Thank you for the opportunity to speak to you this afternoon about some of the drug policy issues that are dominating discussion in the U.S.
In particular, I want to talk about how we are going to confront a future where new medicines offer many new opportunities to improve peoples’ lives, but also mean we often have to confront new financial costs.
Not just from patients who live longer and therefore end up costing our healthcare systems more money over the long run, but also because a lot of the new medical technologies are much better than older treatments, but also more expensive to research and develop.
These are positive developments--that patients are living longer and our ability to intervene to stop or slow disease is constantly improving.
But it raises the question: How do we continue to pay for new drugs, and more importantly better and more innovative treatments, especially when this additional progress also comes with an additional economic cost. In particular, how do we help improve affordability and access to medicines without jeopardizing financial incentives that inspire scientists and investors to take the big risks that are required in order to create these innovative new treatments?
I don’t think these are uniquely American concerns. People around the world--people who benefit from the lifesaving benefits of new medical technology--all share these same concerns I believe.
New medicines and new medical technologies are truly global products.
The task of making sure we continue to create these new technologies is a global challenge.
I am concerned that some of the ideas that have been recently put forward in the U.S. and some of the policies that have been already adopted in other nations for addressing these concerns could reduce the incentives to come up with even better drugs.
That could put an entire generation of medical progress – progress that I believe is right now within our grasp – at risk.
Especially when it comes to questions of drug affordability, we could all be mortgaging the next generation of breakthrough medicines through the shortsighted policy ideas that we adopt today.
We could be trading affordability at the expense of the future progress.
That could have negative implications for our public health, and our ability to combat diseases today that may be far more treatable, or even curable in the next few decades--if only modern technologies were permitted to continue to advance at a steady pace.
I don’t think we need to make this tradeoff. I don’t think the future needs to unfold this way.
But what kind of future we have will depend very much on the policy decisions we make today about how we continue to pay for and deploy new medical technologies.
To start, I believe it is important for all of us to appreciate just how far we have come in making progress against many diseases.
We are living in a remarkable time of scientific progress. Recently, I worked at the U.S. Food and Drug Administration and the U.S. Centers for Medicare and Medicaid Services – the two agencies in the American government that approve new drugs and then administer the Medicare program, which provides health insurance to American senior citizens.
At those two agencies, a lot of my time was spent looking at the policies that these agencies followed in the evaluation of new medical technologies and sometimes looking at the new products themselves.
And looking at these new products – the ones that are just coming on the market right now, and those in the early stages of development, it is clear to me that new drugs today are offering many more benefits, and fewer risks, than at any time before.
This includes many promising drugs being developed by pharmaceutical companies here in Japan, including some heart disease drugs being developed by Sankyo, cancer agents being developed by Eisai and Takeda, and a drug for multiple sclerosis by Tanabe.
These are just a few of the many important achievements of the Japanese pharmaceutical industry that doctors and patients around the world are grateful for.
You also saw all of the medical progress we are making as a community of nations on display just this past month, when thousands of the world’s best cancer doctors gathered for their annual professional meeting, the American Society of Clinical Oncologists or known in the industry by its acronym, ASCO.
More than 400 new cancer drugs are in development right now. I’ll give you just one example of the impact that these new treatments are having.
One of the clearest beneficiaries of recent innovations in cancer drug development has been the field of breast cancer. Fifteen-year survival rates for early stage breast cancer patients have gone from one in ten to one in five in just the past decade.
After a series of new breast cancer drug introductions such as the classes of drugs known as taxanes, and the aromotase inhibitors, and the drug herceptin, just to mention a few--doctors are putting all of these new medicines they have into finely-tailored cocktails that are saving many more lives.
Each of these new products had a small but measurable impact on breast cancer survival that, taken together, has led to some dramatic improvements for victims of this disease. Patients are living longer, or beating disease for good.
Just this week, US News and World Report, a popular U.S. news magazine, ran a cover story asking: are we finally beating breast cancer? I think we are making great progress against breast cancer, and a whole lot of other diseases. This is just the beginning.
