February 11th, 2011
In his State of the Union address, President Obama raised the political stakes for innovative American industries by calling for concerted, bipartisan action to enhance U.S. competitiveness through heightened innovation. Signaling that “this is our generation’s Sputnik moment” that requires “a level of research and development we haven’t seen since the height of the Space Race”, the President strengthened the case that this is the most technology-friendly Administration since President Kennedy. Yet his speech perpetuates the omission of the life sciences – encompassing biopharmaceuticals, medical technology, and novel imaging and diagnostics – from the embrace of federal policy elites in Congress and the Administration, and the call to duty in the shared work of creating new products, jobs, and exports in the face of unprecedented global competition.
This is puzzling, since the United States is the acknowledged global leader in life science innovation, from its world-class research universities and Nobel laureates to its unique venture capital culture and dominance of international markets. Today, the biopharmaceutical industry employs 685,000 American workers, contributes over $294 billion to Gross Domestic Product (GDP), and exports $29 billion in innovative products worldwide. In addition to being the world’s largest exporter of medical devices, the medical technology industry sustains 423,000 American jobs, provides $24.6 billion in payroll, and produces $136 billion in domestic sales.
Neglect could be benign, but for the evident and mounting challenges that threaten the sustainability of our competitiveness in the life sciences. Observers point to a shifting of comparative advantages overseas, such as a recent PricewaterhouseCoopers study which concluded U.S. dominance of the medical device industry will be increasingly challenged by Europe, China and India. Despite a doubling of the budget of the National Institutes of Health (NIH) and enhanced funding of the Food and Drug Administration (FDA), the number of new molecular entities (NME) approved in the U.S. is declining. Widespread problems plague the regulation and premarket review of medical technology, particularly for innovative diagnostics, and, while review times for prescription drugs have fallen as a result of the Prescription Drug User Fee Act (PDUFA), too many products require multiple cycles of review rather than receiving a “first cycle” FDA decision.
Evidence of the Red-Headed Stepchild
Despite these risks to U.S. competitiveness, the absence of life sciences from the national dialogue on innovation and competitiveness is nothing new. In 2008, Senator Obama promised broad, sector-neutral initiatives, such as making the federal research and development (R&D) tax credit permanent, while signaling for the first time his evident preference for high technology and renewable energy over the life sciences. Since taking office, President Obama has championed green technologies, renewable energy, and next-generation broadband, or pursued ostensibly sector-neutral initiatives that are largely silent on health-related technology.
Even the naming General Electric CEO Jeff Immelt as chairman of the new Council on Jobs and Competitiveness arguably perpetuates a scarcity of life science industry representation on the President’s advisory councils, including the President’s Economic Recovery Advisory Board (PERAB) and the President’s Council of Advisors on Science and Technology (PCAST), as well as among the senior staff of the President’s National Economic Council and the Domestic Policy Council.
A close look at recent health-related domestic policy achievements – enactment of the American Recovery and Reinvestment Act (ARRA) and of health reform under the Accountable Care Act (ACA) – only reinforces the policy delinkage of innovation from the life sciences.
- Under ARRA, an unprecedented $17 billion in fiscal incentives are flowing to providers and health systems to promote uptake of electronic health records (EHRs) and the “meaningful use” of existing health information technology (HIT) systems, thereby creating new efficiencies, improving quality of care, and generating savings in health care delivery – but conspicuously not promoting technological innovation or creating new HIT solutions. It was only in December that the linkage between an enhanced HIT infrastructure and the clinical research enterprise which sustains product development was finally noted in passing — despite it being coextensive with the same academic medical centers, hospitals, and providers caring for patients.
- The Accountable Care Act (ACA) expands coverage and will ideally improve quality of care, but “innovation” is avowedly limited to care delivery, comparative effectiveness research, and payment systems, through new mechanisms such as the Independent Payment Advisory Board (IPAB) and the Center for Medicare and Medicaid Innovation, that could potentially impede rather than stimulate life science discovery. Indeed, the singular exceptions in the ACA to the silence about life science innovation largely prove the rule: enactment of the Cures Acceleration Network was largely accomplished by Senator Arlen Specter, while a key bipartisan proposal directed at stimulating biopharmaceutical innovation — to afford new biological drugs 12 years of exclusivity — was opposed by the Administration.
Turning the Corner
The “missing link” between innovation policy and life sciences is both bipartisan and endemic in Congress as well as the Executive Branch. The Administration and Congress persist in pigeon-holing novel health technologies as a problematic cost-driver, rather than as the means to detecting disease earlier, targeting interventions more effectively, reducing disability, morbidity, and mortality, or shortening costly inpatient care. Nor will the change in majority in the House of Representatives necessarily improve the situation: recently, Speaker of the House John Boehner attacked “Big Pharma” for striking a “backroom deal” as part of the ACA to close the Medicare Part D coverage gap for elderly and disabled beneficiaries.
Policies that promote life science innovation are not intrinsically partisan. Even the National Commission on Fiscal Responsibility and Reform called for “cut[ting] red tape … and invest[ing] in .. high-value research and development”. Where the life science community has relied heavily in the past on individual champions, such as Senators Kennedy, Specter, and Mark Hatfield of Oregon, surmounting this “Sputnik moment” requires many more Members of Congress and the Administration to embrace the sector, acknowledge its importance to the creation of high-skill, high-wage jobs, and take concrete steps to enhance innovation. For example:
- Venture capital funding and efficient science-based regulation are among the success factors recently identified by Amgen CEO Kevin Sharer as necessary for sustained innovation. Because medical products are so highly regulated, there is a strong correlation between the two, with capital taking flight to alternative sectors when regulation by the FDA is not consistent, predictable, and risk-based. Commissioner of Food and Drugs Peggy Hamburg has espoused these goals, and President Obama has focused on potential opportunities for regulatory reform to “make our economy stronger and more competitive”, raising hopes that meaningful reforms could streamline and improve the review of novel medical technologies.
- Earlier this month, Health and Human Services (HHS) Secretary Sebelius wrote in Health Affairs that “strong, strategic partnerships both within government and among government, academe, industry, and nonprofits are needed at every stage of drug development.” Yet the initiatives described by the Secretary are too modest and interstitial to fulfill the President’s State of the Union call for rapid, decisive action. The statutory infrastructure for such partnerships exists in the Reagan-Udall Foundation, which has been stalled for want of discretionary funding. An immediate ‘reboot’ is possible, but challenging to accomplish should federal discretionary spending be rolled back to Fiscal Year 2008 levels, as proposed by House Republicans, or frozen for the next five years, as proposed by the President.
- The NIH is taking an important step in assembling a new National Center for Advancing Translational Sciences (NCATS) from existing programs, including the Clinical and Translational Science Awards (CTSA) designed to foster public-private collaborative research. With little likelihood of expanded NIH funding, the agency and Congress must confront whether an even greater allocation of funds to translational and clinical research is needed and whether the agency’s intramural research programs are in need of a critical and independent assessment.
- The merits of implementing IPAB require heightened scrutiny, given its potential chilling effect on life science innovation. Viewed as a brake on Medicare spending, IPAB will submit legislative recommendations beginning in 2014 for fast track congressional consideration to reduce program expenditures if they exceed targeted growth rates. Yet the ACA puts troubling limits on congressional authority over IPAB, the Medicare program, as well as over laws enacted on the basis of IPAB recommendations, which are first due in 2014. Congress would also do well to repeal the politically expedient but substantively indefensible exemption of hospitals from IPAB’s scrutiny until the end of 2019.
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