Pharma Innovation DA



Pharma Innovation DA1NC – Pharma InnovationUS markets subsidize medical research for the rest of the world – we’re key to pharmaceutical innovationGrossman 3/9 (Nicholas Grossman, Lecturer in International Relations at the University of Iowa, “What Everyone’s Forgetting About Healthcare”, Arcdigital Media, )Every other economically advanced country has a form of universal healthcare. And, though the systems vary, they all spend less while achieving better outcomes. Compared to every country on that list, the United States has lower life expectancy at birth, higher infant mortality, and higher obesity. And more American seniors have two or more chronic conditions (68%). Canada (56%) and Australia (54%) are the only others above 50%. The comparison isn’t as simple as advocates make it out to be. With other advanced economies clamping down on the profit motive, the United States effectively subsidizes research and development of drugs and medical devices for the rest of the world. However, it’s fair to say a single-payer system with private health providers (like Canada), a publicly run system (like the UK), or strict price controls and required insurance (like Japan) could plausibly give the United States better care for less money. But it’s politically impossible. That’s obviously true now, with Republicans in charge, but it’s probably true for the foreseeable future.National Health Insurance destroys the incentive for pharma researchHuber 3/29 (Ryan Huber is Professor of Christian Ethics at Fuller Theological Seminary, “U.S. Health Care Reality Check #1: Pharmaceutical Innovation”, Arcdigital Media, )Looking at a cost breakdown of Big Pharma companies from 2014, a big chunk of their costs, almost equal to the sum of the entire first and second phase of their clinical trials, come from the 4th phase of clinical trials, which is often referred to as “post-marketing surveillance.” This is the phase of a drug’s life that takes place after its approval for sale on the U.S. market, in which the FDA requires continued and ongoing studies to validate the drug’s safety and efficacy using data generated from every phase of clinical trials leading up to its approval in the first place. It’s in this phase of a drug’s life where, after spending large amounts of money to get the drug approved, companies can still watch as the FDA rescinds a drug’s approval status, which leads to the drug getting withdrawn from the market, in many cases never to be seen again. In fact, as of 2015, 462 medicinal products were withdrawn from the market between 1953 and 2013, and the supporting evidence in 72 % of cases consisted of anecdotal reports. Only 43 (9.34 %) drugs were withdrawn worldwide and 179 (39 %) were withdrawn in one country only. Withdrawal was significantly less likely in Africa than in other continents (Europe, the Americas, Asia, and Australasia and Oceania). So, not only is almost a fourth of a drug’s average R & D cost attributable to legislative constraints the government imposes on pharmaceutical companies to police their own products even after they’ve been approved based on incredibly high standards of safety and testing, but also, compared to less developed countries, we’re more likely to pull drugs off the market and revoke their status as a result of anecdotal case reports of adverse effects that generally go unverified. We consistently decide to err on the side of safety, even if it means pulling the plug on a 10–15-year-long investment (the average length of development for a drug), which helps clarify how aspiring for safer and more effective drugs begins to preclude cheaper drugs. So the United States produces the most novel and cutting edge therapeutic compounds despite the most expensive and stringent approval process and sells them to other countries at much lower prices than we do at home. In doing this, we are indeed subsidizing research and development of drugs and medical devices for the rest of the world. This subsidized medical innovation is a major contributing factor to the out-of-control health care costs in the United States, and losing this innovation will be one of the sacrifices we make if we move toward a more cost-controlled or government-run health care system over the next several years.Only pharma innovation solves global pandemics that risk extinctionSachs 14 (Jeffrey, Professor of Sustainable Development, Health Policy and Management @ Columbia University, Director of the Earth Institute @ Columbia University and Special adviser to the United Nations Secretary-General on the Millennium Development Goals) “Important lessons from Ebola outbreak,” Business World Online, August 17, 2014, )Ebola is the latest of many recent epidemics, also including AIDS, SARS, H1N1 flu, H7N9 flu, and others. AIDS is the deadliest of these killers, claiming nearly 36 million lives since 1981. Of course, even larger and more sudden epidemics are possible, such as the 1918 influenza during World War I, which claimed 50-100 million lives (far more than the war itself). And, though the 2003 SARS outbreak was contained, causing fewer than 1,000 deaths, the disease was on the verge of deeply disrupting several East Asian economies including China’s. There are four crucial facts to understand about Ebola and the other epidemics. First, most emerging infectious diseases are zoonoses, meaning that they start in animal populations, sometimes with a genetic mutation that enables the jump to humans. Ebola may have been transmitted from bats; HIV/AIDS emerged from chimpanzees; SARS most likely came from civets traded in animal markets in southern China; and influenza strains such as H1N1 and H7N9 arose from genetic re-combinations of viruses among wild and farm animals. New zoonotic diseases are inevitable as humanity pushes into new ecosystems (such as formerly remote forest regions); the food industry creates more conditions for genetic recombination; and climate change scrambles natural habitats and species interactions. Second, once a new infectious disease appears, its spread through airlines, ships, megacities, and trade in animal products is likely to be extremely rapid. These epidemic diseases are new markers of globalization, revealing through their chain of death how vulnerable the world has become from the pervasive movement of people and goods. Third, the poor are the first to suffer and the worst affected. The rural poor live closest to the infected animals that first transmit the disease. They often hunt and eat bushmeat, leaving them vulnerable to infection. Poor, often illiterate, individuals are generally unaware of how infectious diseases -- especially unfamiliar diseases -- are transmitted, making them much more likely to become infected and to infect others. Moreover, given poor nutrition and lack of access to basic health services, their weakened immune systems are easily overcome by infections that better nourished and treated individuals can survive. And “de-medicalized” conditions -- with few if any professional health workers to ensure an appropriate public-health response to an epidemic (such as isolation of infected individuals, tracing of contacts, surveillance, and so forth) -- make initial outbreaks more severe. Finally, the required medical responses, including diagnostic tools and effective medications and vaccines, inevitably lag behind the emerging diseases. In any event, such tools must be continually replenished. This requires cutting-edge biotechnology, immunology, and ultimately bioengineering to create large-scale industrial responses (such as millions of doses of vaccines or medicines in the case of large epidemics). The AIDS crisis, for example, called forth tens of billions of dollars for research and development -- and similarly substantial commitments by the pharmaceutical industry -- to produce lifesaving antiretroviral drugs at global scale. Yet each breakthrough inevitably leads to the pathogen’s mutation, rendering previous treatments less effective. There is no ultimate victory, only a constant arms race between humanity and disease-causing agents.UniquenessUQ – Yes InvestmentInvestor confidence in pharma and biotech is high nowKrauskopf 1/12 (Lewis, Reuters, “Investors in big pharma, biotech look to ride out Trump storm”, )Investors in large U.S. pharmaceutical and biotech companies are counting on strong dividends, reasonable stock valuations and new products to help ride out a storm of political uncertainty as the incoming Trump administration dives into healthcare policy. The sector took a pounding on Wednesday after U.S. president-elect Donald Trump said the drug industry was "getting away with murder" on medicine costs, suggesting that the specter of government actions on pricing is not going away any time soon. The industry faced critical scrutiny during much of the presidential election campaign last year. But despite the potential for political volatility ahead, some investors are finding reasons to hang onto shares of drugmakers. "We do think they are generating a lot of cash, throwing out a very nice dividend and the valuations are more reasonable than many areas of the market," said David Katz, chief investment officer at Matrix Asset Advisors in New York, which owns stock in Merck (MRK.N), Pfizer (PFE.N), AbbVie (ABBV.N) and Gilead (GILD.O). "We definitely are worried and aware" of pricing concerns, Katz said. "But we think when all is said and done they are going to muddle through it - and the stocks are too cheap." While the S&P 500 companies are overall trading at prices well above their traditional valuations, a group of pharmaceutical stocks in the index .SPLRCCARD recently has traded at 14.8 times earnings estimates for the next 12 months, below their 16.4 average over the past three years, according to Thomson Reuters Datastream. Shares of Gilead, which also faces questions about its hepatitis C franchise sales, are trading at around 7 times forward earnings, while fellow biotech giant Amgen (AMGN.O) is trading at 12.5 times. Merck, whose shares have climbed in the past two days after positive developments for its cancer treatment Keytruda, holds a higher P/E