The U.S. must fund more biotech innovation – or other countries will catch up faster than you think
In the coming years, U.S. market share in biotech will decline unless the federal government makes investments to improve the quality and quantity of U.S. research, writes the author.
The U.S. has approximately 58 percent of the market share in the biotech sector, followed by China with 11 percent. However, this market share is the result of several years of previous research and development (R&D) – it is a present picture of what happened in the past. In the future, this market share will decline unless the federal government makes investments to improve the quality and quantity of U.S. research in biotech.
The effectiveness of current R&D can be evaluated in a variety of ways such as monies invested and the number of patents filed. According to the UNESCO Institute for Statistics, the U.S. spends approximately 2.7 percent of GDP on R&D ($476,459.0M), whereas China spends 2 percent ($346,266.3M). However, investment levels do not necessarily translate into goods that end up contributing to innovation.
Patents are a better indication of innovation. The biotech industry relies on patents to protect their investments, making patenting a key tool in the process of translating scientific discoveries that can ultimately benefit patients. In 2020, China filed 1,497,159 patents, a 6.9 percent increase in growth rate. In contrast, the U.S. filed 597,172, a 3.9 percent decline. When it comes to patents filed, China has approximately 45 percent of the world share compared to 18 percent for the U.S.
So how did we get here? The nature of science in academia allows scientists to specialize by dedicating several years to advance discovery research and develop new inventions that can then be licensed by biotech companies. This makes academic science critical to innovation in the U.S. and abroad.
Academic scientists rely on government and foundation grants to pay for R&D, which includes salaries for faculty, investigators and trainees, as well as monies for infrastructure, support personnel and research supplies. Of particular interest to academic scientists to cover these costs is government support such as Research Project Grants, also known as R01 grants, the oldest grant mechanism from the National Institutes of Health. Unfortunately, this funding mechanism is extremely competitive, as applications have a success rate of only about 20 percent. To maximize the chances of getting funded, investigators tend to limit the innovation of their applications, since a project that seems overambitious is discouraged by grant reviewers.
Considering the difficulty in obtaining funding, the limited number of opportunities for scientists to become independent investigators capable of leading their own scientific projects, and the salaries available to pay for scientists with a doctoral degree, it is not surprising that the U.S. is progressively losing its workforce for innovation.
This approach affects the future success of the R&D enterprise in the U.S. Pursuing less innovative work tends to produce scientific results that are more obvious than groundbreaking, and when a discovery is obvious, it cannot be patented, resulting in fewer inventions that go on to benefit patients. Even though there are governmental funding options available for scientists in academia focused on more groundbreaking and translational projects, those options are less coveted by academic scientists who are trying to obtain tenure and long-term funding to cover salaries and other associated laboratory expenses. Therefore, since only a small percent of projects gets funded, the likelihood of scientists interested in pursuing academic science or even research in general keeps declining over time.
Efforts to raise the number of individuals who pursue a scientific education are paying off. However, the number of job openings for those trainees to carry out independent scientific research once they graduate has proved harder to increase. These limitations are not just in the number of faculty openings to pursue academic science, which are in part related to grant funding, but also the low salary available to pay those scientists after they obtain their doctoral degree, which ranges from $53,000 to $65,000, depending on years of experience.
Thus, considering the difficulty in obtaining funding, the limited number of opportunities for scientists to become independent investigators capable of leading their own scientific projects, and the salaries available to pay for scientists with a doctoral degree, it is not surprising that the U.S. is progressively losing its workforce for innovation, which results in fewer patents filed.
Perhaps instead of encouraging scientists to propose less innovative projects in order to increase their chances of getting grants, the U.S. government should give serious consideration to funding investigators for their potential for success -- or the success they have already achieved in contributing to the advancement of science. Such a funding approach should be tiered depending on career stage or years of experience, considering that 42 years old is the median age at which the first R01 is obtained. This suggests that after finishing their training, scientists spend 10 years before they establish themselves as independent academic investigators capable of having the appropriate funds to train the next generation of scientists who will help the U.S. maintain or even expand its market share in the biotech industry for years to come. Patenting should be given more weight as part of the academic endeavor for promotion purposes, or governmental investment in research funding should be increased to support more than just 20 percent of projects.
Remaining at the forefront of biotech innovation will give us the opportunity to not just generate more jobs, but it will also allow us to attract the brightest scientists from all over the world. This talented workforce will go on to train future U.S. scientists and will improve our standard of living by giving us the opportunity to produce the next generation of therapies intended to improve human health.
