Speeches & Communication

John J. Castellani Remarks at Economist Pharma Summit 2013

PhRMA March 29, 2013

John Castellani
President & CEO
Pharmaceutical Research and Manufacturers of America

The Economist Pharma Summit 2013
February 28, 2013
London, UK

Thank you for that kind introduction.

I’m here to talk about the future. But first allow me to address some of the criticism of the biopharmaceutical research industry I’ve heard today.

This industry is men and women dedicated to improving the health of everyone.

Finding solutions for patients is what gets us up in the morning. It’s why we’ve made extraordinary progress fighting disease. It’s why patients rightly place their hopes in us.

Any dialog that helps us advance this cause is welcome.

But some of the criticisms voiced today offer no answers, nor does it help any patient get the medicines they need any faster or push innovative research forward.

Instead, they present a straw man – what some here in the U.K. might call an ‘Aunt Sally’ – putting industry on “trial” and impugning the work of hundreds of thousands of good men and women.

Make no mistake: we want critics asking hard questions about our industry. 

We must continually examine and re-examine how we do business, conduct trials, evaluate new medicines and track how our medicines perform when they leave the laboratory and enter the real world. But, as we consider criticism, we (and our critics) ought to ask questions about the solutions proposed.

How will this impact patient safety and privacy? 

How will this impact our ability to develop and deploy innovative new medicines?

Will this encourage companies to embrace risk and tackle significant new challenges or, instead, incentivize them to take smaller risks in more familiar fields?

Will this prolong an already protracted regulatory process and, if so, will the potential benefits outweigh the costs of delay to patients?

These are responsible questions. They are the ones that we must answer – as do our critics.

So, let me start a constructive conversation. 

First: above all, we need a system that protects patients, their privacy and safety. Responsible data sharing is part of credible, regulated, strong biopharmaceutical R&D.

In fact, our industry is cooperating in initiatives like the CEO Roundtable on Cancer’s Life Science Consortium’s “Project Data Sphere” (led by PhRMA’s former Chairman Chris Viehbacher).

Additionally, our companies already regularly receive and grant requests for clinical trial data for legitimate scientific purposes and our reporting of on-going clinical trials is the most extensive in the world.

Second: clinical trials and all R&D are an increasingly collaborative process – one that companies invest in to the benefit of patients. But needed future investment will only come if fair returns and the resulting intellectual property are protected.

Third: this industry relies on a rigorous, transparent, efficient regulatory process. It is our license to do business. We are committed to the highest scientific standards and fully understand that without them we forfeit needed patient trust.

Finally, a “Wiki-Regulatory” approach advocated by some critics may work as an academic exercise, but it is unlikely to benefit patients in the real world.

In the real world, over the last 15 years, more than a hundred innovative medicines have helped transform lives.

Take HIV/AIDS, once a death sentence, now, in the developed world, it is often a manageable chronic disease and death rates are down 80 percent.

Cardiovascular disease kills about 17 million people globally each year. But, in the U.S., associated death-rates fell by 28 percent between 1997 and 2007 – due in no small part to improved medicines.

We’ve also made significant gains against osteoporosis, rheumatoid arthritis, Hepatitis C., diabetes and rare diseases. That’s real progress from innovative medicines and patients’ access to those medicines.

These achievements, I note, were made with current research and clinical trial paradigms.

Clearly, something is working.

Sadly, some see this progress but still label the biopharmaceutical research industry as “bad.” They are on the wrong side of history and owe patients more than indignation and rhetoric.

They owe them solutions.

Solutions that recognize that risk-taking and failure play a critical role in innovation.

To quoteThomas Edison: “I have not failed. I've just found 10,000 ways that won't work.”

The reality of this industry is that most researchers will never see their work reach a patient, much less cure a disease. Still, they go to work every day and continue to search for new cures and treatments.

Our researchers don’t just 


They do.

So, let’s talk about what they are doing and the future.

This industry is at a fork in the road – what I call the juncture of “Invest Now” or “Pay Later.”

For patients, for innovative healthcare, for our economy, the clear choice is “invest now.”

To spur continued needed investment, I believe there are four clear pillars that must exist.

  1. A business environment that inspires and rewards smart risk-taking and investment, while recognizing our industry’s unique business model and time-lines;
  2. A vibrant, collaborative and modern scientific ecosystem that underpins great scientific and technological innovation;
  3. A modern, transparent regulatory system that evolves with the science to get safe medicines to patients quickly; and,
  4. An environment where innovative medicines are properly valued.

These pillars are interdependent.

Without them it is hard to see how we make future big advances on Alzheimer’s, cancers, rare and chronic diseases. The cost of healthcare to patients and the economy will skyrocket.

Worse, patients’ choices will be limited to the status quo of aging generic medicines.

That’s not hope or a plan. It is an admission of failure and one I do not accept.

Instead, I side with progress and those who dare to risk, to innovate and to invent – those committed to finding solutions.

Today, an era where many healthcare policy choices are made through a narrow fiscal lens, leadership and vision are needed.

Our industry is leading.

In 2012, overall U.S. industry R&D reached about $280 billion. PhRMA member companies alone invested more than $50 billion – more R&D as a share of sales (20 percent) than any other industry.

