Medical Innovation Benefits Patient Health, Economic Growth
Making Strides in War Against Cancer
Remarks of Robert J. Hugin
Pharmaceutical Research and Manufacturers of America
Wednesday, May 5, 2013
Thank you all for joining me today. I am Bob Hugin, Chairman of PhRMA and Chairman/ CEO of Celgene Corporation – a leading medical innovator whose objective to is to help patients with cancer and immune-related and inflammatory conditions live longer and better quality lives.
This week’s visit to Japan is my first international visit as the Chairman of PhRMA since my appointment in April of this year. My visit is most appropriate given that Japan is the largest biopharmaceutical market in the world outside of the United States and, I should add, one of the most progressive countries in the world when it comes to pro-innovation and pro-patient policies that are in the long-term interest of patients, healthcare and the economy.
Let me begin with a short description of Celgene to help illustrate how we are making dramatic progress against cancer, reducing burdens on healthcare systems and strengthening economies through investing in medical innovation and also to share with you the many profound changes underway in our industry. The Celgene story illustrates how entrepreneurial risk-taking start-ups in the United States and elsewhere can develop into successful companies with huge benefits to a nation’s economy and to the health of its people.
Celgene was created in 1986 when Celanese Corporation, then a major American chemical manufacturer, spun off a small division into an independent company which is now Celgene. Our journey was not easy. It included multiple unexpected road blocks, the courage of our people to convert those road blocks into opportunities, the vision to overcome obstacles and to transform them into novel approaches, and, importantly, collaboration with others — doctors, patients, government and investors—to make all this happen.
We had about two dozen people and just enough money to keep the lights on. Our young company faced several crises in our business strategy, our vision and indeed our future. The Celgene story could have ended there—a footnote in the history of the biopharmaceutical industry. However, we were determined to succeed and recognized that to do so we would need to do things differently, have a compelling vision, take risks, not fear failure, and most important, create our future through innovation.
Time and time again, we faced adversity from every direction. We had no financial resources so we raised money; we had no people with global biopharmaceutical experience so we learned and hired experts; we had no appropriate distribution system so we created one; there was no risk-management program for the commercialization of our immunomodulatory therapies so we invented one; there were no life-enhancing treatments for some terminal blood cancers so we discovered and developed them.
I’ve been fortunate to be part of establishing this company based on innovation at all levels. Today, Celgene is a global integrated biopharmaceutical company engaged in the discovery, development, delivery and access of innovative therapies to treat patients with cancer and other severe, immune, inflammatory conditions. From humble beginnings, we have expanded to more than 5,000 employees in more than 50 countries. We began our global operations in 2005, including establishing ourselves in Japan in October of that year. Much like the early days of Celgene US, Celgene KK began with a handful people who decided that, a “go it alone” strategy, although high risk, was in the best long-term interest for patients, and Celgene. Today, Celgene KK now has 250 employees. .
Our global revenues are projected at $6 billion in 2013. That’s good news for global healthcare since it creates opportunities for Celgene to continue to invest billions of dollars in the next-generation of life-saving therapies that will help transform more terminal and disabling diseases into long-term manageable ones.
To that end, we have delivered six life-enhancing innovative therapies in global markets, we are advancing more than 30 pivotal phase III and phase II studies in multiple diseases and we have identified nearly 20 high-potential novel compounds in pre-clinical and early clinical studies that may continue to advance the course of medicine for years to come. So if you believe that past is prologue, than the future of medicine looks very bright, and the prospects for patients living longer and better lives is very promising.
But Celgene is by no means unique among PhRMA member companies. Our companies are vibrant and changing rapidly. All have impressive, committed, and dynamic leaders. We all have a common mission, to make a meaningful difference in the lives of patients around the world. PhRMA members have a common business proposition, that value can't be created if patients don’t benefit first. And the best way for us to deliver a transformational future of medicine that is in the best long-term interest of for patients is to invent it ourselves.
We have a major responsibility to discover and develop new innovative therapies, and we are doing so, investing more, as a percentage of our revenues into R&D, than any other industry in the world. This came to almost $50 billion last year globally. But government policies also have a significant impact on investment and innovation and our ability to deliver transformational outcomes to patients. In the US, over the past 60 years, medical innovation has been the source of more than half of our economic prosperity and growth. In the US, since 1988, as a result of medical innovation, 42 million life years for cancer patients have been saved contributing nearly $3.5 trillion to our economy. Decades of health economic evidence reinforce that pro-innovation and pro-patient policies do make a difference for patients, healthcare and the economy.