It’s hard to put a price on the value of that kind of progress, although governments in Europe try to do just that.
At the same time that we celebrate all of this progress, some are questioning the high cost of these cancer treatments, and many other drugs. They are asking if it is worth the economic price.
In fact many European nations put strict limits on use of these and other drugs. They clearly are deciding that the progress we have made is not worth the cost, or at least, it is not worth their cost so long as someone else is willing to pay for it.
That is a troubling trend, because if we’re not willing to pay for medical progress, then we simply won’t achieve these public health improvements. As a doctor, I think that is simply unacceptable.
So I think we need to think more about how we continue to pay for these new medical treatments, and how do we find ways to make new treatments more affordable – especially to patients and countries with a limited ability to pay for these vital products--without putting at risk the incentives that inspire scientists to continue to spend many years and a lot of money developing them.
Coming up with all of these breakthroughs is not a cheap enterprise and it is among the most risky investment propositions that our capital markets undertake. So the rewards need to match the financial risk, or investors will look elsewhere.
I think some answers to this challenge may rest in lessons learned from changes to our own market in the U.S., changes brought on not by politicians but by the market itself, and the needs and demands of millions of individual people. Many have dubbed this market change consumer-driven healthcare.
As you know, many Americans have their medicines paid for, at least in part, through private insurance that they usually get as a benefit offered by their employer.
While drug costs in this private market have grown significantly, and are now a big source of frustration and public anxiety among employers who want to offload these costs onto our government, the private market for drugs is becoming far more competitive and aggressive and putting in place tools and incentives for holding down spending.
In some parts of our private drug market, drug costs are actually coming under control, especially if you account for all of the improvements that people re getting through new and better drugs for just a small increase in their spending each year.
How is this working? For example, dug insurance companies are exposing consumers to more of the cost of their incrementally more expensive medical choices, through tools such as tiered formularies or co-pays on more expensive branded drugs as opposed to generic medicines.
Consumers, who can afford to contribute to the incremental cost of expensive taste when it comes to drugs, are asked to pay a portion of that that decision.
These economic tools are not perfect. There are better policy ideas such as co-insurance or health savings accounts, which I will not go into in any detail here. But these general ideas are giving consumers reason to make smarter choices about their new drugs, and to make wider use of low cost generic options, and even over the counter drugs, where these kinds of substitutions for branded drugs make therapeutic sense for them.
One recent study by the insurance company Aetna of almost 14,000 beneficiaries found a 5.5 percent decrease in pharmacy costs and a 7 percent increase in overall generic utilization when consumers were exposed to more of the cost of their drug decision.
What we are finding in the U.S. is that when consumers are faced with some of the costs for their medicines, and when they are given information about the risks and benefits of different competing medicines and how much each costs, then they make more informed decisions that take into account the benefits of drugs, but also their costs.
This is also possible because of our competitive market for not just drugs, but also for information about drugs. We regulate what kind of information drug companies can provide to consumers about their new products, but we do not restrict or ban this information altogether.
In this environment, we have found that people start to weigh for themselves whether higher cost medicines provide benefits that make them worth the additional spending, without having a government agency do it for them.
And the decisions they reach are more finely tuned to their individual preferences, just like the targeted drugs that are increasingly the result of new research.
Of course, patients have to want to participate in their own health care decision-making, or be able to, and not everyone will. So we need to maintain a safety net for those who cannot.
I believe helping consumers take more control of their choices, and make smarter decisions about what drugs they use, is the right way to help keep our overall spending in a reasonable band of growth.
But right now, too many of the policy ideas being discussed and in some cases adopted today – especially in Europe--go in the exact opposite direction by giving governments and not patients control over what drugs are used by which patients.
In an age when more of the treatments that are being developed are highly specific to individual diseases and even patients, this is exactly the opposite direction we should be taking if we want to make the best and most affordable use of new medicines.
In particular, many European countries put strict limits on which drugs patients can get, or place price controls on their drugs to keep the costs of medicines low. This bars access to new medicines from patients who need them, and it forces drug companies to charge higher prices in markets like the U.S. where pricing is still relatively unregulated.
