John Castellani 2013 Annual Meeting Remarks

PhRMA President & CEO

 Good afternoon and welcome back. I hope you enjoyed lunch and Dan Pink’s thought-provoking talk.

 We at PhRMA are thrilled to be in San Diego for this year’s meeting.

 I want to thank John Lechleiter and the Eli Lilly team for their work and contributions to this meeting. I also want to thank all the PhRMA Board Members and especially our incoming chairman Bob Hugin of Celgene who inherits the challenge of overseeing next year’s meeting.

As you heard this morning, San Diego is a great place to tell the story of the biopharmaceutical sector. But aside from that, we should all be asking: why is PhRMA holding an engaging, captivating, INDOOR conference in a city surrounded by 70 miles of some of the most beautiful beaches you’ll ever (or in this case NEVER) see?

It’s because San Diego, like the biopharmaceutical sector, is founded on discovery and a mission.

From intrepid explorers like Juan Rodriguez Cabrillo, who sailed into San Diego Bay in 1542 to the 20th Century aeronautical pioneers who built Lindberg’s Spirit of St. Louis here and those who laid the foundation for this area’s growing biotechnology sector: discovery drives San Diego.

Like San Diego’s founders and leaders, we seek to discover. We are undeterred by setbacks. We make progress.

Every day, at PhRMA and at our member companies, we work with allies in the patient and healthcare provider communities, with labor and other stakeholders to help educate policymakers and the public and provide them with the facts that they need to make good choices.

Policy choices that will continue to fire the forge of discovery.

We do it to give patients and their families’ real hope for a healthier, better tomorrow.

We do it because PhRMA member companies exist to solve the riddle of disease.

We do it out of a sincere belief in the power of innovation and great science to both enhance life and fuel economic growth.

In short, we do it because this industry’s success is critical to America’s future.

From Alzheimer’s to cancer, from preventable, manageable but costly chronic diseases to rare disorders, we need more medical progress that is only possible with a thriving innovative biopharmaceutical research sector.

To meet its economic challenges, America also needs the millions of good, high-paying and high-skilled jobs that we create and that help keep this country globally competitive.

That is why every one of the more than 650,000 women and men now working directly for a biopharmaceutical research company and the millions more employed to support it can - and should - be proud of our industry’s efforts.

Without you and your continuing support, advice, vision and enthusiastic activism, we would not have accomplished all that we have over the last year.

But, as successful as we have been, there is still more to do.

In February, I was in London to address the Economist 2013 Pharma Summit.

While there, I had the opportunity to listen to both analysts and critics of our industry.  

Hearing and understanding our critics is necessary and useful.  Many had interesting things to say. Some of it was quite abstract and theoretical.

But what struck me most was the need for our critics and our allies alike to join with us to search for solutions that work in the real world and for real patients.

This means solutions that help patients get innovative medicines faster.

Solutions that stimulate and fund more R&D.

Solutions that foster risky investment.

Solutions that help us meet and overcome the enormous healthcare challenges ahead.

Because as everyone here knows: this industry is about finding solutions.

For much of the last two years, and in a challenging economic and policy environment, we have argued before every audience, in every interview, in every op-ed and in blogs and tweets, that our industry is unique among American businesses.

It is focused on improving human health;

It is both risky and costly to research and develop new medicines;

It has long investment timelines, great potential for failure and promises uncertain returns;

The business model is rapidly changing – driven by science increasingly focused on personalized solutions; and

It operates in a strictly regulated market where everything we do is closely governed.

That is our reality. Yet, year after year, PhRMA member companies continue creating medicines that help save and improve lives.

In order to continue, we need long-term, inter-dependent and integrated policies that nurture innovation and not penalize it – what I’ve called the Four Pillars.

First, we need a business environment that inspires and rewards smart risk-taking and investment, while recognizing our industry’s unique business model and time-lines;

Second, a vibrant, collaborative and modern eco-system that underpins great scientific and technological innovation;

Third, we need a modern, transparent regulatory system that evolves with the science to get safe medicines to patients quickly; and,

Fourth, we need an environment that properly values medicines.

This last point in particular – the value of medicines – is really exciting.

I believe it can be a potential game-changer.

And this moment comes about because the evidence that innovative medicines enhance treatment, reduce costs and improve lives is increasingly compelling.

Uncontrolled diabetes, for example, can lead to many complications including amputations, kidney failure, heart attack and stroke. These complications are bad for patients and they are 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 about $2,400.

More than the cost, however, I hope we can all agree that it is unquestionably better for patients to treat and control their diabetes, than to amputate or endure endless dialysis.

What is true for diabetes is also true in the fight against cancers, heart disease and stroke and many preventable and manageable chronic conditions.

And recently, we’ve begun to see just how the dynamic value of medicines can help control healthcare costs.

For example, there is a 2011 Harvard study published in JAMA.

It found that implementation of the Medicare Part D program was associated with a $1,200 average reduction in non-drug medical spending for Medicare beneficiaries with limited prior drug coverage in each of the first two years of the program.

When coupled with the fact that 11 million seniors gained comprehensive prescription drug coverage through Part D, these offsets imply an overall savings of $13.4 billion on other Medicare services in 2007, the first full year of enrollment in the program.

Analysis and evidence like this is finally changing how the value and costs of medicines are calculated.

After years of work, the U.S. Congressional Budget Office (CBO) now recognizes this important positive dynamic. CBO updated the methodology for calculating the costs of Medicare policies and it now reflects the positive impact of prescription medicines on total medical costs.

This is big.

For the first time, CBO is specifically accounting 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 point two percent decrease in spending on medical services for every one percent increase in the number of prescriptions.

And, while this may seem small, it represents a sea-change in government thinking.