ratio of 16.3 times. But even that is lower than the 17 times for the S&P 500 as a whole. Large drugmakers and a few biotech companies also offer solid dividend payouts. The group of S&P 500 drugmakers are yielding 2.85 percent, which is above the S&P 500's yield of 2.4 percent and slightly ahead of the 2.83 percent for the S&P 500 consumer staples index .SPLRCS, which includes companies known for their high dividends. Drugmakers "have long track records of paying those dividends and regularly increasing them," said George Strietmann, portfolio manager with Cincinnati investment advisory firm Bahl & Gaynor. "The market looks at that as a very strong part of the foundation of owning the stocks." Bahl & Gaynor owns shares of AbbVie, which has a dividend yield of 4.2 percent, and Merck, which is yielding 3.1 percent. Smaller biotech and pharma companies do not offer such dividends, leaving them with potentially less cushion than their larger peers should drug-pricing pressures increase. Regardless, Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois, said he is "very optimistic" about pharma and biotech, noting that "many of them are extremely beaten down." "We think it’s a great sector to be in," Jankovskis said, "and whether we get the benefit of it in the next few months or over the next couple of years, either way we think we’re going to come out ahead." Some investors remain concerned about the sector. Investors should be wary about companies that derive a lot of revenue from big government health programs such as Medicare and Medicaid, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "We think that investors should really pay attention to where the money comes from in these companies, who the buyer is," Forrest said.LinksLink - NHINational Health Insurance destroys the incentive for pharma researchHuber 3/29 (Ryan Huber is Professor of Christian Ethics at Fuller Theological Seminary, “U.S. Health Care Reality Check #1: Pharmaceutical Innovation”, Arcdigital Media, )Looking at a cost breakdown of Big Pharma companies from 2014, a big chunk of their costs, almost equal to the sum of the entire first and second phase of their clinical trials, come from the 4th phase of clinical trials, which is often referred to as “post-marketing surveillance.” This is the phase of a drug’s life that takes place after its approval for sale on the U.S. market, in which the FDA requires continued and ongoing studies to validate the drug’s safety and efficacy using data generated from every phase of clinical trials leading up to its approval in the first place. It’s in this phase of a drug’s life where, after spending large amounts of money to get the drug approved, companies can still watch as the FDA rescinds a drug’s approval status, which leads to the drug getting withdrawn from the market, in many cases never to be seen again. In fact, as of 2015, 462 medicinal products were withdrawn from the market between 1953 and 2013, and the supporting evidence in 72 % of cases consisted of anecdotal reports. Only 43 (9.34 %) drugs were withdrawn worldwide and 179 (39 %) were withdrawn in one country only. Withdrawal was significantly less likely in Africa than in other continents (Europe, the Americas, Asia, and Australasia and Oceania). So, not only is almost a fourth of a drug’s average R & D cost attributable to legislative constraints the government imposes on pharmaceutical companies to police their own products even after they’ve been approved based on incredibly high standards of safety and testing, but also, compared to less developed countries, we’re more likely to pull drugs off the market and revoke their status as a result of anecdotal case reports of adverse effects that generally go unverified. We consistently decide to err on the side of safety, even if it means pulling the plug on a 10–15-year-long investment (the average length of development for a drug), which helps clarify how aspiring for safer and more effective drugs begins to preclude cheaper drugs. So the United States produces the most novel and cutting edge therapeutic compounds despite the most expensive and stringent approval process and sells them to other countries at much lower prices than we do at home. In doing this, we are indeed subsidizing research and development of drugs and medical devices for the rest of the world. This subsidized medical innovation is a major contributing factor to the out-of-control health care costs in the United States, and losing this innovation will be one of the sacrifices we make if we move toward a more cost-controlled or government-run health care system over the next several years.Link - NHIThe plan removes the potential for windfall profits which drive US innovationPage 15 (Leigh Page, 9-29-2015, "Single-Payer System: Why It Would Ruin US Healthcare," Medscape, )Even though the single-payer movement has taken a beating recently, Dr Geddes doesn't think it's going to go away. He already sees many aspects of it in Medicare and Medicaid, which depend on central planning. Dr Geddes says that just like a single-payer system, Medicare imposes arbitrary rules created through central planning. For example, Medicare dictates that certain patients have to be in the hospital for a certain number of days before they can be referred to a rehab hospital. Often, he says, patients can be transferred earlier, but they are forced to stay in a high-cost hospital bed. "The rules actually force doctors to waste resources," he says. "That's how a single-payer system operates." Furthermore, Dr Geddes thinks the ACA will be just a temporary stop on the way to a single-payer system. Despite cost controls in the ACA, insurance premiums are rising significantly. He believes that health insurance will eventually become unaffordable, and the US public will rise up and call for abolishing private insurance and establishing a single-payer system. That would be the wrong way to go, Dr Geddes says. "Our private healthcare system is working," he says "We have the finest healthcare system in the world, and it continues to get better." Even as much of the rest of the world has embraced single-payer and other forms of government-controlled healthcare, such as price controls, they are completely dependent on medical advances created by the US system, he says. Advances in pharmaceuticals, medical equipment, and many surgical techniques come from the United States, where a free market encourages entrepreneurs, Dr Geddes says. "The incentive is potential windfall profits," he says. "But if you take it away, the whole process of innovation will cease. No other country could take up the slack." Dr Geddes is a regent of the University of Colorado, whose state-of-the-art Anschutz Medical Campus hosts biotech firms financed by venture capital firms and others. Even within the United States, he says, Medicare and Medicaid depend on the cost shift from private payers. "The only way physicians can afford to participate in Medicare is that they get higher payment from commercial insurers," Dr Geddes says. "Single-payer advocates talk about 'Medicare for all,' but if Medicare were standing alone, it would fall flat."Link – Medicare For AllMedicare For All Would Reduce R&D by billions annuallyGulfo 15 (Joseph Gulfo is the executive director of the Rothman Institute of Innovation and Entrepreneurship at Fairleigh Dickinson University and author of "Innovation Breakdown: How the FDA and Wall Street Cripple Medical Advances" (Post Hill Press). He has more than 25 years of experience in the biopharmaceutical and medical-device industries and is the former CEO of Mela Sciences, The Hill, “Medicare Negotiating With Pharma Is Not the Answer”, December 4, 2015) we are seeing here is an out-of-control regulatory paradigm and the real solution lies in evaluating the FDA's current system of drug development regulation and approval and removing barriers to creating highly competitive markets that would promote lower prices. By way of background, the 2003 Medicare law exempts Part D drugs from "best price" rebates that drugmakers have been required to give to the state Medicaid programs since 1991. Medicare is prohibited from receiving "best price" to provide incentives to drugmakers to develop drugs for conditions that affect patients over 65 years of age. And this incentive is working — in the first few years after Medicare D was enacted, there was an estimated 40 percent increase in all clinical trials versus expected trends and a 59 percent increase in the number of drugs entering the final phase before FDA approval. If Medicare received the same best price rebates that Medicaid and the VA received, the Congressional Budget Office estimates that savings over 10 years would total $155 billion. However, considering that biopharma companies spend roughly 23.4 percent of revenues on research and development (R&D), this would mean a loss of $36 billion in development activity on new drugs over a decade. Even more devastating, some are calling for Medicare to adopt European-style price controls. Consider the prices paid by foreign developed countries as outlined by Dean Baker of the Center for Economic and Policy Research. Using Denmark (34 percent of the level of the U.S.) as an example, Medicare would reduce its spending on drugs by $541.3 billion over 10 years, which translates into reduced R&D investment of $14.3 billion yearly — a 28 percent reduction in R&D spending off the current $51.2 billion invested by Pharmaceutical Research and Manufacturers of America's (PhRMA) member companies. Developing a new drug is a costly, time-intensive affair. According to Dirk Calcoen in Nature Reviews Drug Discovery, only about one in 10 drug products that enter phase I testing are ever approved in the U.S. Wayne Winegarden of the Pacific Research Institute writes that only two in 10 approved drugs recoup their development costs. For some hard-to-treat indications, success rates can be even lower. Yet new drugs, barring high-profile exceptions, are delivering unprecedented medical value to patients by keeping patients out of the hospital and avoiding huge costs elsewhere in the healthcare system. The Congressional