost billions of dollars and face great odds against success. (The odds of reaching Mars, by the way, are a lot better than finding an Alzheimer’s treatment. About half the Mars missions launched since the 1960s succeeded. But only 3 out of 101 potential treatments developed since 1998 have been approved for patients.) But with each mission – even the failed ones – and each breakthrough research is expanded, lessons are learned and a trail is blazed for what can come next.
Despite the obstacles, people working in laboratories have brought life, health and hope to millions of patients.
Everyone here can remember when an HIV/AIDS diagnosis was a death sentence. Beginning in the late 1980’s, our scientists, working with patient advocates, academics, government researchers and others turned HIV/AIDS into a manageable chronic disease.
This kind of dramatic progress continues today. This morning, in fact, I’m pleased to mark a major 21st Century healthcare milestone: PhRMA member companies’ total investment in research and development since 2000 now exceeds $500 billion – a sum greater than the annual revenues of any company on the Fortune 500.
That investment has helped produce more than 340 new medicines approved between 2001 and 2011. These include the first ever vaccine against cervical cancer, the first new medicine for lupus since 1955, a breakthrough treatment for cystic fibrosis, a therapy that helps adults suffering from multiple sclerosis walk, and many more. That investment has also helped reduce the death rates for cancer, heart disease and diabetes.
These breakthroughs are simply the prologue.
There are over 3,000 potential medicines now in development. These include 235 medicines to treat diabetes and related conditions, 312 medicines either in clinical trials or awaiting FDA approval to further reduce the number of deaths from heart disease and stroke, and 981 medicines and vaccines to help fight cancer.
To be sure, even with great progress, serious health care challenges loom on the horizon.
Currently, someone in the U.S. develops Alzheimer's disease every 71 seconds.
If trends continue this will increase to every 33 seconds by 2050 – that’s the time it took me to say the last three sentences. That could mean 15 million Americans with Alzheimer’s. The cost of their care? More than $1 trillion per year.
Diabetes? By 2034, projected annual costs for care are $336 billion; for cardiovascular disease cost for care will reach $818 billion by 2030.
New medicines to help treat these conditions, or even delay their onset, would be wonderful – a godsend for patients and families. They could also make a huge difference in our economic future.
Let me cite two examples. First, a recent study in Health Affairs estimated that improved adherence to diabetes medications could avert nearly 700,000 ER visits and close to 350,000 hospitalizations annually – for a total annual savings of $4.7 billion.
And, by the way, improving patient adherence to their medicines and doctors’ recommendations is an industry priority. The PhRMA Foundation just announced a new Young Investigator Grant program to study how to improve adherence.
Next, congestive heart failure is expensive and often results in hospitalizations. Typical CHF hospitalizations can run as high as $22,000. Consistent use of medicines costing around $3,500 a year can prevent complications and slow the progress of the disease. Patients who take their medicines as recommend can reduce their healthcare costs by over $9,000 per year.
For these reasons, and many more, biopharmaceutical research must be part of the nation’s health care conversation in 2012 and beyond.
It should also be part of the equation about how we add jobs and grow our economy.
Based on their campaign ads, you might think that Governor Romney and President Obama disagree on just about everything. In fact, this is one area where they seem very close.
Consider these two quotes:
- “If we are to remain the strongest nation on Earth, we must remain the most innovative nation on Earth” and
- “The key to our success – as it has always been – will be to compete by developing new products, by generating new industries, by maintaining our role as the world’s engine of scientific discovery and technological innovation.”
The first is Governor Romney, and the second is from the President. Pretty similar, right?
That’s because they reflect what experience has proven – that innovation is the key to economic progress.
And what’s the most innovative industry in the nation? Some might guess Silicon Valley.
Wrong. It’s the biopharmaceutical research industry.
I realize that, coming from the CEO of PhRMA, those words may sound dubious. But in this case, I’m sure even the most zealous staffer at FactCheck.org or PolitiFact would bear me out.
- According to data from the National Science Foundation, the biopharmaceutical sector accounts for the single largest share of all U.S. business R&D, representing nearly 20% of all domestic R&D funded by U.S. businesses.[i]
- We have been the leading private sector generator of patents for the last five years.