This problem cannot rely on just one solution, but what is certain is that unless there are more creative changes in funding approaches for scientists in academia, eventually we may be saying “remember when the U.S. was at the forefront of biotech innovation?”
Breakthrough therapies are breaking patients' banks. Key changes could improve access, experts say.
Single-treatment therapies are revolutionizing medicine. But insurers and patients wonder whether they can afford treatment and, if they can, whether the high costs are worthwhile.
CSL Behring’s new gene therapy for hemophilia, Hemgenix, costs $3.5 million for one treatment, but helps the body create substances that allow blood to clot. It appears to be a cure, eliminating the need for other treatments for many years at least.
Likewise, Novartis’s Kymriah mobilizes the body’s immune system to fight B-cell lymphoma, but at a cost $475,000. For patients who respond, it seems to offer years of life without the cancer progressing.
These single-treatment therapies are at the forefront of a new, bold era of medicine. Unfortunately, they also come with new, bold prices that leave insurers and patients wondering whether they can afford treatment and, if they can, whether the high costs are worthwhile.
“Most pharmaceutical leaders are there to improve and save people’s lives,” says Jeremy Levin, chairman and CEO of Ovid Therapeutics, and immediate past chairman of the Biotechnology Innovation Organization. If the therapeutics they develop are too expensive for payers to authorize, patients aren’t helped.
“The right to receive care and the right of pharmaceuticals developers to profit should never be at odds,” Levin stresses. And yet, sometimes they are.
Leigh Turner, executive director of the bioethics program, University of California, Irvine, notes this same tension between drug developers that are “seeking to maximize profits by charging as much as the market will bear for cell and gene therapy products and other medical interventions, and payers trying to control costs while also attempting to provide access to medical products with promising safety and efficacy profiles.”
Why Payers Balk
Health insurers can become skittish around extremely high prices, yet these therapies often accompany significant overall savings. For perspective, the estimated annual treatment cost for hemophilia exceeds $300,000. With Hemgenix, payers would break even after about 12 years.
But, in 12 years, will the patient still have that insurer? Therein lies the rub. U.S. payers, are used to a “pay-as-you-go” model, in which the lifetime costs of therapies typically are shared by multiple payers over many years, as patients change jobs. Single treatment therapeutics eliminate that cost-sharing ability.
"As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket,” says Patricia Goldsmith, the CEO of CancerCare.
“There is a phenomenally complex, bureaucratic reimbursement system that has grown, layer upon layer, during several decades,” Levin says. As medicine has innovated, payment systems haven’t kept up.
Therefore, biopharma companies begin working with insurance companies and their pharmacy benefit managers (PBMs), which act on an insurer’s behalf to decide which drugs to cover and by how much, early in the drug approval process. Their goal is to make sophisticated new drugs available while still earning a return on their investment.
New Payment Models
Pay-for-performance is one increasingly popular strategy, Turner says. “These models typically link payments to evidence generation and clinically significant outcomes.”
A biotech company called bluebird bio, for example, offers value-based pricing for Zynteglo, a $2.8 million possible cure for the rare blood disorder known as beta thalassaemia. It generally eliminates patients’ need for blood transfusions. The company is so sure it works that it will refund 80 percent of the cost of the therapy if patients need blood transfusions related to that condition within five years of being treated with Zynteglo.
In his February 2023 State of the Union speech, President Biden proposed three pilot programs to reduce drug costs. One of them, the Cell and Gene Therapy Access Model calls on the federal Centers for Medicare & Medicaid Services to establish outcomes-based agreements with manufacturers for certain cell and gene therapies.
A mortgage-style payment system is another, albeit rare, approach. Amortized payments spread the cost of treatments over decades, and let people change employers without losing their healthcare benefits.
Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
The new payment models that are being discussed aren’t solutions to high prices, says Bill Kramer, senior advisor for health policy at Purchaser Business Group on Health (PBGH), a nonprofit that seeks to lower health care costs. He points out that innovative pricing models, although well-intended, may distract from the real problem of high prices. They are attempts to “soften the blow. The best thing would be to charge a reasonable price to begin with,” he says.
Instead, he proposes making better use of research on cost and clinical effectiveness. The Institute for Clinical and Economic Review (ICER) conducts such research in the U.S., determining whether the benefits of specific drugs justify their proposed prices. ICER is an independent non-profit research institute. Its reports typically assess the degrees of improvement new therapies offer and suggest prices that would reflect that. “Publicizing that data is very important,” Kramer says. “Their results aren’t used to the extent they could and should be.” Pharmaceutical companies tend to price their therapies higher than ICER’s recommendations.