Budget Office (CBO) estimates that for every 1 percent increase in the number of prescriptions filled, one-fifth of 1 percent of healthcare spending is reduced. With drugs costs accounting for just 9 percent of overall healthcare expenditures, the cost reduction is enormous. Noteworthy, too, is the fact that the value of drugs to Medicare in terms of overall reduced healthcare spending is even higher than the value to private insurers, who, after spending a large sum of money on a drug or drug regimen, might not see the benefits in the long-term because patients often switch insurers. In other words, by reaping the full benefits of its investment in patients (fewer hospitalizations, fewer surgeries, etc.), Medicare gains more value for its spend than private insurers.Link – PricesReducing healthcare spending would hurt innovationDouthat 13 (Ross Douthat, 10-22-2013, "Why Not Medicaid For All?," )Now many liberals would dispute the premise that health insurance doesn’t have a big impact on health. (Hence the inevitable to-and-fro over what the Oregon Medicaid data actually showed.) But they could also agree, or semi-agree, with that premise and still reject the right’s policy prescriptions. Yes, these liberals would say, maybe we should spend less on health care and consume fewer medical services overall. But there’s no need to jerry-rig some kind of untested-except-kinda-in-Singapore catastrophic-plus-H.S.A.’s setup that might leave big gaps in coverage, since we already know that single-payer systems have by far the best track record in accomplishing the cost-reduction feat. Just look at the difference between what Western European countries spend on health per capita and what America spends — or, to return to my colleague’s argument, just look at the difference between what Medicaid spends and what our private insurers pay out. There’s no comparison: If you want people to spend less on health care, socialized medicine rather than catastrophic coverage is obviously the way to go. And this is where we start to really get down to ideological bedrock, because conservatives and libertarians (and a few liberals) then look at the European/Canadian model and say, Surely there’s a better way than that. Yes, we concede, the strictly socialized systems do seem to save money relative to our mixed, kludge-y, public-private mess. But we also think that Americans really do get something for all the extra money that we spend: Specifically, a system that appears to drive a leonine share of global health care innovation, creating the drugs and procedures and life-extending technologies that then ripple outward, improving health and life expectancy in the developed and developing world alike. And the great fear on the right is that if we, too, end up controlling costs from the top down the way other countries do, then we won’t just squeeze waste out of the system, we’ll squeeze out innovation and drive out talent as well … and worse, we won’t even know it, because we’ll just assume that the innovations that we get are the only ones there could have been. So these are the two foundations for the conservative perspective on these issues. First, that our health care sector is oversubsidized and a great deal of health care spending is unnecessary, and second, that controlling this spending through the kind of price controls that other nations employ has long-term costs that are unquantifiable but potentially enormous. Which in turn leads to the basic calculus in favor of the catastrophic alternative: That when it comes to long-run human welfare, for the poor as well as the rich, X (the cost-inflation reductions achieved by cost sharing and price transparency) plus Y (the gains to innovation from maintaining or increasing the role of market forces in American health care) is greater than Z (the costs, financial and medical, of not covering as much care for low-income people as a single payer system would).Link - PricesDrug Prices Directly Affect R&DSummers and Smith 9 (Cheryl S. Smith is a Strategic Plan Development Manager for Health System Reform for the State of Utah, and a former Health Policy Fellow at the Center for Health Policy Studies at The Heritage Foundation. Laura L. Summers is a recent graduate of Brigham Young University with a Master's in Public Policy, “How Medicare’s Drug Pricing Can Hurt R&D”, The Heritage Foundation, January 12, 2009) Drug prices play a role in the intensity of pharmaceutical R&D. Based on the nature of its product, the lengthy development time, and the intense regulatory environment, the pharmaceutical industry is one of the most research intensive industries in the United States. According to a study conducted by PhRMA, R&D intensity has grown by about 50 percent since 1970. Most of this growth occurred in the early 1980s, and since then the industry's R&D intensity has remained around 19 percent.[15] The relative stability of the pharmaceutical industry's R&D intensity suggests that firms find it profitable to invest the majority of their earned profit into their own drug research. When a successful drug generates a large cash flow, the firm's first incentive is to invest the money back into research and development for new drugs. The stability of the pharmaceutical industry's R&D intensity also suggests that changes in drug prices can induce a real affect on a company's propensity to invest in R&D. If the price of a drug increases, firms earn more sales revenue and have a greater incentive to invest in research and development. If the real price of drug falls, firms will have less incentive to invest in R&D. A 2006 CBO study found that a 10 percent change in real U.S. drug prices increases the pharmaceutical industry's R&D intensity by almost 6 percent, everything else held constant.[16] The CBO study also found that changes in drug prices have an effect on individual companies' expectations about profits. CBO researchers found that higher drug prices may provide incentives for pharmaceutical companies to complete existing projects faster, as well as encourage companies to undertake additional research.[17] Based on this study, it appears as though higher drug prices have a clear positive effect on R&D investment, spending, and intensity, contradicting the public's push to reduce the pharmaceutical industry's prices and profits.Link – Price ControlsPrice controls destroy incentives for innovationDaemmrich 11 (Arthur Daemmrich is the director of the Lemelson Center for the Study of Invention and Innovation. Arthur previously was an associate professor at the University of Kansas School of Medicine, assistant professor at Harvard Business School, a visiting professor at the China Europe International Business School, “US Healthcare Reform and the Pharmaceutical Industry”, Harvard Business School, September 14, 2011) Since 1980 and at a rate that accelerated in the 1990s, the United States became the leading worldwide location for pharmaceutical research, clinical testing, and marketing. The “pharmacy to the world,” once located at the intersection of Germany, Switzerland, and France, today is found in the United States.88 Studies of the industry have attributed this comparative advantage to a variety of factors, including U.S. intellectual property policies, funding for biomedical research through the National Institutes of Health, the absence of government drug price controls, and the availability of venture capital and other factors that fostered the growth of the biotechnology industry.89 It should be noted that the combination of higher prices and large numbers of prescriptions, described here as beneficial to the U.S comparative advantage in the pharmaceutical industry, also contribute to the U.S. cost spiral in healthcare. Link – Price ControlsPrice Controls Would Cut R&D by up to 60%Howard 15 (Paul Howard is a senior fellow and director of health policy at the Manhattan Institute, “To Lower Drug Prices, Innovate, Don’t Regulate”, The New York Times, September 23, 2015) that price controls in the United Sates would powerfully dampen innovation. "Cutting prices by 40 to 50 percent in the U.S. will lead to between 30 to 60 percent fewer R&D projects being undertaken," one?study?found. A 2008 RAND study exploring the effect of U.S. price controls on those aged 55 to 59 in the United States and Europe similarly found that, on net, pharmaceutical price controls would hurt patients.Link – Price ControlsUniversal Healthcare Would Force Price Controls on DrugsSamuelson 16 (Robert J. Samuelson writes a weekly economics column that usually runs in The Post on Mondays, “The False Charms of Bernie Sanders’s Single-Payer Plan”, The Washington Post, February 7, 2016) To hear Sanders tell it, his single-payer plan (the government pays for most health care) would cure these ailments. Everyone would have coverage. People would go to doctors, hospitals and clinics as needed. There would be no deductibles or copayments to discourage them. Workers would not be locked into jobs they dislike because they fear losing employer-provided insurance. As for costs, the government would negotiate price cuts on drugs and eliminate private insurers’ high overhead costs. To be sure, paying for the plan would require new taxes. But for many middle-class families, these taxes would be less than today’s out-of-pocket expenses and their share of premiums for employer-provided insurance. A family of four with $50,000 of income could save nearly $5,800 a year, Sanders says. It sounds too good to be true, because it is. For starters, even if Sanders became president, the prospect for his plan being enacted would be slim. That’s not a conservative wish but the view of many liberals. It’s politically unrealistic, they argue, to think that nearly a fifth of the economy could be totally remade. “As the old joke goes, ‘You can’t get there from here,’” writes economist Henry J. Aaron of the liberal-leaning Brookings Institution in Newsweek. There would be too much opposition and uncertainty. Hospitals, doctors and drug companies would lobby for favored treatment — or resist punitive policies. Insurance companies would fight to survive. Americans with good