There are multiple actions that must take place if we are to accomplish our goal of improving the lives of patients. First, regulatory agencies must have proper funding so that we have a 21st century regulatory science system that allows us, in the most cost-effective and rapid way, to bring new therapies to patients. Second, it is critical that there be strong intellectual property protection across the globe. Intellectual property is the life blood of innovation, and it will be the protection of intellectual property that leads to the innovation that brings better patient care, better health outcomes, and, ultimately, economic prosperity. And third, that governments create pricing and reimbursement policies that foster a high risk research environment that allows for the return on our investment necessary to reinvest revenues back into our next-generation of research.
I have had the opportunity this week to meet with a wide range of individuals in Tokyo, including Cabinet Ministers, Diet members, researchers, healthcare providers, and industry leaders, and I am grateful for the time they gave me and the candid discussions we had.
I leave Japan with an even stronger sense that your healthcare system is one of the best in the world, having produced the highest life expectancy and one of the lowest mortality rates. The universal healthcare system and the national health insurance system with low overall spending compared to other developed countries and easy access to physicians is a system that other countries should study and emulate. This has been the result of significant improvements in much of the healthcare environment in Japan in recent years – regulatory reform that allows for global development to include Japan at the earliest stage; improvements in the clinical trial environment; pricing and reimbursement reform to stimulate the development of innovative medicines; policies to ensure that unapproved therapies and indications are brought to Japan more quickly, and updating the vaccine law to ensure that both children and adults benefit from the newest and most effective vaccines we are developing.
The result has been creation of a much more favorable environment for the development of medical innovation in Japan than in the past and, I should add, than in almost any other developed country at the present time.
However, as you all know, there are serious challenges and risks confronting Japan’s healthcare system. We believe that medical innovation, based on decades of health economic evidence, is the solution to healthcare and the economy, not the problem. The rapidly aging population, the need to care for the elderly, funding pressures due to increasing demands on the healthcare system in an increasingly constrained budget environment – these and more, are the most critical challenges facing Japan. I don’t have to explain these to you since you write about them every day.
Additional investments in healthcare, particularly in innovative medicines, can help mitigate these risks and create significant social and financial benefits for the nation. Use of innovative medicine reduces the life-time cost of treatment by more effectively treating and preventing diseases. Many serious diseases today are treated with a capsule or pill that the patient can take at home, with the family, with a glass of water. This more efficient use of medical resources leads to less need for care or hospitalization, especially for the elderly, thus saving on cost. Further, use of innovative medicines can enhance labor productivity by improving patients’ level of health so they will continue to work, consume goods and pay taxes. All of this contributes a stronger economy through GDP growth, job creation and reduced burden on the healthcare system.
Over the past five years, 176 new medicines have been introduced in Japan and are now available to patients here. This success is due to favorable government pro-innovation and pro-patient policies in the review and approval processes where the average time for new drug review has been cut in half, pricing and reimbursement reform that has stimulated earlier drug development in Japan, and clinical trials where the percentage of global clinical trials that include Japanese patients has risen markedly.
PhRMA has just completed a study of a group of these medicines recently introduced in Japan, and the study conclusions are included in the material you have in front of you. Using available Japanese data, an examination of five best-in-class drugs that treat major chronic diseases demonstrated a total economic value of 1.3 to 1.5 trillion yen. That represents 16 percent of the total medical spending in these disease areas. To be more precise, our analysis demonstrated that for these five drugs, there was a total medical treatment cost savings of 800-950 billion yen and an economic benefit because of productivity gains of 500-550 billion yen, thus, a total economic value to the nation of 1.3 to 1.5 trillion yen.
The disease areas of the five drugs examined were diabetes, chronic obstructive pulmonary disease or COPD, chronic kidney disease, stroke prevention atrial fibrillation, and depression. The resultant extension of life, healthcare savings and economic value added from investment in these five drugs is truly stunning and demonstrates clearly why the Japanese government should continue to promote medical innovation in the life science sector.
