Preserving Incentives for Innovation

Pharmaceutical innovation is not a given. In an era of new scientific and public policy challenges, preserving a climate that supports innovation is more important than ever.

"Far better treatments for many more illnesses - the promise of the new biomedical sciences of the 21^st century - is by no means a sure thing... If the needed R&D investments can't be covered or made less risky, they will slow down."
- FDA Commissioner Mark McClellan, November 18, 2003

The shift in pharmaceutical research and development from Europe to the United States over the past decade illustrates the importance of maintaining incentives for innovation. European pharmaceutical research companies are relocating their labs to the United States in increasing numbers, and over the past 10 years, the U.S. has surpassed Europe as the leading site for pharmaceutical R&D.

Why? In no small part, because of U.S. policies that provide an economic and regulatory environment in which innovation can thrive.

To continue bringing new discoveries from America's research labs to patients, it is essential to preserve the incentives that drive innovation. To achieve the tremendous promise of American pharmaceutical innovation, policymakers should:

Recognize the increasingly important role of pharmaceuticals in medical care
Innovative medicines save lives, alleviate suffering, and improve the quality of life. They also often reduce the need for more invasive and more expensive treatments. In recent years, guidelines issued by medical societies and the U.S. government have recognized the importance of prescription medicines in the cost-effective management of many health conditions. In debating how to reduce health costs, it will be important not to focus only on the cost of innovative brand-name medicines - which account for just 7% of total healthcare spending - but to consider how proper use of prescription medicines (especially newer drugs and biologics) may actually reduce our overall healthcare burden.
Focus on improving quality care
Large percentages of patients with conditions like diabetes, high cholesterol, asthma, hypertension, and depression are not receiving recommended care, including prescription medicines. Supporting efforts to improve the quality of care will lead to better results for patients and help avoid the complications or hospitalizations that are major contributors to rising health costs.
Support cost-control strategies that don't restrict access or stifle innovation
The competitive market and pricing we have in the U.S. drive rapid innovation and help fund research into future breakthroughs. In working to contain health costs, policymakers should explore solutions such as disease management programs that use prescription drugs to improve care and reduce overall costs. Government price controls should be avoided: experience in Europe and Japan show they reduce incentives for investment in R&D and restrict patient access - some patients have been denied crucial treatments for years while governments decide on prices. If price controls were in place in the U.S. between 1952 and 2001, economists estimate that between 330 and 365 new medicines would not exist today.
Maintain patent incentives in the U.S. and strengthen them worldwide
Abraham Lincoln wrote, "Patents provide the fuel of interest to the fire of genius." Indeed, patents are a crucial factor in innovation, ensuring that companies have the possibility of being rewarded for the major investments needed to develop a new medicine is vitally important. Medicines already have fewer effective years of patent protection than other U.S. products, and a growing number of generics are entering the market years before these patents expire. Preventing further erosion of patents in the U.S., and defending them in other nations, is needed to protect this important incentive for further investment.
Maintain rigorous, efficient and transparent regulation of pharmaceuticals
The FDA Modernization Act of 1997 was a major step forward, but the FDA should continue to streamline its operations so that safe and effective new treatments are approved and made available to patients as rapidly as possible. Recently, the FDA initiated an important new Critical Path initiative to spur continued pharmaceutical innovation. International regulatory harmonization can help get new drugs and biologics to patients in all parts of the world.
Support a strong industry-government research partnership
Academic scientists use government research funds to discover how a gene causes a disease; scientists working for pharmaceutical companies develop medicines that regulate that gene, turning basic research into a treatment or cure. This partnership is a crucial link in the process of bringing new discoveries to patients.