insurance would worry that they’d lose their privileged position. Billions of dollars would be at stake. Most employer-provided health insurance would disappear, saving companies (Aaron says) about $700 billion. Some of that would be drained by a new 6.2 percent payroll tax to pay for government insurance. But what would happen to any remainder? Would it fatten workers’ wages or shareholders’ profits? Especially controversial would be cost savings. The Sanders campaign estimates that his plan would lower costs by about $1 trillion annually, but how this would occur isn’t clear. Controlling the “administrative costs [of insurers and providers] and drug prices,” as the campaign suggests, may not yield huge savings. Drugs are only 10 percent of total health-care costs, according to the Centers for Medicare and Medicaid Services. Similarly, insurance companies’ profit and overhead represent about 6?percent of all health-care costs: equal to about one year’s growth in total spending. Even large cuts to both (say 20?percent) would represent relatively modest reductions in overall health costs.Link - Price ControlsPrice Controls Lead to 30-60% Fewer R&D ProjectsHoward 15 (Paul Howard is a senior fellow and director of health policy at the Manhattan Institute, “To Lower Drug Prices, Innovate, Don’t Regulate”, The New York Times, September 23, 2015) that price controls in the United Sates would powerfully dampen innovation. "Cutting prices by 40 to 50 percent in the U.S. will lead to between 30 to 60 percent fewer R&D projects being undertaken," one?study?found. A 2008 RAND study exploring the effect of U.S. price controls on those aged 55 to 59 in the United States and Europe similarly found that, on net, pharmaceutical price controls would hurt patients.Link – Price NegotiationsPrice negotiations destroy R&DSummers and Smith 9 (Cheryl S. Smith is a Strategic Plan Development Manager for Health System Reform for the State of Utah, and a former Health Policy Fellow at the Center for Health Policy Studies at The Heritage Foundation. Laura L. Summers is a recent graduate of Brigham Young University with a Master's in Public Policy, “How Medicare’s Drug Pricing Can Hurt R&D”, The Heritage Foundation, January 12, 2009, )Based on the analysis of the data, the estimated effect of federally negotiated prices for Medicare Part D on pharmaceutical research and development sales would be dramatic and alarming.[29] Total prescription drug sales in 2007 amounted to $286.5 billion.[30] Given the 2007 estimates of both total pharmaceutical sales and total Medicare Part D expenditures, estimated non-Medicare Part D drug sales were $237 billion.[31] Understanding this, the amount of Medicare Part D expenditures was reduced by the difference between the average weighted private and public prices relative to AWP. As a result, Medicare Part D expenditures would be reduced to $29.7 billion (60 percent of the original 2007 total). That total, combined with the non-Medicare Part D drug sales, indicates that total pharmaceutical sales (including sales using negotiated Medicare Part D prices) would be about $256.8 billion, representing a $29.7 billion (10.4 percent) loss in pharmaceutical sales revenue. Considering the link between pharmaceutical sales revenue and R&D, the effect such a reduction would likely have on R&D investment can then be estimated. In 2007, U.S. pharmaceutical and biotech companies invested $58.8 billion in R&D, representing approximately 20.5 percent of total pharmaceutical sales. If pharmaceutical sales were reduced to $256.8 billion, the amount invested in R&D would be reduced to $52.4 billion. As a result, this would amount to a reduction of $6.4 billion (10.9 percent) in total pharmaceutical research and development.Link - RegulationsGovernment intervention = less innovationHeath 2011 (Hadley Heath (senior policy analysis Independent Women’s forum (a non-partisan, 501(c)(3) research and educational institution and University of North Carolina in 2010 as a Morehead-Cain Scholar with a double major in economics and journalism) LBIt’s not that Americans are intrinsically smarter or more innovative than citizens elsewhere. Our (relatively) free health care market attracts innovators from around the world to our soil. Our patent system and the higher monetary returns innovators receive for creating their new treatments here create an incentive to invest in research and development, and for the best and brightest to focus their energy and talents on discovering new, innovative medical services. Our government shouldn’t add more hurdles to the process of creating and bringing new treatments to the market, but should instead recognize the importance of the profit motive and remove burdensome regulations in medical innovation. Patients should also consider how more regulations impact doctors. Many doctors fear a loss of autonomy due to government “evidence- based” research and “guidelines,” which can turn into rules and leave them open to lawsuits any time they stray—even if it is for good reason based on the patient’s unique health status—from the government-approved path. as the government discourages doctors from working one-on-one with patients to develop more personalized treatment regimes, many talented doctors and would-be doctors may opt out of the profession in favor of ones that provide more freedom. Funding promotes a challenge to innovationHerzlinger 2006 (Regina Herzlinger Regina E. Herzlinger is the Nancy R. McPherson Professor of Business Administration at Harvard Business School, Harvard Business Review, ) LBInnovation in health care presents two kinds of financial challenges: funding the innovation’s development and figuring out who will pay how much for the product or service it yields. One problem is the long investment time needed for new drugs or therapies that require FDA approval. While venture capitalists backing an IT start-up may be able to get their money out in two to three years, investors in a biotech firm have to wait ten years even to find out whether a product will be approved for use. Another problem is that many traditional sources of capital aren’t familiar with the health care industry, so it’s difficult to find investors, let alone investors who can provide helpful guidance to the innovator. A frequent source of investor confusion is the health care sector’s complex system of payments, or reimbursements, which typically come not from the ultimate consumer but from a third party—the government or a private insurer. This arrangement raises an array of issues. Most obviously, insurers must approve a new product or service, and its pricing, before they will pay. And their perception of a product’s value, which determines the level of reimbursement, may differ from patients’. Furthermore, insurers may disagree. Medicare, whose relationships with its enrollees sometimes last decades, may see far more value in an innovation with a long-term cost impact, such as an obesity reduction treatment or an expensive diagnostic test, than would a commercial insurer, which typically sees an annual 20% turnover. An additional complication: Innovations need to appeal to doctors, who are in a position to recommend new products to patients, and doctors’ opinions differ. From a financial perspective, a physician who is paid a flat salary by a health maintenance organization may be less interested in, say, performing a procedure to implant a monitoring device than would a doctor who is paid a fee for such services.Medicaid/Medicare hurts innovation specifically towards poor/elderlyKevles 14 (Daniel Kevles B.A. in physics and Ph.D. in history from Princeton University, Medicare, Medicaid, And Pharmaceuticals: The Price of Innovation (a series of several posts stemming from presentations given at “The Law of Medicare and Medicaid at Fifty,” a conference held at Yale Law School), November 20, 2014, edicare-medicaid-and-pharmaceuticals-the-price-of-innovation/) LBThe development and FDA approval costs for a new drug run upwards of a billion dollars. Thus, given the government’s MM market and pricing policies, we should not be surprised that drug companies did not focus their efforts at innovation on drugs targeting the afflictions of the elderly or the poor — who suffer, for example, high rates of mental health problems such as bipolar disorder. Manufacturers evidently counted the prospective payoffs inadequate to warrant the investment; they looked for their principal profits to the general and open pharmaceutical market, where they could charge whatever prices the market or private insurance companies would bear for products under patent.Link - PerceptionThe plan reverses the incentives for pharma innovation – it’s not just about price controlsGrossman 3/9 (Nicholas Grossman, Lecturer in International Relations at the University of Iowa, “What Everyone’s Forgetting About Healthcare”, Arcdigital Media, )One reason the United States spends so much on healthcare is overconsumption. For example, Americans get twice as many MRI exams and nearly twice as many CT scans (per capita) as Canadians. Americans also take more prescription drugs than residents of other wealthy countries. These scans and medications are expensive, and, considering America’s weaker health outcomes, many of them are probably unnecessary. With higher deductibles, American patients would decline some expensive procedures or medications. But the biggest way market-based plans tackle overconsumption is by reducing, or eliminating, the tax break for employer-provided insurance. During WWII, the United States instituted wage and price controls, but this created labor shortages (on top of those created by the war), and the government responded with tax breaks for health insurance. Businesses could deduct money spent on employee insurance, while individual benefits were exempt from federal, state, and city taxation. Americans liked it, and after the war, didn’t want to give it up. The system worked for a while, expanding coverage to a large portion of the population. But, among other problems, it encouraged overconsumption. The tax break gave businesses a strong incentive to provide more