As a result of medical innovation, government will obtain fiscal relief that will benefit taxpayers and strengthen the healthcare system. Patients will enjoy a better quality of life and a longer healthy lifespan. Physicians will be able to provide better care for their patients. Academic and research institutions will be able to attract and develop more and even better scientific talent. The overall Japanese economy will benefit from higher productivity, GDP growth and job creation. As the market environment becomes friendlier to innovation, foreign companies will pursue more clinical trials throughout Japan, and they will collaborate more with Japanese scientists and technicians who will benefit from new knowledge and new research experiences.
Although we looked at drugs in five disease areas, a similar analysis of innovative therapies in other major areas like oncology and vaccines would likely have also shown significant value.
I want to stress that we focused on the economic, budget and productivity gains from use of these medicines because we wanted to quantify the impact in an important way and share the value of medical innovation that is fully understood by communicators, such as yourselves, who can make a meaningful difference when you have the facts. But the non-quantitative impact on the quality of life of patients cannot be minimized. Depression patients can achieve remission and enjoy every day social life. Diabetes patients can carry on with their normal daily activities. A patient with COPD who may lose her ability even to walk could delay the progression of the disease significantly and have more active years because of taking innovative medicine.
The policy implications of this analysis is clear – investment in medical innovation should be more focused on the life curve and investment in the next-generation of medical innovation that will reduce the cost of healthcare with broader sustainable access which is in the long-term interest of patients, families, caregivers, and the growth of the economy. The Japanese government has recognized this by putting a priority on healthcare, including medical innovation, as one of the key growth engines for Japan. We hear this in many countries, but Japan is one of the few governments that truly implements policies that are profoundly pro-innovation and pro-patient. I salute what I see as a significant effort by stakeholders across government and throughout the healthcare ecosystem.
But, despite such impressive progress, all countries must continue to increase their focus on innovation. Three decades ago, Europe produced over one half of the innovation and intellectual property related to new drugs. Today, that figure is below 25 percent and can be attributed to a failure to support early-stage research with policies that include inadequate reimbursement for drug development. There are many reasons that European economies have suffered, but I believe that this failure to understand the link between medical innovation and economic growth is one of the most important explanations.
I ask leaders in my own company a number of questions they must keep in mind to ensure that we have an innovative environment. I think these questions can also help governments, whether it is the United States, Japan, or any others, as they try to maximize their pro-innovation policies.
- How do we create a mindset to look at things in creative ways?
- What can we do to challenge the conventional wisdom?
- How can we work in areas that are going to make transformational change for patients and change the way science and medicine are practiced?
- How can we revolutionize processes so that we are looking to do things in a way that has the highest probability of creating great outcomes and doing things that have the most efficiency?
- How can we improve access to innovative therapies for patients and improve compliance?
- Are we committing our resources in the right way to advance science and medicine?
I do not know Professor Shinya Yamanaka of Kyoto University personally, but I would bet that he has constantly asked questions like these in his quest for discoveries that will truly change the world.
The results of the study that PhRMA released today demonstrating the huge long-term positive financial impact of innovative drugs are similar to analyses we have done in the United States and other markets. I urge all stakeholders in Japan to work together to establish an environment that continues to promote innovation. The benefits to patient health, economic growth, and financial well-being are enormous.
I would be remiss if I did not talk for a moment about PhRMA’s agenda in Japan which relates very directly from my comments about supporting the environment for innovation. There are several specific policy measures that I recommend the Japanese government take. First, I referred to the important impact of the new price premium introduced three years ago on innovation. We look at the long-term when we make investment decisions, and this requires stability and predictability in pricing and reimbursement policies. Therefore, we urge that the price premium pilot project be made a permanent and regular part of the pricing system. Second, we recommend the abolition of the policy of repricing for market expansion, which is profoundly anti-innovation and conflicts with the government’s policies to support innovation. Third, we recommend the abolition of the 14 day limitation on prescriptions for drugs during the first year after approval. This often delays patients’ access to new drugs and negatively affects their compliance with important new drugs. Fourth, we urge PMDA to continue the excellent progress they have made in recent years by continuing to improve the efficiency and speed of the review process and to move more quickly to accepting foreign clinical data. Fifth, we encourage more of a focus on preventive healthcare, including drugs that can prevent disease and ameliorate the effects of disease. This includes adding new important vaccines to the list of vaccines funded by the national government. Finally, we urge policymakers to look differently at the healthcare budget and the value of medical innovation as an investment in society, in the economy, and in citizens rather than looking at it as simply another budget cost that needs to be cut.
Thank you. I would be happy to answer your questions.