- U.S. biotech firms account for 80 percent of the world’s biotechnology R&D.
- A Battelle study found that the biopharmaceutical sector’s contribution to GDP was 3 ½ times the average contribution of other sectors of the economy.
- That same study found that this sector expends $105,000 per employee on R&D versus the $65,000 of the next leading sector – communications – and the average of $10,000 for the rest of the economy.
- And the CBO says that “pharmaceutical firms invest as much as five times more in R&D, relative to their sales, than the average U.S. manufacturing firm.”[ii]
What do these innovation statistics mean for patients and their families? New and improved treatments, preventative options, longer lives and a better quality of life.
AIDS patients, for example, used to have to take a medicine cabinet full of pills, and they had to administer precise doses at specific times during the day and night. Now many can take a single pill, or very few.
In the last few years, our industry has also developed an oral treatment for multiple sclerosis, much easier ways to monitor blood sugar levels, new hepatitis C protease-inhibiting drugs, new blood tests that measure circulating tumor cells, and many other ways to help patients.
This commitment to innovation also means jobs. In fact, it means the kind of high quality jobs both presidential candidates and those running for Congress want for America. Biopharmaceutical companies employ over 600,000 Americans. Each sector job helps create five additional indirect and induced jobs economy-wide – that’s nearly four million American jobs.
Our industry’s exports also contribute to our economic health.
U.S. biopharmaceutical exports stand at nearly $48 billion a year. It ranks fourth overall in exports.
The important role our industry plays in the economy is often overlooked here in America. But it is very well known to our competitors in the global economy. In fact, they are coming after this American engine of innovation and growth.
The Chinese government has identified biotechnology as one of the keys to its future economic growth and to creating over a million new jobs. India and Russia have publicly declared their goal of strengthening their biopharmaceutical research sectors. And Singapore’s vision is to be the “biopolis” of Asia, an international science cluster aimed at advancing human health.
American policy makers should be at least as focused on the economic value of our industry as our competitors. When the Congress and the President focus on a viable growth and jobs strategy, the biopharmaceutical research sector has to be one of the building blocks.
The hard debate over our fiscal future will begin in earnest the day after the election and reach critical mass early next year. The long-term effects of the debate will have profound implications for all stakeholders in our healthcare ecosystem.
The 18th Century British philosopher and astute observer of America, Edmund Burke, once said: “All government -- indeed, every human benefit and enjoyment, every virtue and every prudent act -- is founded on compromise and barter.”
Unfortunately, Washington today is much better described by a 20th Century philosopher… Groucho Marx. He said, “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies."
Why is Groucho right? Because policies are often focused on short term fiscal issues without fully considering how today’s decisions could affect other critical foundations of our health and our economy for the long run.
One result is that “compromise” – instead of being Burke’s foundation of virtue – is increasingly hard to find. Critical policy challenges like healthcare, jobs and fiscal policy have been met with division where sound policy-making and national interest should instead inspire collective vision.
Without a long-term mindset, it is difficult for lawmakers to agree on the kind of forward looking policies needed to support innovation and to balance the complex interactions between key elements of our health care system.
It need not be this way.
As the recently reauthorized Prescription Drug User Fee Act shows, policy makers can work together. This necessary legislation won overwhelming support from across the political spectrum. It also took a long-term view of how our regulatory system can support medical innovation and meet patients’ needs.
However, short-term fiscal scenarios – like sequestration – offer new challenges to the significant progress we made in PDUFA.
The successful Medicare Part D program is another example of policy makers taking a longer view. It is delivering quality health care to seniors at costs far below initial projections.
But if we alter the program as part of deficit reduction, not because it is wise policy but because it represents dollars available on a spreadsheet, we could directly threaten our sector’s ability to invest in new medicines, support good jobs and, most importantly, protect seniors’ – and all patients’ -- access to needed medicines.
As Yogi Berra put it, “You've got to be very careful if you don't know where you are going because you might not get there.”
