Modern biotechnology is a relatively young industry, but in just over 40 years, the entrepreneurs, researchers and investors working in this field have firmly established themselves at the forefront of medical innovation and the search for new cures and therapies for previously untreatable diseases. That’s why it is important that policy proposals designed to respond to the activities of outliers like Turing Pharmaceuticals and Valeant do not hurt America’s leadership in biotechnology innovation and investment.
Today, more than 57 percent of the world’s new drugs come from U.S. companies and more than 60 percent of these new innovations are developed by small companies.
These companies punch above their weight. Of the approximately 5,000 programs in clinical trials today, more than 3,500 are conducted by small companies. That means that more than 70 percent of all clinical programs are from small, emerging companies.
The vast majority of biotechnology companies are pre-revenue enterprises, focused on using our increased understanding of science and biology to develop and invest in innovative new medicines. In fact, of the approximately 1,200 biopharma companies in the United States, more than 90 percent of these enterprises do not earn a profit and focus on innovative R&D for future products. Collectively, BIO members – both large and small – are searching for the new cures and therapies that continue to transform modern medicine. (You can read BIO’s new white paper on Unleashing the Next Generation of Biotechnology Innovation.)
In addition to their overwhelming benefit to patients, biotechnology companies are proven job creators and their innovations help reduce costs throughout the healthcare system. The Congressional Budget Office (CBO) credits each dollar of additional spending on medicines with a twenty cent reduction in other healthcare expenses (i.e. hospital stays, nursing homes). As one prominent venture capitalist recently noted, “Innovative drugs are not the enemy, they are the solution.”
The ability to get more of these innovations to patients rests on a carefully calibrated policy framework that allows these companies to attract billions of dollars of private capital. Private investment can flow to and shift among many different sectors, and investors have shown that they will flee areas like biotechnology when they think policy decisions could adversely impact an already risky investment.
Companies such as Turing and Valeant are not reflective of the broader industry, our focus on research and development, and our innovation business model.
If fact, the CEO of Valeant points this out in news reports and in their conversations with investors.
For example, according to Fortune Magazine and a transcript of the Sanford C Bernstein Strategic Decisions Conference, Michael Pearson, CEO of Valeant, told the investment conference that his company is more is more like “a professional services firm” — like an investment bank or a law firm — than a pharmaceutical company.
Further, as noted in a blog post by PhRMA, Valeant’s CEO has said the company’s “strategy is quite different from traditional pharmaceutical companies” in that it has “consistently pursued profitable growth through diversification, strong execution and financial discipline,” rather than a focus on R&D investment and innovation.
The PhRMA post also points out that Valeant invests on average less than 3% of its total revenue on R&D. If you look at the broader biopharma industry you see a much different business model. In aggregate, these companies put about 19 percent of sales back into R&D. This ranks the industry first of 126 sectors analyzed, and ahead of the semiconductor industry, which ranked number two.
On the subject of Turing, John Maraganore, CEO of Alnylam, summed up in a CNBC interview why Turing’s actions do not reflect the broader biotech industry and its entrepreneurs. He stated, “We’re about innovation, patients and 21st century medicines. We’re not about repricing drugs from the 1950s to make a profit. It’s not how we focus our R&D investments.” Maraganore further noted that his company has invested over $1 billion in research and that the innovations they bring forward can make an enormous difference in people’s lives.
There are amazing men and women across the biotechnology industry, individuals who have dedicated their lives to alleviating suffering and disease. Let’s not let the actions of a few sully the reputation and the work of more than a million people working in this essential field.