The Virtuous Cycle: Investing in Better Health Care

What will it take to create a virtuous cycle of sustainable medical innovation?

Lately media and policymakers have been taking aim at the pricing of breakthrough therapies that could save thousands of lives in the United States each year. Patients want and deserve to have access to the best treatment options, and all those involved in health care need to focus on how to support the development of and access to the next generation of therapies that will improve patient lives.

“Countries and societies need to decide whether or not they want to invest in improving health care and looking for new cures,” Mark Elliot, executive vice president of the U.S. Chamber of Commerce’s Global Intellectual Property Center, said. “If we are happy with the therapies that are on the market now, then there’s no need to reward innovation. But no country believes that we do not need to improve health care.”

Bringing a new therapy to market is risky and expensive. For every 5,000 to 10,000 compounds that enter development, only one is approved.  Because of those challenging odds, medical innovators spend about $1.2 billion to bring a single drug to market. Recent estimates suggest this number may now be as high as $5 billion.

Strong intellectual property (IP) policies encourage innovators to take this risk and remain committed to developing new therapies that improve the quality and length of patient lives.

“I worry that downward pressure on pricing will put us in a place where it’ll no longer make sense to invest in these endeavors,” Scott Gottlieb, M.D., a resident fellow at the American Enterprise Institute, said. “We certainly don’t see an overwhelming amount of capital coming into the life sciences right now.”

The United States has some of the strongest IP policies in the world, providing an environment that encourages medical innovation. As a result, U.S. innovators were responsible for 47 percent of the 252 therapies approved by the FDA between 1998 and 2007. Japan and the United Kingdom were next, contributing about 9 percent each.

Where FDA Approved Drugs Were Discovered

U.S. patients also have better access to new therapies than do those in other countries. One study found that patients in the United States had among the highest levels of access to new cancer therapies and that a new cancer therapy was 10 times more likely to be prescribed for a patient in the United States than in Europe.

With access to new therapies, Americans are living longer, healthier lives. The five-year survival rate for U.S. cancer patients is 65.9 percent, higher than all other countries worldwide. Life expectancy in the United States was 76.9 years when not factoring in fatal injuries (which health care cannot prevent or treat), which is the highest of all countries according to a 2006 study.

“The founding fathers identified intellectual property as something very important to the future of the US,” Elliot said. “They were taking a bet that America could out-innovate the rest of the world, and their intellectual property and their innovations should be protected. And that has served America very well.”

We’re accustomed to paying for chronic care rather than cures. But the science is actually enabling something much better, and so payment models need to adapt to that.

The real concern should be focused on how to improve access to these therapies. Although new therapies are improving patient lives and reducing the costs of health care, insurers do not have a financial incentive to provide access to the most effective treatment options.

“Insurers don’t hold onto their patients long enough to want to make $1 million investment or $200,000 investment to cure a patient,” Gottlieb said. “And so there is resistance in the marketplace to therapies that have a high upfront cost but could change the course of a disease in a way that saves substantial money over the long run.”

New pricing models, whereby the cost of treatment could be spread over time for patients and insurers, may be one solution, according to Gottlieb. “We’re accustomed to paying for chronic care rather than cures,” Gottlieb said. “But the science is actually enabling something much better, and so payment models need to adapt to that.”

Today, dozens of new therapies promise to effectively treat millions of patients living with a variety of diseases. That variety is a testament to the strong patent policies that encourage medical innovation in the United States. Instead of targeting the medical innovators who are committed to improving patient lives, the system must find new ways to provide access to these therapies that, in turn, help fund the development of more effective therapies to come.