health coverage instead of higher wages, and unions accepted the deal, since the net value was greater. As a result, over 100 million Americans have extensive coverage and tiny copays. They don’t feel the cost of their care, so they okay anything their doctor recommends. Providers, pharmaceutical companies, and medical device manufacturers all make more money the more patients consume, and when patients never say no, doctors recommend a lot. Getting rid of the deduction for employer-provided insurance and pushing everyone into robust insurance marketplaces would make everyone more cost-conscious, flipping the incentives.Link - PerceptionThe plan won’t cut costs, but will destroy innovation – threats of price controls deter investment in expensive R&DPipes 15 (Sally Pipes is the President of the Pacific Research Institute, “Bernie Sanders' 'Medicare For All' Would Be A Disaster For All”, Forbes, October 19, )This month, Bernie Sanders took his vision for the future of American health care to a national television audience in the first Democratic presidential debate. "We should look to countries like Denmark, like Sweden and Norway and learn from what they have accomplished," Sanders said. He wants the United States to copy Denmark's single-payer healthcare system. This idea electrifies his supporters. Under a Sanders presidency, he promises, there'd be no more spiraling insurance premiums or high drug prices. But a closer look demonstrates that single-payer -- in Denmark or anywhere else -- devastates a nation's healthcare system. Sanders's plan would do nothing but guarantee exploding costs, long wait times, and low-quality care. Consider Medicare, the federal healthcare program for seniors. Last year, Medicare wasted $60 billion -- about 10 percent of its budget -- on improper or fraudulent payments. That money went to non-existent healthcare providers with phony addresses and doctors with suspended licenses. And the government was none the wiser. Because of its massive size and inability to adequately monitor its spending, the Government Accountability Office first labeled the program "high risk" in 1990 -- meaning especially susceptible to fraud and abuse. Unsurprisingly, the program is headed toward bankruptcy. Medicare's latest annual report revealed that its main Part A trust fund -- for Hospital Insurance -- will be exhausted in 15 years. The feds will then have to sharply cut benefits, raise the payroll taxes used to fund it -- or raid the rest of the federal budget to cover seniors' care. Seniors themselves are increasingly rejecting traditional Medicare in favor of a privately administered alternative called Medicare Advantage. This program lets seniors choose private insurance plans that contract with Medicare to provide benefits. These Medicare Advantage plans often provide better benefits than traditional Medicare. For example, seniors don't have to purchase supplementary "Medigap" insurance policies -- policies that enrollees need to plug gaps in coverage under standard Medicare plans. Enrollment in Medicare Advantage plans has nearly tripled since 2004. As a result, one in three seniors on Medicare has enrolled in a private Advantage plan compared with just 1 in 10 a decade ago. That doesn't say much for the program Sanders wants to impose on everyone. Nor does his plan's $15 trillion price tag. Other countries that have adopted single-payer systems haven't fared any better than Medicare. Take Canada. As someone who was born there, I can tell you firsthand that Canada's single-payer health system is the last thing the United States needs. Canadians looking for treatment must wait for care, even if they're in desperate need. Alberta Health Services, for example, reports that 90 percent of patients who need back surgery have to wait up to almost nine months. Hundreds have fled to clinics in the United States to get treatments that their government health programs have been denying them. The Fraser Institute, a Canadian think tank, calculates that residents of our northern neighbor have to wait an average of two months to get an MRI -- and almost a year if they need orthopedic surgery. One in three is waiting to see a primary care doctor. Part of the problem is a lack of capacity. For example, the province of Ontario has fewer hospital beds per capita -- just 1.4 per 1,000 people -- than other industrialized nations. The average in eight similarly developed nations is 3.4 beds per 1,000 people. And while Ontario officials brag that this is a sign of how efficiently they run their healthcare system, medical professionals say that this shortage has caused the hospital equivalent of gridlock. "This means the hospital's beds are full. Surgeries have to be cancelled and there are no beds in which patients can recover," noted the Ontario Health Coalition, which is trying to ward off still more spending cuts as the province deals with a $10.9 billion budget gap. Fraser estimates that Canada's healthcare system costs patients nearly $1 billion a year in lost productivity. Innovation has suffered as well. Companies have little incentive to develop new technologies for the Canadian market, as they know that the government will immediately slap price controls on their services. Between 2001 and 2013, for example, research and development within the country's pharmaceutical industry dropped 29 percent. Denmark's single-payer system, which Sanders wants to copy, has also failed to help patients. The Commonwealth Fund recently evaluated the quality of healthcare in 13 major industrial nations. While the United States had one of the lowest rates of death from cancer, Denmark had the highest. Normally, policy proposals by a self-proclaimed "Democratic Socialist" wouldn't merit much attention. But Sanders has been drawing big crowds -- and posting big poll numbers -- with an agenda that includes single-payer health care. If Sanders wins the presidency, patients will lose.Internal Links and HelpersI/L – R&D Investment ReversibleHigh costs of developing drugs and lack of certainty make R&D investment risky – they’d back outSummers and Smith 9 (Cheryl S. Smith is a Strategic Plan Development Manager for Health System Reform for the State of Utah, and a former Health Policy Fellow at the Center for Health Policy Studies at The Heritage Foundation. Laura L. Summers is a recent graduate of Brigham Young University with a Master's in Public Policy, “How Medicare’s Drug Pricing Can Hurt R&D”, The Heritage Foundation, January 12, 2009) In a 2003 study, researchers estimated that the cost of developing a new drug averages around $800 million and that it takes about 12 years until the new drug is ready for market.[7] Of those 12 years, about 4.5 years are spent developing the drug in the pre-clinical phase, and 7.5 years are spent testing the drug in clinical trials and seeking FDA approval. The average cost of successfully bringing a new drug to market is high because it includes the expenditures on failed projects and tests, as well as the value of any investments the company missed while its capital was tied up developing the new drug.[8] The pharmaceutical industry typically has larger opportunity costs than other industries because of the amount of money and time it takes to develop a new drug. The $800 million estimate also accounts for the potential risk of not earning a profit -- pharmaceutical companies do not earn a return on R&D investments unless the drug receives FDA approval.[9]I/L – Margins KeyChanges in margins directly affect pharmaceutical R&D investmentScherer 01 (Frederic M. (2001). The link between gross profitability and pharmaceutical R&D spending. Health Affairs, 20(5), 216-220. )Examination of Exhibit 1 reveals why the usual techniques of time-series analysis used by economists work poorly in ascertaining the links between R&D and profitability. Those methods focus on year-to-year changes in the variable of interest. But there are few sharp changes in the spending path from year to year and, accordingly, few true “degrees of freedom” necessary for a standard time series analysis.4 Rather, one sees gradual swings in actual R&D spending around a best-fitting long-term R&D time trend, assuming steady exponential growth. The trend line implies growth in inflation-adjusted spending at an average rate of 7.5 percent per year. The most closely comparable aggregate time-series measure of industry profitability is derived from Census of Manufactures and Annual Survey of Manufactures data from the U.S. Census Bureau. It is computed as sales less outside materials purchases, payroll outlays, and employee fringe benefits—including those mandated by law along with voluntary benefits. As such, it is best described as a measure of pharmaceutical manufacturing plants’ gross margins—that is, the surplus of revenues over in-plant production costs available to cover R&D costs along with depreciation, marketing costs, central office costs, debt service costs, income taxes, and net profits. The coverage match between ethical drug R&D outlays and this gross margin measure is not perfect, as the census universe under the Standard Industrial Classification (SIC) code 2834—Pharmaceutical Preparations— also includes less research-intensive over-the counter drugs, generic drugs, and some vitamin formulations.5 Fringe benefit outlays, amounting to 3.68 percent of gross margins in 1967, had to be estimated by extrapolation for 1962–1966, imparting possible inaccuracies in the gross margin measure too small to affect the results reported here. The growth rate of deflated gross margins was 4.23 percent per year—much lower than the 7.51 percent growth rate found for R&D outlays (Exhibit 2 ). The disparity of growth rates implies a likely slackening of R&D growth rates in the future. If R&D were covered solely by domestic gross margins, continuation of growth trends experienced since 1962 would mean that R&D outlays would exceed gross margins in the year 2025. To be sure, profits from overseas sales also help to repay R&D costs, but since the United States is the largest single market for U.S. drug companies’ products, retardation of R&D growth rates seems likely