To illustrate how this affects healthcare and the economy, let me go back to Alzheimer's, the disease every baby boomer thinks about and fears.
The long term projected toll of that disease – 15 million Americans with Alzheimer’s by 2050, with a cost of more than $1 trillion per year – is stunning.
That projection is based on current trends. Biopharmaceutical breakthroughs can change those trends, as it has done with AIDS and other deadly diseases. PhRMA member companies are right now working to find a medicine that could delay the onset of the condition.
However, remember what I said about the costs, time needed and odds of developing a potential new medicine and let me pose a hypothetical question:
What if a new treatment for Alzheimer’s arrives, but it comes with a high, short-term price tag? Suppose its one-year cost approaches $11 billion, the highest annual revenue for the world’s top-selling medicine.
Too many lawmakers today would only see the short-term. This $11 billion per year would appear only as a cost to the system. It’s a safe bet that some policymakers would try to slash that cost in the interest of short-term budget gains.
Yet here’s what an Alzheimer’s Association study projects: a treatment that delayed the onset of the disease by five years could dramatically
new cases and save$447 billion a year by 2050.
Now that’s an impressive return on investment.
I believe strongly that, whoever they vote for, Americans overwhelmingly want solutions. That means the victors in November will have a tremendous opportunity to create new ways of working together and with the private sector – including our industry.
And the fact is, outside the spotlight of cable news and the blogosphere, there are signs that government and the private sector can work together to encourage innovation.
Congress and the President have enacted 12 years of data protection for innovative biologics, reformed the U.S. patent system, reauthorized PDUFA and permanently reauthorized incentives for development of pediatric medicines. The work of researchers at the NIH and in the private sector continues to complement each other well.
To build on this progress and to seize the post- election opportunities, the biopharmaceutical sector commits itself to:
- First, being a strong partner in an increasingly complex health care system;
- Second, driving America’s global leadership and innovation in biopharmaceutical research;
- Third, supporting vibrant communities across the country through our investment, research, clinical trials and other work;
- And, fourth, delivering progress for patients who depend on this industry to discover new medicines that help us live longer, healthier lives.
We call on the leaders who come to Washington next January to work with us to build a modern regulatory system; foster a thriving scientific infrastructure; create a business environment that embraces innovation; and one that properly values medicines and their contribution to controlling costs and improving health.
Let me conclude where I began, with the researcher’s journey from hope to cures, from a discovery in the lab to making a difference for patients.
At a time when she was battling cancer, Susan Sontag wrote, “Everyone who is born holds dual citizenship, in the kingdom of the well and in the kingdom of the sick. Although we all prefer to use only the good passport, sooner or later each of us is obliged, at least for a spell, to identify ourselves as citizens of that other place. “
Statistics tell us that over the course of our lifetimes, every one of us will become a patient. My 96-year-old father is active, spry and healthy – hopefully for many years to come. But one day he will again be a patient.
Also, maybe not today, but I, my wife, my sons, my daughters-in-law and even my 2-year-old grandson will one day be patients too.
As I stand before you today, it is inevitable that all of us in this room will one day confront disease. Some may face Alzheimer’s disease. Others face diabetes, heart disease, cancers and other conditions. We will all want access to the latest, best medicines available.
Somewhere in America right now, there is a scientist hard at work, pushing the frontiers of research in pursuit of the next treatment that will take us from hope to cures. The leaders of the biopharmaceutical industry and the leaders of government must help that scientist. Together we must foster the next $500 billion in research. Together we must support the environment needed to sustain medical innovation. Together, we must do everything we can to ensure that scientist succeeds.
[i]National Science Board. 2012. Science and Engineering Indicators 2012. Arlington VA: National Science Foundation (NSB 12-01).
[ii]Congressional Budget Office, “Research and Development in the Pharmaceutical Industry.” October, 2006.
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $49.5 billion in 2011 in discovering and developing new medicines.
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For information on how innovative medicines save lives, visit: http://www.innovation.org
For information on the Partnership for Prescription Assistance, visit: http://www.pparx.org
For information on ensuring the flow of medicines during public health emergencies, visit http://www.rxresponse.org