Health-Care Reform and the 'Innovation Test'

Government-run insurance plans have curtailed access to new medicines.

Two dramas are underway in health care. The first is set in laboratories and clinics, and it is a hopeful story of how innovation may continue to improve human health. The other drama is set in Washington conference rooms and corporate boardrooms, and it concerns the reform of health-care access, financing and regulation. As a scientist who leads what I call "the last unmerged large pharmaceutical company" (more on that in a moment), I am the rare player who moves between these two stages -- and I do so with growing concern.

I've spent three decades working in or near biopharmaceutical research and development. During that time, I've witnessed breakthroughs as diverse as biosynthetic human insulin, bone-forming agents for treating osteoporosis, new cancer therapies, and a first-ever treatment for severe sepsis go from glimmers of intuition to everyday medical tools.

Inventions such as these -- and my list includes only the partial output of the company I work for -- have transformed the most basic expectations of human life in the last century. Today, the average life expectancy at birth in the U.S. is 78; when my mother was born in 1928 it was 57. (She's still in great health, by the way.)

Even in the last two decades of the 20th century, new medicines accounted for 40% of the increase in life expectancy in more than 50 countries, according to a recent study by Columbia University economist Frank Lichtenberg. In other words, for every year that life expectancy has increased, five months can be attributed to the availability of new medicines.

The progress so evident in this first drama is poised to continue and even accelerate in the years ahead. Genomics, systems biology and other basic-research streams of new knowledge are bringing forward clues about the origins of disease -- and giving drug developers fresh insights to apply to an amazing array of new targets.

Today, a record 861 new medicines and vaccines are in human trials or awaiting regulatory approval in the fight against cancer, along with more than 300 for heart disease and stroke, another 300 for mental illnesses -- including Alzheimer's disease -- and 90 for HIV/AIDS.

U.S.-based private industry is the heart and soul of this innovation drama, investing $58 billion in research and development for new medicines in 2007 alone. Virtually no discovery reaches the point of regulatory approval if it is not shepherded through clinical development by a large biotech or pharmaceutical company. This means companies too often maligned as "Big Pharma" are in fact the only entities with the right combination of expertise, infrastructure and financing to pull this off.

Yet in today's policy-reform drama -- if early clues from Washington are a guide -- the requirements of innovation may be written out of the script. Already in defensive mode, several large pharmaceutical companies are restaging the old merger play -- continuing to narrow the ranks of firms with the full-scale capacity to innovate. Meanwhile, skittish investors have retreated, leaving nearly half of all publicly traded biotech companies with less than a year of cash on hand. These trends amount to show-stoppers if they continue.

Biomedical innovation is not incompatible with the health-care reform goals of universal access, quality improvement and cost control. On the contrary, without new, more effective medicines -- along with new devices and diagnostic tools, and better treatments and surgical techniques -- it will be impossible for larger numbers of Americans to obtain better health care at a manageable cost.

So it is vital to all of us that we insist that reform proposals pass the "innovation test." Providing insurance to millions of Americans through a government-run plan would fail the test. Similar efforts around the world have led to rationing of health care and created hurdles between patients and the most advanced treatments. On the other hand, innovation would remain reasonably secure if universal access were achieved through tax credits and government subsidies that allow patients to choose from a variety of private health-financing options.

Curtailing health-care costs by allowing the federal government to dictate prices for branded medicines also would fail the test. Price controls and rebate requirements tend to be arbitrary and make it much harder for innovators to attract and recoup investments. For their part, private insurers and patients tend to control costs by insisting on value -- forcing companies to demonstrate how the effectiveness or broader savings generated by their product justifies its price. That approach maintains the incentives for innovation and is yet another reason not to crowd out the free market.

Proposed laws that could weaken the enforcement of patents on biotechnology products flunk the innovation test as well. Some in Congress want to leave the creators of new biotech medicines with only small periods of time in which to retain exclusive use of research-and-development and manufacturing-process data for these products. This might speed the arrival of copied versions of some medicines, but it would kill critical incentives to discover and develop them in the first place.