in the long run. As in the R&D time series, pharmaceutical industry gross margins exhibit long swings around their exponential time trend. To some extent, coincidence in the timing of the swings can be seen by comparing Exhibits 1 and 2 . However, the relationships are brought into sharper focus by computing the percentage deviations of actual R&D outlays and gross margins from their exponential time trend values.6 The resulting trend deviation series are juxtaposed in Exhibit 3. The degree of coincidence was, at least to this investigator, surprisingly close. The simple Pearsonian correlation between the two time series is +0.92. Deviations from trend values rise and fall in tandem. The swings are so closely correlated that it would be implausible to infer a chain of causation running from R&D to profits, since lags of ten to fifteen years from peak R&D spending to peak profitability for new products are typical.7 At two of the three clear turning points, reversals in the R&D spending series precede reversals in the gross margin series by a year or two. This is superficially inconsistent with a hypothesis that changes in gross margins drive changes in R&D spending. However, the paradox diminishes if decision makers are able to foresee changes in general industry conditions two or more years into the future—for example, recognizing that the “rational drug design” approaches, demonstrated by the introduction of Tagamet in 1977, presaged increasingly rich opportunities for profitable new product development. Sensitivity tests revealed that the patterns observed in Exhibit 3 persist when domestic R&D outlays, a time series available only beginning in 1970, are substituted for worldwide R&D outlays, and when fringe benefit outlays, reported by the Census Bureau only beginning in 1967, are not deducted in calculating gross margins. It is conceivable, as one referee suggested, that the cycles observed here reflect spuriously correlated changes in industry aggregates, for example, as a result of differences in sample coverage between the trade association and Census Bureau universes. To test this possibility, a further analysis correlated trend deviations in variables defined as ratios, with no intermingling of trade association and census universe data for a given ratio. For R&D, the relevant ratio was worldwide R&D outlays, divided by worldwide sales of trade association members in any given year. The PhRMA sales variable was not used in the previous analysis. For gross margins, the relevant ratio was the gross margin, as defined for Exhibit 2 , divided by the total value of plant shipments, a rough Census Bureau surrogate for sales, which can double-count interplant shipments. For the time series of each variable, a best-fitting linear trend was estimated. A linear trend was used because, as variables with a distinct upper bound, the two ratios could not plausibly sustain exponential growth for any extended period. Percentage deviations from these best-fitting linear trends were computed (Exhibit 4 ). Except during the early 1960s, their movements over time are similar to and consistent with those of Exhibit 3 . Their simple correlation is 0.863. Given the internally consistent industry sample frames but different trend measurement assumptions used for Exhibit 4 compared with Exhibit 3 , the similarity of trend deviation patterns suggests that there was indeed cyclical comovement in pharmaceutical industry gross margins and R&D outlays.I/L - Investment KeyR&D Spurred by Profits Pope 13 (Christopher M. Pope, PhD, is a Graduate Fellow in the Center for Health Policy Studies at the Heritage Foundation, “Legislating Low Prices: Cutting Costs or Care?”, The Heritage Foundation, August 9, 2013) Drug innovation is particularly vulnerable to regulatory predation. On average, researching and developing a new biopharmaceutical molecule costs $1.3 billion.[92] Yet once developed, it can often be replicated for a few cents per dose. Nor are drug research and development (R&D) investments reliably profitable. Only the top 30 percent of drugs generate enough revenue to cover the average R&D costs.[93] Unless firms are allowed to reap a substantial share of the value that their most successful innovations generate, they have little incentive to make the colossal up-front investments necessary to produce new drugs. Patents are therefore needed to secure the revenues generated by new drugs for those investing in innovation. However, governments have a strong temptation to renege ex post facto on promises to defend these firms’ revenues and to undermine patent rights by dictating low prices to manufacturers.I/L – US Market KeyUS spends the most on R&DCowen 6 (Tyler Cowen is an American economist, who is an economics professor at George Mason University, where he holds the Holbert C. Harris chair in the economics department, “Poor U.S. Scores in Health Care Don’t Measure Nobels and Innovation”, New York Times, October 5, 2006) In real terms, spending on American biomedical research has doubled since 1994. By 2003, spending was up to $94.3 billion (there is no comparable number for Europe), with 57 percent of that coming from private industry. The National Institutes of Health’s current annual research budget is $28 billion, All European Union governments, in contrast, spent $3.7 billion in 2000, and since that time, Europe has not narrowed the research and development gap. America spends more on research and development over all and on drugs in particular, even though the United States has a smaller population than the core European Union countries. From 1989 to 2002, four times as much money was invested in private biotechnology companies in America than in Europe. Dr. Thomas Boehm of Jerini, a biomedical research company in Berlin, titled his article in The Journal of Medical Marketing in 2005 “How Can We Explain the American Dominance in Biomedical Research and Development?”Dr. Boehm argues that the research environment in the United States, compared with Europe, is wealthier, more competitive, more meritocratic and more tolerant of waste and chaos. He argues that these features lead to more medical discoveries. About 400,000 European researchers are living in the United States, usually for superior financial compensation and research facilities. This innovation-rich environment stems from the money spent on American health care and also from the richer and more competitive American universities. The American government could use its size, or use the law, to bargain down health care prices, as many European governments have done. In the short run, this would save money but in the longer run it would cost lives. Medical innovations improve health and life expectancy in all wealthy countries, not just in the United States. That is one reason American citizens do not live longer. Furthermore, the lucrative United States health care market enhances research and development abroad and not just at home. The gains from medical innovations are high. For instance, increases in life expectancy resulting from better treatment of cardiovascular disease from 1970 to 1990 have been conservatively estimated as bringing benefits worth more than $500 billion a year. And that is just for the United States. The American system also produces benefits that are hard to find in the numbers. The economist Arnold Kling in his “Crisis of Abundance: Rethinking How We Pay for Health Care” (Cato Institute, 2006) argues that the expected life span need increase by only about half a year for the extra American health care spending to be cost-effective over a 20-year period. Given that many Americans walk less and eat less healthy food than most Europeans, the longevity boost from health care in the United States may be real but swamped by the results of poor lifestyle choices. In the meantime, the extra money Americans spend to treat allergy symptoms, pain, depression and discomfort contributes to personal happiness.I/L – US Market KeyUS Huge Market for Pharmaceuticals Whitman and Raad 9 (Glen Whitman is an associate professor of economics at California State University, Northridge. Raymond Raad, M.D., M.P.H., is a resident in psychiatry at New York Presbyterian Hospital / Weill Cornell Medical Center, Cato Institute, “Bending the Productivity Curve: Why America Leads the World in Medical Innovation”, November 18, 2009) There is little doubt that the United States is responsible for a disproportionate share of the monetary returns to medical innovation. In recent years, the United States has accounted for 45 percent of worldwide pharmaceutical sales, as compared to Europe’s 27–31 percent and Japan’s 9–12 percent.32, 33 The population of Europe is 150 percent that of the United States, and Japan 42 percent, so the greater con- tribution of the United States cannot be attrib- uted to its large population. The fact is that Americans spend more per capita on pharmaceuticals. Critics often describe this as a defect of the American system—but with regard to encouraging innovation, we must consider it a feature. The United States is also over-represented as a base of operations for top pharmaceutical firms. Of the top 15 pharmaceutical firms by pharmaceutical revenues, eight are based in the United States, six in Europe, and one in Japan.34 The list of top pharmaceutical com- panies by total revenues is even more skewed: seven of the top 12 are based in the United States and five in Europe.35 This is unlikely to be a coincidence. Although the firms might have located in the United States for histori- cal reasons or because of a superior business climate, being near their most important market is at least a contributing factor."I/L – US Market KeyUS Largest and Least Restricted Pharmaceutical Market Daemmrich 11 (Arthur Daemmrich is the director of the Lemelson Center for the Study of Invention and Innovation. Arthur previously was an associate professor at the University of Kansas School of Medicine, assistant professor at Harvard Business School, a visiting professor at the China Europe International Business School. He holds a Ph.D. from Cornell University in Science and Technology Studies and a B.A. from the University of Pennsylvania in the History and Sociology of Science, “US Healthcare Reform and the Pharmaceutical Industry”, Harvard Business School, September 14, 2011) The United States provides the world’s largest and least restricted pharmaceutical market once the Food and Drug Administration (FDA) authorizes drugs for marketing. In 2010, total prescription drug sales exceeded $250 billion, some 30-35 percent of the global total of $850 billion. 