Keeping U.S. Lead in Medical Innovation

Published October 26, 2010

The United States dominates the global market in biopharmaceuticals, but that strong performance is increasingly endangered by federal taxes and regulations. In 2007, more than 2,700 drugs were under development in the United States—compared to just 1,700 throughout the rest of the world. Between 1996 and 2006 the number of domestic jobs in the industry exploded, growing at twice the rate of job creation elsewhere in the economy.

Through 2008, during the worst recession in decades, the biopharmaceutical sector grew by 1.4 percent even as total private-sector employment declined 0.7 percent.

Biopharma directly employs almost 700,000 people in the United States and supports 3.2 million U.S. jobs in total. These are well-paying jobs—the average salary in the biopharmaceutical sector was $77,595 in 2008, $32,000 more than the average private-sector job.

Not Just Economic Benefits

The biopharmaceutical sector does more than create jobs and foster economic growth. Its research saves and improves lives.

Worldwide, antiretroviral treatments have cut AIDS deaths by 70 percent. Innovative drugs are largely responsible for cutting cancer death rates in half. Between 1991 and 2004 the average lifespan in the United States increased by nearly two-and-a-half years thanks to new drugs and better medical imaging technology, a Columbia University study found.

U.S. dominance of the biopharmaceutical sector isn’t a certainty, however. European and Asian companies are fighting harder and harder for a bigger piece of the biopharma pie. So how do we make sure the United States remains at the top?

Three Key Steps

First, the United States must be an attractive place to do business overall. Biopharma is a very dynamic industry—scrappy startups compete head-to-head with some of the biggest companies in the world.

To make sure these innovative companies can succeed, our leaders must maintain a level economic playing field. Excessive taxes and onerous regulation will discourage new businesses from sprouting and will prompt established firms to seek friendlier climes abroad.

Second, the United States must resist the temptation to forcibly limit the price of drugs. Pharmaceuticals are a high-risk, high-reward business. The average drug costs more than $1 billion to develop. For every 5,000 to 10,000 compounds that enter testing, only one will get FDA approval and make it to market.

Investors understandably demand a positive return on their investment. If government price controls prevent companies from recouping the billions they pour into research and development, investors will refuse to fund the next round of innovative research.

Finally, the nation’s leaders must work to improve the U.S. educational system to produce the bright young people medical research requires.

In these trying economic times, the nation’s biopharmaceutical sector provides a reason for optimism. It’s medicine for hard times—but our leaders must make sure the industry can continue to grow and breathe life into the economy.

Peter Pitts ([email protected]) is president of the Center for Medicine in the Public Interest and a former associate commissioner of the U.S. Food and Drug Administration. This column originally appeared in the San Diego Union-Tribune. Reprinted with permission.