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Our competitors understand why America is the global leader in biotechnology.
Why don’t we?

Robert Goldberg, Ph.D.
Medical Progress Today
April 4, 2005

In March, I met with officials from the Health and Insurance Ministry of the People's Republic of China as part of a program to foster better understanding of America’s free market economy. I took them through the steps of drug development. I emphasized that, if they wanted to encourage private investors to put a significant amount of money into far-reaching biomedical research activities, the government shouldn’t impose price controls on new medicines.

One of the delegates wrote down "No price controls" three times, and put dollars signs next to the phrase. If only some members of Congress understood what even communists can understand. In America, the Congress and dozens of states want to limit drug prices by law. If they succeed, our thriving biotechnology sector will be strangled.

Biotechnology is the platform of the next industrial revolution. As a recent study by the Milken Institute shows, by 2014, the biopharmaceutical industry will generate over 3.6 million jobs and $350.1 billion in revenues. That does not include the health benefits, economic gains, longer lives and lower health care costs that are the result of new medicines.

According to the Milken Institute, these projections are based upon the assumption that government policies continue to encourage basic and applied research and development in the biopharmaceutical field. So any nation seeking to capitalize on the promise of biotechnology—whether it’s America or one of our competitors—should be doing all it can to secure its scientific strength in this area. The United States currently leads the world in biotechnology patents and products, as well as the development of genetic tools needed to produce a new generation of targeted medicines in less time and at a lower cost than ever before. But our policymakers seem increasingly tempted to forfeit our lead through price controls, which will only drive vital biotech investment abroad.

Our competitors, especially in India and Europe, are moving to embrace our model for market pricing and trying to find ways to rid themselves of burdensome price controls in order to attract more investment. In New York State, however, one legislator perennially introduces a law that would force drug prices down to those charged in Nigeria. In Congress, so-called free market Republicans from South Carolina and Louisiana have voted to require drug and biotech companies to give Medicare a 24 percent price discount below wholesale, or be barred from selling to seniors altogether.

India recently voted to strengthen the intellectual property protection of biotechnology and pharmaceutical products as a way to encourage more venture capital and risk taking among drug companies. Europe is considering a phaseout of laws allowing distributors to import drugs sold in a country with low reimbursement levels for drugs (like Spain) to a higher priced country (like England) to make a profit on the mark-up. In America, politicians and pundits are practically tripping over themselves to limit patent rights, sponsoring legislation that would force companies under threat of criminal prosecution to sell as much of their product as a distributor requires under terms a distributor dictates without regard to patent claims.

India is encouraging its Ph.D’s to come home. In India’s new market-based, patent-friendly environment, scientists can work with start up companies, which can in turn partner with India’s version of our National Institutes of Health. If those scientists come up with a new drug that makes millions or billions of dollars in profits, they will be hailed as heroes, pioneers of a bold new Indian biotechnology initiative that will overturn the West’s long dominance.

The same scientists in the U.S. are continually pilloried as lackeys of industry who can’t be trusted to work at the NIH.

Europe has a roadmap for integrating its FDA (called the EMEA) with academic medical institutions, government medical research centers and other experts to upgrade the science of drug evaluation. Their idea is to make drug safety part of a continuous process of drug discovery, development and treatment. On this side of the pond, Senators and Congressman seem hell-bent on creating a stand-alone drug safety agency that will treat every safety “problem” like a plane crash or car wreck, replete with the usual assortment of ambulance chasers and yellow-journalism.

America’s dominance in biotechnology rests on its willingness to encourage the rapid commercialization of new scientific discoveries, and to reward investors handsomely. But the rest of the world has seen what the combination of free markets, patents, capital and scientific creativity has created in our country. They are rapidly catching up. America’s policymakers, meanwhile, seem to have forgotten the lessons that made us global leaders in the first place.

Robert Goldberg, Ph.D. is director of the Center for Medical Progress at the Manhattan Institute for Policy Research.

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