CBO has come around, in a small way, to recognizing what all governments must face if we are to avoid pushing the cost of untreated, un-managed disease down the road.

The bottom-line is that 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 investment in the innovative therapies that can help reduce those costs.

Innovative medicines represent real solutions.

Consider that over the course of this decade, innovative medicines are projected to comprise approximately eight percent of Medicare and Medicaid spending. Now, this doesn’t sound like a lot. But that eight percent delivers better health, lower costs, more productivity, investment, jobs, and hope.

That’s a pretty good deal.

To take full advantage of this value and potential savings 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.

Now, unfortunately, in the current fiscal environment, too many policymakers view medicines through a narrow lens that sees only costs. They appear willing to sacrifice continued and future health progress on the altar of immediate political and fiscal needs.

It is a mind-set that was best described by the great American humorist, Ogden Nash, who said:

“Progress might have been all right once, but it’s gone on too long...”

As we explain our industry to policymakers, the media, the public, allies and critics alike, we must remember that when it comes to meeting the future healthcare and economic challenges we face, progress isn’t an option; it is a necessity.

And the environment that fosters progress, like this industry, doesn’t exist in a vacuum.

The enormous medical progress made in recent decades was possible because of scientific, regulatory, economic and investment conditions that helped make America the global leader in new, innovative R&D.

Conditions and interdependent policies that our global competitors increasingly understand and seek to copy in order to build their own innovative biopharmaceutical research sector.

Conditions that also inspired unprecedented R&D investment that is helping to create new opportunities in the battle against disease.

In fact, since 2000, PhRMA member companies have invested more than half a trillion dollars in innovative biopharmaceutical R&D.  Today, we are announcing that R&D investment by PhRMA member companies in 2012 was $48.5 billion, despite a difficult economic environment.

The potential rewards of this investment are enormous.

It is critical to the health and hopes of patients and to America’s long-term economic health.

But continued robust investment and progress is not certain.  There are warning signs.

Venture capital investment, a critical contributor to growing the biotechnology and biopharmaceutical sectors, is declining. VC investment in this sector dropped 24 percent between 2007 and 2012.

These challenges remind me of a joke in Woody Allen’s movie Annie Hall.

Breaking up with Annie Hall, Woody Allen’s character observes: “A relationship … is like a shark….it has to constantly move forward or it dies. What we have here is a dead shark.”

While we are far from having a “dead shark” on our hands, everyone here can imagine scenarios where continued progress is made more difficult, where innovation languishes and this vibrant, sophisticated and inspired industry struggles to survive.

And keep in mind that if our industry falters here in America, it will leave behind more than closed manufacturing facilities and thousands of unemployed highly-skilled, once highly-paid employees. It will also leave millions of patients here and around the globe without hope for innovative treatments.

That is why it is time there was a biopharmaceutical research version of the so-called “precautionary principle.”

As many of you know, environmentalists often use the “precautionary principle” to challenge industry.  It goes something like this:

“If an action or policy has a suspected risk of causing harm to the public or to the environment in the absence of scientific consensus that the action or policy is harmful, the burden of proof is on those taking the act.”

 

For our industry, a Precautionary Principle would go something like this:

Any action or policy that risks delaying or halting efforts to research and develop innovative healthcare solutions - prevents patients from accessing or benefiting from the latest, best medicines available - or otherwise undermines investment in new R&D - is harmful and the burden of proof is on those taking the act.”

We need such a principle because, at the end of the day, whether a proposed policy makes things better for patients – meets their needs and fulfills their hopes for a healthier future and a longer life – is the only test that counts.

In other words, does a proposal help an HIV/AIDS patient get access to medicines needed to manage the disease?

Will it foster the R&D needed to tackle the looming Alzheimer’s disease crisis?

Will it help reduce the enormous cost of treating chronic diseases by providing innovative solutions and treatments?

Will it help Judy Orem and thousands of other cancer patients just like her?

Judy is a cancer survivor from Oregon who we met during one of our “Research in Your Backyard” events highlighting the value of clinical trials to patients and the economy.

In 1995, her doctor told her that the medicines she was on were no longer effective and that her chances of making it – even with a last-gasp bone marrow transplant – were no better than five percent.

She didn’t lose hope.  She wanted to find another way. She found and enrolled in a Phase One clinical trial of a possible treatment. 

Now, not all clinical trial participants will do as well as Judy. That is the difficult truth of clinical trials and finding solutions that work for patients.  And they, like Judy, are the true heroes of medical progress.

But fortunately Judy flourished. Today she is alive, strong, her cancer is in remission and she’s an advocate for patients and for improving access to clinical trials.

And today, 15 years later, that medicine, Gleevec, is responsible for helping Judy and tens of thousands of patients survive this horrible disease.

But Judy’s story isn’t unique. It is duplicated everyday in clinical trials and for millions of patients who rely on hundreds of great medicines approved for patient use after rigorous clinical trials.

So we must ask again: will a proposed policy hurt Judy Orem?

Will it scare away needed new R&D investment?

Will it slow ongoing R&D into innovative medicines?

Will it slow clinical trials?

Will it prevent patients like Judy from getting a needed medicine once it is approved?

In other words: will a proposed policy “solve” a short term problem by undermining long-term and on-going progress?

Certainly, as individuals and as industry, we must be humble and feel privileged to be part of the great work of helping patients, improving their lives and fulfilling their hopes.

We need never apologize for the millions of patients around the world whose lives have been improved and extended because of this industry or for the work now being done in PhRMA member companies’ laboratories.

But today and every day, we along with the great men and women who work for our industry in America and around the world, must re-commit to continuing the fight: the fight to improve patients’ lives; the fight against disease; and the fight to keep innovating and making progress.

Thank you.

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