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To continue innovating, the biopharmaceutical sector needs support from all levels.
After several of the most challenging years in recent financial memory, America's economy is poised for recovery. Sustained recovery, however, will depend on the critical contributions and presence of US industries, including the life-sciences sector, whose innovation is recognized as a historic driver of competitiveness and economic growth. In fact, the importance of these innovative companies was underscored by a recent report by Battelle, a science and technology research firm based in Ohio, which calls for the development of a national innovation agenda to support, and grow, the healthcare sector.
There's no denying that times have been hard. American workers have felt the effect of job losses across the country and throughout all sectors, including healthcare. A fluctuating marketplace has raised concerns for the future of biopharmaceutical research companies, which must balance research and development (R&D) investment against the risks provided by often unpredictable regulatory, policy, and business environments.
The biopharmaceutical sector has not been immune to the economic downturn, and the challenges facing the industry aren't going away. However, the past has demonstrated not only that biopharmaceutical R&D is a growth sector, but also that the growth is often at a rate that exceeds the rest of the economy.
In fact, according to a study conducted by Georgia's Archstone Consulting, prior to the recession (between 1996 and 2006), direct employment in the biopharmaceutical sector grew at more than twice the rate of employment in the rest of the economy.
Also, the economic impact of this growth expanded beyond those directly employed by the sector. The same study found that each direct job within the sector in 2006 supported another 3.7 jobs, leading to greater economic growth.
Although many workers have been affected in the intervening years, the Pharmaceutical Research and Manufacturers of America (PhRMA) believes that there is reason for hope in the years ahead. The Battelle report, commissioned by the Council for American Medical Innovation (CAMI), found that biomedical industry jobs grew 1.5% between 2007 and 2008, while the overall economy declined by 0.7%. The report concludes that the creation of a national medical innovation agenda will help build on the strengths of the healthcare economy and the high-quality jobs it provides, while leading to real health benefits for patients.
What's more, despite the many hurdles, biopharmaceutical sector-wide investment in R&D reached a record $65.3 billion last year. This continued commitment to research offers great hope for patients seeking new options and builds on the 34 new medicines approved by the US Food and Drug Administration in 2009 alone.
Now, with the enactment of healthcare reform, more Americans will have access to critical coverage and other health services, including potentially life-saving therapies. Expanded access to health insurance and, with it, medicines, offers the potential to not only improve public health and patient outcomes, but also to lower overall health costs and contributes to increases in overall productivity.
According to a study by the Milken Institute, an independent think tank in California, the seven common chronic diseases (i.e, cancer, diabetes, heart disease, hypertension, stroke, mental disorders, and pulmonary conditions) cost nearly $300 million and contributed to a more than $1 trillion loss in worker productivity per year.
Moreover, meeting unmet medical needs provides, in addition to the health benefits for patients, an economic effect. For example, recent research from the Alzheimer's Association has estimated that delaying the onset and progression of Alzheimer's could save Medicare and Medicaid $210 billion by 2030.
We cannot underscore the importance of patient access to medicine, and that is the number one reason why our companies commit so much of their sales—roughly 18% of domestic sales among PhRMA members since 2000—to R&D. But this investment in research is not just an investment in the future of American patients; it is an investment in the future of America's economy. It is no secret that the strength of America's economy has long rested on innovative sectors, and few are as innovative as biopharmaceuticals.
The Congressional Budget Office stated in a 2006 report on R&D that, "The pharmaceutical industry is one of the most research-intensive industries in the United States. Pharmaceutical firms invest as much as five times more in research and development, relative to their sales, than the average US manufacturing firm."
However, as we look to the future and work to promote the sustainable growth of the sector, we know that challenges remain. We believe that one of the best ways to achieve sustainable growth is through collaboration. The combination of federal and state funding in medical research along with substantial private investment—and the public-private partnerships that follow—are an important way to foster economic growth at the state and regional levels.
Many states have implemented a range of policies and programs in recent years to help attract and grow jobs in the biopharmaceutical sector, providing an important economic counterpoint to the national programs in countries outside the United States intended to woo America's biopharmaceutical companies. From tax credits to the development of technology parks in collaboration with university systems, these efforts have helped create innovation clusters that lead to job growth and the stimulation of local economies.
Unfortunately, as the report commissioned by CAMI points out, although the US was one of the first countries to offer an R&D tax credit beginning in 1981, we have not kept up with the efforts made by other countries. It is time our national policymakers follow suit with the many successful state efforts that have stimulated the biopharmaceutical sector, along with America's other innovative industries.
These programs, which could promote private investment, inform regulatory policy, advocate translational research and public-private partnerships, and develop scientific talent through improved educational platforms, would enhance the work of biopharmaceutical research companies. The benefit to both America's patients and to America's economy could, as we rebuild, be immeasurable.
Ken Johnson is senior vice-president of the Pharmaceutical Research and Manufacturers of America (PhRMA).