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Exclusive Life Science Feature ment to put significant financial resources into R&D; — a policy Hugin believes needs to be implemented on a more macro level. BRANDED INNOVATION BENEFITS SOCIETY THROUGH A VIRTUOUS CYCLE Evangelizing the importance of increasing investment in medical innovation in the U.S. requires more than just a revamped culture of innovation. Namely, it requires pro-innovation policies and regulations, IP protection, and a significant financial commitment. Presently, the biopharmaceutical sector is the most R&D-intensive; industry in the United States, investing more than nine times the amount of R&D; on a per-employee basis when compared to manufacturing industries overall. Celgene is even higher, investing approximately $265,000 in R&D; per employee. Compare that to the $7,634 per-employee average R&D; expenditure for all U.S. manufacturing sectors between 2000 and 2004. Celgene and the biopharmaceutical sector have demonstrated the financial fortitude to invest in U.S. medical innovation, which THE ECONOMIC BENEFITS OF GOOD PUBLIC POLICY "So few people today appreciate the improvements to the quality and length of life that medicines, devices, and medical innovations have on our society and the economy at large," states Bob Hugin, chairman and CEO of Celgene. For example, in 1900, the average U.S. life expectancy was 49 years. Today, it is 79. It is estimated by 2040 U.S. life expectancy will reach 85 years, a full 13 years more than the rest of the world. This is primarily the result of innovation in medicine and improvements to public health, which translates to U.S. economic health as well. Economists Kevin Murphy, Ph.D., and Robert Topel, Ph.D., calculated life expectancy gains from 1970 to 2000 to have added approximately $3.2 trillion per year to national wealth. They estimate a modest 1% reduction in cancer mortality would be worth $500 billion to the U.S. economy. Unfortunately, many pundits focus on prescription drug spending in a vacuum, noting increased spending on newer prescription drugs, while failing to note the overall reduction in medical spending that often results. Research conducted by Columbia University Professor Frank Lichtenberg, Ph.D., provides strong evidence to support the use of newer drugs in actually reducing total healthcare spending. For example, he estimates the use of a newer drug to treat a condition would result in an increase in prescription drug spending of $18. However, it would also result in a reduction in other medical spending by $129, with most of the savings being due to reduced hospital and physician office-visit expenditures. Hugin cites Medicare Part D as a real-world example in support of Lichtenberg's research. "In the first year, we saw a $14 billion reduction in other medical services expenditures with just the introduction of Medicare Part D – and costs 43% below forecasts," he attests. "It's only been around seven years and has nearly a 90% approval rating, which is pretty much unheard of. How can anyone not believe that Medicare Part D represents great public policy and an important social advance for America?" 28 LifeScienceLeader.com April 2013 helps people live longer, better, and healthier lives and, in turn, stimulates the U.S. economy. But Hugin believes there are some big opportunities that should be mentioned and discussed frequently, for example, the facts related to the cost of drug development. "When successful drug discovery costs close to $1.2 billion and takes an average of 12+ years, that is just not sustainable if you want to provide therapies that can be costeffective while continuing to invest in more programs to have more solutions," he states. In order to protect the U.S. medical innovation R&D; engine, the effort needs to be truly collaborative, with multiple constituents, including life sciences companies, academia, patient advocates, payors, FDA, NIH, and CMS (Centers for Medicare & Medicaid Services). Additionally, he says the fact that most drugs eventually go generic is an important consideration for all life sciences constituents. "If you want people to take risks, they have to have confidence and the certainty that if, in the rare case they are successful, they will benefit from it and be able to sustain the business model and make future investments in R&D;," he notes. An integral component of the virtuous cycle of medical innovation is that new discoveries are accessed and reimbursed based on their therapeutic value. As a result, this provides both funding for future innovation and long-term benefit to society in the form of generic drugs after the original patent life has expired. As a point of reference, the innovator's discovery spends more time in the generic phase of its product life cycle than it does in the brand phase of its life cycle — an enormous societal benefit. "Generics will not exist if we don't invest in branded, innovative therapies that get fully protected for the life of the intellectual property," reminds Hugin. "Generics are invented by branded innovative companies. They aren't invented by generic companies." SEEK OPPORTUNITY WHEN FACING ADVERSITY Hugin is hopeful that U.S. government lawmakers heed the example of the EU's drug industry. He believes public policies which are supportive of collaboration and pro-innovation are necessary to truly protect the U.S. medical innovation R&D; engine. Referencing Federal Reserve Chairman Ben Bernanke's Feb. 26, 2013 comments, Hugin advocates the need for addressing problems with a long-term approach as opposed to the EU's implementation of austerity — spending cuts and increasing taxes. Bernanke recently urged Congress to consider tax and spending policies that "increase incentives to work and save, encourage investments in workforce skills, advance privatecapital formation, promote research and development, and provide necessary and productive public infrastructure." Hugin is in agreement, noting, "Often, during times of great adversity, you are presented with excellent opportunities. Seek to find the opportunities adversity presents." Not bad advice coming from the CEO of a company that overcame adversity by bringing back a once-banned drug that ignited bold pursuits in science and transformational approaches to rare, serious, and debilitating