90 Despite its larger population and more encompassing insurance coverage, Europe’s share of global pharmaceutical sales was ten percent less than that of the United States (see Table 2). The difference is largely explained by higher drug prices; for many of the top-selling drugs, the U.S. wholesale price was between two and three times as high as in Germany or the United Kingdom, and consumers (or their insurer) paid retail prices between two and four times as high as in other countries.91 Thus, even though the number of prescriptions filled annually in Canada (an average of 14 per person) and the United Kingdom (an average of 15 per person) exceed the United States (an average of 12 per person), international pharmaceutical firms are drawn to the U.S. market. 92 In many instances, European-based pharmaceutical companies have sought market authorization first in the United States, despite the FDA’s international reputation for rigorous review.93 Even though pharmaceuticals are easily shipped internationally, world-leading sales appear to have contributed to spending on research and development in the United States by pharmaceutical firms. Seven of the top fifteen global pharmaceutical and biotechnology firms are headquartered in the United States, and all of the top twenty firms have research labs in the country. Total R&D spending in the United States exceeded $45 billion in 2010. Of approximately 6,500 drugs in clinical development worldwide in 2007, over 40 percent were discovered in the United States.94 As a consequence, pharmaceutical firms in the United States provided employment for more than 700,000 workers in 2010, along with approximately 2.5 million jobs in supporting industries.95 Likewise, the opportunity to price drugs at high levels has helped create an investment climate in which venture funds with high risk tolerances support entrepreneurial new biotechnology firms. The biotechnology industry started in the United States in 1980 when the Supreme Court ruled that genetically modified organisms were patentable, Congress allowed recipients of federal research to take out patents, and Genentech held the biotech industry’s first initial public stock offering.96 Biotech as an industry has undergone repeated cycles of boom and bust; nevertheless, in 2010 there were 1,452 biotech companies in the United States employing 180,000 people.97 Remarkably, the United States has in recent years maintained and even increased its leading position in clinical testing. While press attention has focused on the outsourcing of clinical trials to developing countries, the vast majority of trials underway are located in North America and Europe (see Table 2, above). Location decisions by the industry for clinical trials appear to align far more closely with pharmaceutical sales than with available patient populations. The United States thus benefits from a virtuous cycle linking R&D investment to testing to new drug availability. Despite predictions in the mid-2000s that India, China, and other developing countries would soon gain comparative advantage in running clinical trials, the number of trials underway in the United States has remained above 50 percent of the global total. I/L – High Prices KeyHigh prices drive investmentPope 13 (Christopher M. Pope, PhD, is a Graduate Fellow in the Center for Health Policy Studies at the Heritage Foundation, “Legislating Low Prices: Cutting Costs or Care?”, The Heritage Foundation, August 9, 2013) An all-star cast of Obamacare advocates recently reassembled in The New England Journal of Medicine to call for a follow-up reform whereby “public and private payers would negotiate payment rates with providers, and these rates would be binding on all payers in the state.”[4] Several of these scholars seemed even to suggest that price controls might yield a free lunch, by checking the monopoly power of health care providers. They suggested that price regulation could compensate for an “inability or unwillingness of private insurers to resist the pricing power of consolidated health systems.” As evidence of potential benefits of deploying the government’s supposedly superior skill at bargaining, they cited the ability of Medicare and Medicaid to purchase care at cheaper rates than private payers.[5] However, this contention is shaky. Fixed costs account for 84 percent of hospital costs, which is to say that the cost of providing care—the cost of maintaining a hospital, equipping an operating room, staffing, and so forth—is largely incurred whether or not an additional individual is treated.[6] A hospital may therefore spread these costs unequally, by charging different amounts for different cases. Therefore, the government’s capacity to oblige hospitals to charge less for Medicare and Medicaid patients does little to prove that it can reduce the costs for all. While price controls on a monopolist may theoretically yield lower prices and higher output, in the absence of government intervention or structural barriers to competition, any market power will tend to be a short-run phenomenon. Indeed, the ability to charge more than the marginal cost of providing services—at least for a time—is essential to attracting the substantial fixed capital investments that are necessary for modern health care. The market for hospitals, for example, is not a natural monopoly, but occasionally an artificial one established by regulation. If providers are permanently shielded from competition, price regulation cannot substitute for the need to reform the various causes of unearned market power, such as barriers to hospital expansion, regulatory restrictions on the capacity of insurers to bargain with providers, licensing requirements, or regulations that privilege favored providers. Far from mimicking the benefits of competition, government price setting prevents providers from competing with each other to earn more by doing a better job. I/L – Deters InvestorsThe plan destroys pharmaceutical innovation – it deters R&D and drives off investors in pharma and biotechHeck 16 (Mia Heck is Director, Health and Human Services Task Force at the American Legislative Exchange Council, “Hillarycare 2.0”, March 18, )The topic of healthcare has typically been a lightning rod election issue, and the 2016 presidential campaign is no exception. Hillary Clinton, oft remembered for her failed 1993 health reform plan, is promising to “improve” Obamacare by lowering the cost of prescription drugs, and introducing new and unprecedented regulatory requirements for the pharmaceutical industry. To lower prescription drug costs, the former first lady has a multi-pronged approach to restrict one of the last segments of the healthcare industry not under control of the federal government. Central to Clinton’s plan is to grant the U.S. Department of Health and Human Services (HHS) the authority to negotiate drug prices with pharmaceutical companies, as the Department of Veterans Affairs (VA) currently does. The VA – a closed healthcare system known for long wait lists and poor health outcomes – employs a process of ‘negotiation’ that is founded on restricting access to newer and more effective treatment for veterans. What typically makes the final formulary is the cheapest option for the Department, and does not include many of the exciting, more promising medical innovations that have recently come to market. Stanford University Researchers findings show the restrictive nature of the VA formulary. A recent comparison revealed only one-third of prescription medicines available to Medicare beneficiaries are currently available to veterans as they are considering treatment options. The Medicare Part D program does currently negotiate the price of prescription drugs, but if HHS sets drug prices for Medicare in the same manner as is done for the VA, Medicare will certainly devolve into a government-run program that robs seniors of their freedom of choice, while significantly lowering quality of care for those who have spent their lives paying into the Medicare system. As currently structured, Prescription Drug Plans (PDPs) work with pharmaceutical companies to develop their drug formularies, then Medicare beneficiaries choose the plans they want, according to which best serves their healthcare needs. This program design works, as is shown by the availability of newer prescription drugs for seniors, which has seen only a 1.5 percent annual increase in cost to beneficiaries over the past eight years. Another part of Hillary’s proposal is to mandate a minimum threshold of pharmaceutical investment in research and development (R&D), or face tax penalties. The notion of requiring minimum funding for reinvestment in R&D implies pharmaceutical companies do not make drug development a priority, which is grossly misleading. Developing new prescription medicines is a ten to fifteen year multi-billion-dollar process that requires a return greater than the original investment to overcome the high risk involved in drug development. In 2013 alone, the pharmaceutical industry invested $51 billion in R&D, creating 3.4 million high-wage and highly-educated jobs, totaling $789 billion in economic output. Why disrupt this sector of the U.S. economy? This proposal would also have an unavoidable impact on breakthroughs in drug development. Revenues earned from pharmaceutical investment are critical to moving forward in developing specialty drugs and are the reason the U.S. is leading the discovery of medical innovations for new ways to manage chronic conditions such as heart disease and diabetes. Over the past 25 years, prescription treatments have reduced the mortality rate for cancer patients by 20 percent. While this