The worst part about this is it is bad for patients in Europe, as I will discuss a little later. But it is also causing policy concerns in the United States.
The situation has made some Americans angry, including politicians in our Congress, who feel that American consumers are baring the brunt of the research and development costs of new drugs through the high prices they pay, while the rest of the world free-rides on our spending.
Paradoxically, while Europeans may pay less for newer drugs owing to these price controls, they pay much more than Americans for their generic drugs.
This is an important point, because the fact that the U.S. is covering a disproportionate share of the bill for R&D into new drugs through the higher prices it pays relative to Europe does not mean that other countries aren’t spending a lot of money on their medications – or that many European countries need to increase their total spending on drugs substantially in order to share more in the costs of developing new medicines.
Rather, it’s how they spend their money that matters. Many countries could do more to encourage innovation in health care by changing the way money is spent, to get more value for their citizens by encouraging more competition when it comes to generic drugs, which should be made available quickly and used more widely as soon as fair, legitimate drug patents expire.
Why, you might ask, would European countries overpay for older generic drugs, and underpay for newer, often better new drugs?
Take the example of France, which makes the regulatory approval process for new generic drugs long and complex. I believe this is done in order to protect their domestic French generic manufacturers.
Sanofi Aventis is one of the largest sellers of generic drugs in France, and the government helps the company protect that lucrative franchise by making it hard for other generic makers to enter the market.
European countries are overpaying for generic drugs to subsidize their local generic drug businesses, while underpaying for branded drugs, which are increasingly produced by American and Japanese companies.
This kind of industrial planning is not isolated to France.
In Italy, for example, a study revealed that generic drugs cost almost twice as much as those in the U.S. Other data from a study commissioned by the U.S. Commerce Department shows that prices of U.S. generic drugs range from a third lower in France to almost half as much in both Italy and Germany.
This is industrial policy of the worst kind, because it limits access to new medicines that we all agree have dramatically improved health around the world. And to what end? To prop up a few obsolete generic drug companies in Europe and the expense of new and better health products for the rest of us.
The bottom line is this: It is possible to redirect billions of dollars in drug spending, through greater use of less expensive and more competitively-priced generic drugs, permitting greater financial rewards for developing and providing access to valuable new drugs more quickly.
This approach encourages innovation without spending much more money, because more generic competition means that you can’t keep making money on the same old drug for many, many years.
To these ends, I was also encouraged by a recent article I read in the Nikkei Shimbun, that Japan might consider measures to promote more widespread use of generics.
I am hopeful, from what I read, this will also be coupled with fair, more market-based pricing for newer, more innovate medicines. Pricing that is reflective of their value to patients and not simply the budget needs of government agencies.
This for example, could eventually mean revising the rule for pricing new drugs that would allow greater rewards for truly groundbreaking new drugs. Or extending the length of exclusivity on new drugs from the 6-8 years drugs in Japan now enjoy to something closer to the 10 years granted in Europe, or to the slightly longer terms enjoyed by innovative new drugs in the U.S.
With this kind of balance between rewarding innovation and achieving broader access through wider use of low-cost generic drugs--with spending that encourages more generic drug use while rewarding newer medicines--then I believe it is possible to encourage innovation while taking more opportunity to save money.
The alternative is clear. If nobody around the world wants to pay for new drugs, there will be a sharp reduction in new medical treatments and a slowdown, if not a complete stop, in all the progress we have been making against many diseases.
You can already see the cracks in our system by looking at Europe, where price controls on drugs are having a corrosive effect on innovation and new drug development there, shifting some European companies into less productive areas of new research and development or out of markets altogether.
Worse still, more restrictive pricing policies will begin to roll back a lot of the medical progress that we are making, because these policies limit access to new and better medicines that people need in order to beat disease in the future that today cause to much suffering and death.
In closing today, I wanted to discuss how the pricing situation in Europe is hurting patients.
Right now in Europe, the protracted pricing reviews that new drugs undergo often delays the launch of new medicines by months and sometimes years compared to other markets.