In fact, a National Science Foundation report found that this industry accounts for the single largest share of all U.S. business R&D – nearly 20 percent of all domestic R&D funded by U.S. businesses.

Since 2000, PhRMA members alone have invested half-a-trillion dollars in new R&D.

This industry created more than four million U.S. jobs, while the overall annual impact of the sector on the domestic economy is $917 billion. Its contribution to the U.S. GDP is three-and-a-half times the average contribution of other sectors of the economy.

But to keep moving forward we must fully embrace the value of medicines, not just focus on cost.

For example, just look at the value of innovative diabetes treatments.

Uncontrolled diabetes can lead to many complications including amputations, kidney failure, heart attack and stroke. These complications are bad for patients and costly.

The average cost of amputation surgery is $40,000.

A single year of dialysis for kidney failure runs about $83,000.

But, a year’s supply of medicines that can help control diabetes averages around $2,400.

More than the cost, however, I think it is unquestionably better for patients to treat and control their diabetes, than to amputate or endure endless dialysis.

And the evidence continues to mount that innovative medicines – and access to those medicines -- can help to limit costs.  

For example, JAMA in 2011 published an important Harvard study on the implementation of the Medicare prescription drug benefit – known in the States as Part D.

The study showed a $1,200 per year decrease in non-drug medical spending among patients who previously had limited or no prescription drug coverage – an overall savings to Medicare of more than $13 billion.

Evidence of the value of medicines like this recently compelled the U.S. Congressional Budget Office (CBO) to update its methodology for calculating the costs of Medicare policies.  It now reflects the positive effect of prescription medicines on total medical costs.

CBO will for the first time account for the savings from medicines that reduce the need for other costly medical services, like hospitalizations, acute care and long-term care.

The new methodology incorporates a 0.2 percent decrease in spending on medical services for every one percent increase in the number of prescriptions.

While this may seem small, it represents a sea-change in government thinking. CBO has come around, in a small way, to realizing what all governments must face if we are to avoid pushing the cost of untreated, un-manageable disease down the road to a point outside of the political here and now.

No nation, no matter how wealthy, can provide innovative health care for its citizens unless it values wellness, prevention and disease management at least as much as it values acute care.

Similarly, no nation can afford to ignore the looming costs of chronic diseases like diabetes, hypertension and Alzheimer’s disease by dis-incentivizing the innovative therapies that can help reduce those costs.

If we are to foster the development of innovative medicines that will both make life better and also reduce overall costs, we must put a premium on the fruits of innovation. The benefits to payers, to economies and, most importantly, to patients more than justify the premium.

But governments must do more to help realize the full value of medicines.

They must promote investment along with regulatory, scientific and economic policies that foster risk-taking and innovation.

Policy must recognize that the risk-free world doesn’t exist. Churchill recognized this when he observed that “a pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

I am an optimist.

I am also inspired by risk takers – like the researchers at biopharmaceutical research companies, academic, hospital and government laboratories seeking solutions for patients.

The treatments they’re developing are pushing the technological and scientific envelope – and they do it because of patients who have run out of every option but hope.

Innovation and risk go together.

This moment, to me, appears to be one when industry, government, academia, patients and all stakeholders can forge the long-term policies needed to generate investment and build a sustainable innovation ecosystem – the four pillars I spoke of.

This effort will also help give markets certainty. Greater certainty fosters increased investment and unleashes additional creative and innovative firepower that benefits both patients and society.

Today, this industry invests in innovation in spite of great odds including: the high-cost of development; long development time-line; investor impatience; and the fact that the vast majority of R&D never results in a new medicine.

The more than 5,000 new medicines now in the global biopharmaceutical pipeline are the result.

Of these medicines in development, 70 percent are potentially the first-in-class, others are for diseases for which no new therapies have been approved in the last decade.

For example, there are 158 potential medicines for ovarian cancer, 19 for sickle cell disease and 41 for small cell lung cancer.

In just seven years, the number of new medicines in development has grown by 40 percent – thanks to R&D investment leavened with prudent risk-taking.

Think what we can accomplish in a more dynamic innovation ecosystem?

This is potentially a unique moment in history. We’ve made enormous progress in the fight against a host of diseases. We’re investing in on-going and new R&D that promises even more progress. And, there’s growing recognition – by CBO and policy makers – of the critical value and contribution that medicines make.

If we read the signs properly, make good policy choices and take a long-term versus expedient view of our healthcare challenges and costs, we’ll have a fighting chance to meet and overcome future and growing healthcare needs.

In short, by paying now – and smartly – we may avoid having to pay later.

Thank you for listening to why I am optimistic about the future.

There’s a faint glow on the horizon. Just as dawn brightens to morning, the proof of the value of innovative medicines grows ever clearer.

This is good news for everyone now working to find better treatments and even cures for the diseases we confront.

The enormous value of the work is being recognized and its contributions to improving health and limiting healthcare costs to the economy increasingly appreciated.

But it is even better news for patients.  Their hopes for better health, better medicines and even a cure are not misplaced. 

Somewhere in America, here in the United Kingdom, in Europe and elsewhere around the world, academic and government supported scientists along with biopharmaceutical research companies are likely working on a new and better ways to help them overcome their healthcare challenges.

But, it will take everyone here and beyond this room working together to ensure we see the full sunrise.

Thank you.