In contrast, the "Pathways to Biosimilars Act" now before Congress gets the mix right. It does this by giving innovators the time needed to recoup their research investments while defining a clear framework for legal copying of biotech products down the road. It strikes the right balance between innovation and competition.

Our legislators in Washington still have the power to keep innovation in the health-care reform script. Not doing so would be a true American tragedy.

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Republicans and ObamaCare

Republicans? They're trying to figure out what they think. Well, not all of them. Earlier this week I ended up in the office of Oklahoma Sen. Tom Coburn, where the doctor was hosting North Carolina Sen. Richard Burr. The duo is, for the second time, crafting a comprehensive reform that would lower costs, cover the uninsured, and put Americans in control of their health care. And while the senators decline to talk GOP politics, their bill raises the multitrillion-dollar question: Will the party have the nerve or sense to coalesce behind some such conservative alternative to the Democratic product?

They'd better, because the days of Republicans winning these battles solely by spooking Americans are over. Phil Gramm, Harry and Louise might have scored with that approach in the 1990s, but the intervening years have brought spiraling costs and public unrest. Americans want a fix. Democrats promise one. The GOP can't tank the public option simply by complaining it will kill private insurance. The party has to finally elucidate how it plans to allow the private market to work.

Not that the senators don't think Republicans need to make clear to the country that the public option is, in Mr. Burr's words, "a fast track to a single-payer system." But they are also operating on the belief that Republicans must go beyond Band-Aid solutions to embrace, as Mr. Coburn puts it, a "complete transformation" of a system that is "structurally" flawed.

Their own bill overhauls the tax code, currently stacked in favor of corporate employees, to provide a tax credit to every American to purchase insurance. It expands health-savings accounts. It creates state health-insurance exchanges, where private insurers compete to cover Americans, including the uninsured. (This is partly modeled on the Medicare drug program, which has provided seniors with choice and held down costs.)

More broadly, it seeks to reorient financial incentives so that the system is no longer focused, as Mr. Coburn puts it, on "sick care," but on preventing the chronic diseases that eat 75% of health expenditures. These incentives would be used to lower costs and discourage insurers from cherry-picking patients. The bill also dives into Medicare and Medicaid reform.

Yet no small number of Senate Republicans are biding their time in Max Baucus land, waiting to see what the Democratic finance chairman produces as a "bipartisan" product. (Read: A bill the president wants.) This crowd has taken to heart Mr. Obama's accusation that they are the party of "no," and think it might be easier to be the party of Baucus, or the party of Baucus-lite, or the party of nothing whatsoever.

The White House is targeting folks like Chuck Grassley, Orrin Hatch and other Senate Republicans who back in 1997 voted for the State Children's Health Insurance Program, which was pitched by Democrats at the time as a modest program to help poor kids. It has, of course, become exactly what Democrats always intended it to be: a ballooning federal entitlement that is today transferring middle-class children from private insurance onto the federal rolls. This might be thought of as a teachable moment. But now Republican "moderates" are all ears for the administration's soothing suggestions that perhaps the "public option" can be "structured" so as to protect private insurance. Uh-huh.

Another group of Republicans are still going 50 rounds over taxes -- namely, whether a deduction isn't a more principled and cleaner way than credits to equalize the tax treatment of insurance. This is a legitimate debate, but one that should've been had 10 years ago when Republicans were in the majority. While the GOP fiddled, Democrats focused the argument on "uninsureds," which has made a tax deduction (which would only cover those who pay taxes) even less politically palatable.

Over in the House time runs on, as the Republican leadership and a health-care working group continue to noodle over platforms, policies, egos and timing. Democrats intend to be debating their bill by June.

As for Messrs. Coburn and Burr, they spent a good half hour with me enthusiastically explaining why a competitive market would improve health, provide control and choice, lower costs, and tackle entitlements. It's a good pitch. If only the rest of America could hear the party make it.

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