Delays hit people with deadliest diseases hardest, since these conditions that cost the most to treat and often require the timeliest and most aggressive medical intervention.
Taking the example of cancer--between 1995 and 2001 the 15 cancer drugs approved in both Europe and America took 468 days to reach patients in Europe versus 273 days in the U.S.
In Europe, driving harder bargains also means forgoing more therapies. After all, it’s the capacity to shift or restrict treatments that reinforces a government’s negotiating power.
When Europeans cannot get a price they like, or often even when they do, they also impose strict prerequisites on who can get access to new drugs.
In Germany, a recent study found that 41 percent of German physicians are treating early-stage breast cancer with taxanes compared to 60 percent in America.
German breast cancer mortality decreased by nine percent from 1990 to 1998, while in the U.S. mortality dropped more than twice as much, by 19 percent.
Restrictions on access to new medicines may also be a contributing factor in a British woman’s chance of surviving breast cancer being below the United States and other countries in Europe.
A study done in 2003 for your National Health Service in the UK found that more than 1,000 eligible breast cancer patients across the UK were still not receiving herceptin, even after its approval.
There are complex reasons for all of these health disparities, but the contribution of delayed access to the new treatments cannot be ignored. The impact of these pricing policies can be seen in other diseases.
In France, the National Hepatitis C Plan declared that at least 80 percent of infected patients should be treated by 2002, but less than a quarter of the 200,000 eligible patients have received care.
Fewer than 50 percent of the 30,000 French multiple sclerosis patients eligible for treatment with beta interferons actually receive it.
Although safer atypical antipsychotic drugs are recognized as first line treatments and account for 60 percent of all prescriptions for schizophrenia in the U.S., in Italy it is only 40 percent of eligible patients, in Spain 20 percent, and in Germany 10 percent.
It should be no surprise, then, that a report by the G10 Medicines Group, which reviewed the impact of governmental pharmaceutical, health and enterprise policies in Europe, recommended reducing the time between granting a marketing authorization and pricing and reimbursement decisions.
According to the report, “The price negotiating systems and reimbursement structures in a number of Member states can lead to significant delays.”
But it’s hard to reduce times if negotiations on access remain fierce.
The growing gap between what Europeans get when it comes to their healthcare, and what Americans can receive, is not lost on consumers in the U.S. Americans are grateful for the access they have to the most innovative care, as I trust are Japanese patients.
But the higher prices we pay in the U.S. are also inescapable to many consumers, and as I said, are causing a lot of anger. This anger has spilled over into proposals for policies that would begin to place price controls on medicines in our own market.
While I don’t believe any of these policies will come to pass anytime soon, the fact that the last free market for drugs is under siege is especially worrying.
In fact, at the very time that many of your own drug companies are looking for new ways to penetrate the American market, whether it’s through new acquisitions of American biotech companies or through bigger corporate operations such as the new headquarters that have been built around Chicago – our market in the U.S. is undergoing political and economic challenges that make it uncertain.
I think we can achieve a better future for drug innovation and for healthcare generally, one that encourages innovation and also encourages more widespread use of lifesaving new medicines where these new treatments have the potential to improve peoples’ lives and help them live longer.
But that will mean finding better ways to support the research and development of new drugs, and better ways to make sure that we are making the most high-value use of new medicines.
It will mean doing this without taking these decisions out of the hands of doctors and patients and placing them instead in the hands of big government authorities. Authorities that are far removed from the patient’s bedside and blind to the many considerations that go into any personal medical decision between a patient and her doctor.
I am optimistic that these ideas will ultimately prevail in the current discussion over how we can improve drug safety in the U.S. There is simply too much untapped medial opportunity at stake, and too much medical progress already being made, for us to adopt policy solutions to our challenges that would thwart the continued development of medical innovations.
I also believe that there is a lot we can learn from each other, from things that we are each doing well, and things that we want to do better.
And that is why I am so delighted to be here in Japan, and to have the opportunity to talk with many of your scientists and businessmen and policy experts about these ideas.
Thank you for having me here today.
Scott Gottlieb, M.D., is a resident fellow at AEI.