Drug Development Costs Soar
Drug developers have long pointed to the onerous costs of drug development as a reason for high prices.
A 2020 study found the average cost to bring a drug to market exceeded $1.1 billion, while other studies have estimated overall costs as high as $2.6 billion. The development timeframe is about 10 years. That’s because modern therapeutics target precise mechanisms to create better outcomes, but also have high failure rates. Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
Skewed Incentives Increase Costs
Pricing isn’t solely at the discretion of pharma companies, though. “What patients end up paying has much more to do with their PBMs than the actual price of the drug,” Patricia Goldsmith, CEO, CancerCare, says. Transparency is vital.
PBMs control patients’ access to therapies at three levels, through price negotiations, pricing tiers and pharmacy management.
When negotiating with drug manufacturers, Goldsmith says, “PBMs exchange a preferred spot on a formulary (the insurer’s or healthcare provider’s list of acceptable drugs) for cash-base rebates.” Unfortunately, 25 percent of the time, those rebates are not passed to insurers, according to the PBGH report.
Then, PBMs use pricing tiers to steer patients and physicians to certain drugs. For example, Kramer says, “Sometimes PBMs put a high-cost brand name drug in a preferred tier and a lower-cost competitor in a less preferred, higher-cost tier.” As the PBGH report elaborates, “(PBMs) are incentivized to include the highest-priced drugs…since both manufacturing rebates, as well as the administrative fees they charge…are calculated as a percentage of the drug’s price.
Finally, by steering patients to certain pharmacies, PBMs coordinate patients’ access to treatments, control patients’ out-of-pocket costs and receive management fees from the pharmacies.
Therefore, Goldsmith says, “As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket.”
Transparency into drug pricing will help curb costs, as will new payment strategies. What will make the most impact, however, may well be the development of a new reimbursement system designed to handle dramatic, breakthrough drugs. As Kramer says, “We need a better system to identify drugs that offer dramatic improvements in clinical care.”
In today's podcast episode, law professor Gaia Bernstein talks about the challenges of keeping control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
Each afternoon, kids walk through my neighborhood, on their way back home from school, and almost all of them are walking alone, staring down at their phones. It's a troubling site. This daily parade of the zombie children just can’t bode well for the future.
That’s one reason I felt like Gaia Bernstein’s new book was talking directly to me. A law professor at Seton Hall, Gaia makes a strong argument that people are so addicted to tech at this point, we need some big, system level changes to social media platforms and other addictive technologies, instead of just blaming the individual and expecting them to fix these issues.
Gaia’s book is called Unwired: Gaining Control Over Addictive Technologies. It’s fascinating and I had a chance to talk with her about it for today’s podcast. At its heart, our conversation is really about how and whether we can maintain control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
Listen on Apple | Listen on Spotify | Listen on Stitcher | Listen on Amazon | Listen on Google
We discuss the idea that, in certain situations, maybe it's not reasonable to expect that we’ll be able to enjoy personal freedom and autonomy. We also talk about how to be a good parent when it sometimes seems like our kids prefer to be raised by their iPads; so-called educational video games that actually don’t have anything to do with education; the root causes of tech addictions for people of all ages; and what kinds of changes we should be supporting.
Gaia is Seton’s Hall’s Technology, Privacy and Policy Professor of Law, as well as Co-Director of the Institute for Privacy Protection, and Co-Director of the Gibbons Institute of Law Science and Technology. She’s the founding director of the Institute for Privacy Protection. She created and spearheaded the Institute’s nationally recognized Outreach Program, which educated parents and students about technology overuse and privacy.
Professor Bernstein's scholarship has been published in leading law reviews including the law reviews of Vanderbilt, Boston College, Boston University, and U.C. Davis. Her work has been selected to the Stanford-Yale Junior Faculty Forum and received extensive media coverage. Gaia joined Seton Hall's faculty in 2004. Before that, she was a fellow at the Engelberg Center of Innovation Law & Policy and at the Information Law Institute of the New York University School of Law. She holds a J.S.D. from the New York University School of Law, an LL.M. from Harvard Law School, and a J.D. from Boston University.
Gaia’s work on this topic is groundbreaking I hope you’ll listen to the conversation and then consider pre-ordering her new book. It comes out on March 28.