progress is significant, there is still much we do not know about how cancer develops, spreads, and what can be done to stop the growth of cancer cells. We do not want to interrupt the pace of private sector cancer research, where increasingly, prescription drugs are substitutes for surgery or other medical procedures. In addition to targeting R&D costs, Hillary also intends to reduce the time pharmaceutical patent protections remain in effect, from 12 years to seven. This proposal will undoubtedly cause R&D investors to shy away from the risky and uncertain pipeline for developing specialty prescription drugs. If private-sector companies are unable to recover the cost of capital during the patent life of their newest medicines, it will dramatically reduce investment in the discovery of experimental specialty therapies. While penalizing the industry with regulatory requirements may sound good on the campaign trail, cutting incentives will result in fewer life-saving treatments and cures over time. If Clinton’s rhetoric calling to ‘improve’ Obamacare by controlling costs is realized, healthcare will become even more costly and more centralized. In short, leaders should look at ways to preserve and enhance existing incentives, not restrict patient access and discourage medical innovation that could very well end America’s standing as the world leader in biomedical innovation.I/L – Global InnovationUS markets subsidize medical research for the rest of the world – plan destroys innovation globallyGrossman 3/9 (Nicholas Grossman, Lecturer in International Relations at the University of Iowa, “What Everyone’s Forgetting About Healthcare”, Arcdigital Media, )Every other economically advanced country has a form of universal healthcare. And, though the systems vary, they all spend less while achieving better outcomes. Compared to every country on that list, the United States has lower life expectancy at birth, higher infant mortality, and higher obesity. And more American seniors have two or more chronic conditions (68%). Canada (56%) and Australia (54%) are the only others above 50%. The comparison isn’t as simple as advocates make it out to be. With other advanced economies clamping down on the profit motive, the United States effectively subsidizes research and development of drugs and medical devices for the rest of the world. However, it’s fair to say a single-payer system with private health providers (like Canada), a publicly run system (like the UK), or strict price controls and required insurance (like Japan) could plausibly give the United States better care for less money. But it’s politically impossible. That’s obviously true now, with Republicans in charge, but it’s probably true for the foreseeable future.I/L – Global InnovationHigh prices in the US drive down prices for medicines globally – the plan destroys innovation and forces global prices upHuber 3/29 (Ryan Huber is Professor of Christian Ethics at Fuller Theological Seminary, “U.S. Health Care Reality Check #1: Pharmaceutical Innovation”, Arcdigital Media, )There are several important reasons why health care is so expensive in the United States, and Grossman points out perhaps the most important: the United States effectively subsidizes research and development of drugs and medical devices for the rest of the world. As Grossman notes, other advanced nations “clamp down” on the profit motive in various ways, meaning that people who would normally make more money in a free market through developing new medical devices, medications, or procedures to produce better health care outcomes and perhaps drive down prices through competition have less incentive to do so in these more government-controlled health care systems. That is, despite the many regulations and laws aimed at consumer protection and safety that do exist in the United States, our health care market is relatively freer and more dynamic than those of other developed countries. This leads to a high rate of medical and pharmaceutical innovation that ends up benefiting the rest of the world, particularly other rich countries, in a similar way that NATO nations, for example, benefit from close military alliance with the United States. In short and somewhat reductive terms: we spend more money so everyone else can be healthier. But this doesn’t make total sense at first. If the United States is developing more innovative medicines, devices, and procedures than every other advanced economy, why aren’t we making money by selling these medical innovations to others for a hefty profit? Why aren’t there many more billions of dollars of revenue coming into the United States Treasury because of our status as a medical innovator? The answer is complicated, but here are some facts you need to know: First, pharmaceutical companies which innovate in the United States charge their domestic customers much more than they do their customers abroad. This is because, if countries don’t like the prices charged by a given pharmaceutical company for a certain drug, they will simply ignore the patent that company holds for their drug in the United States or elsewhere. Novartis spent nearly 15 years seeking a patent in India for Glivec, a medicine for chronic myeloid leukemia. That quest reached its dead end, at last. India’s Supreme Court rejected the Swiss drugmaker’s patent application. Glivec (marketed in America as “Gleevec”) is a blockbuster, earning the Swiss drugmaker $4.7 billion last year. Its prospects in India are now zilch. Although in this example Novartis happens to be a Swiss drug company, the ruling sends the same clear message to drug makers in the United States: Give us your drugs for next to nothing or you’ll get exactly nothing. Second, and relatedly, notice that there seems to be a correlation between how much a country spends on prescription drugs and the percentage of NMEs (New Molecular Entities) produced by that country. If you combine points 1 and 2, you start to understand that the high spending of health care consumers in the United States is arguably funding not only global pharmaceutical innovation but is also facilitating the availability of new medicines to other countries at much lower prices than domestic consumers pay.I/L – Global InnovationThe US healthcare system leads in innovation – drives global innovationCowen 06 (Tyler Cowen, an American economist, who is an economics professor at George Mason University, where he holds the Holbert C. Harris chair in the economics department. 10-5-2006, "Poor U.S. Scores in Health Care Don’t Measure Nobels and Innovation," New York Times, )In real terms, spending on American biomedical research has doubled since 1994. By 2003, spending was up to $94.3 billion (there is no comparable number for Europe), with 57 percent of that coming from private industry. The National Institutes of Health’s current annual research budget is $28 billion, All European Union governments, in contrast, spent $3.7 billion in 2000, and since that time, Europe has not narrowed the research and development gap. America spends more on research and development over all and on drugs in particular, even though the United States has a smaller population than the core European Union countries. From 1989 to 2002, four times as much money was invested in private biotechnology companies in America than in Europe.Dr. Thomas Boehm of Jerini, a biomedical research company in Berlin, titled his article in The Journal of Medical Marketing in 2005 “How Can We Explain the American Dominance in Biomedical Research and Development?” (downloads/pdfs/bridgesvol7_BoehmArticle.pdf) Dr. Boehm argues that the research environment in the United States, compared with Europe, is wealthier, more competitive, more meritocratic and more tolerant of waste and chaos. He argues that these features lead to more medical discoveries. About 400,000 European researchers are living in the United States, usually for superior financial compensation and research facilities. This innovation-rich environment stems from the money spent on American health care and also from the richer and more competitive American universities. The American government could use its size, or use the law, to bargain down health care prices, as many European governments have done. In the short run, this would save money but in the longer run it would cost lives. Medical innovations improve health and life expectancy in all wealthy countries, not just in the United States. That is one reason American citizens do not live longer. Furthermore, the lucrative United States health care market enhances research and development abroad and not just at home. The gains from medical innovations are high. For instance, increases in life expectancy resulting from better treatment of cardiovascular disease from 1970 to 1990 have been conservatively estimated as bringing benefits worth more than $500 billion a year. And that is just for the United States.ImpactsDisease, EconomyCollapse of pharma innovation causes disease spread, destroys the economy, and undermines US technological leadershipChin 15 (William W. Chin is former dean of Harvard Medical School, “A Delicate Balance — Pharmaceutical Innovation and Access”, New England Journal of Medicine, November 5, )As an endocrinologist, a former dean at Harvard Medical School, and a one-time head of research and clinical investigation at a biopharmaceutical company, I've seen many encouraging advances in medicine, plenty of discouraging false starts, and myriad areas where answers remain unknown. But today, as chief medical officer and executive vice president of Pharmaceutical Research and Manufacturers of America (PhRMA), I am seeing a therapeutic golden age like no other in my four-plus decades in medicine. I believe ongoing biopharmaceutical advances hold great promise for us all, and they lie at the center of a national debate over the cost and value of health care in general and new medicines in particular. This debate demands our attention, because whereas it is essential to accelerate scientific and medical progress, it's also critical to ensure that patients have affordable access to the care they need, want, and deserve. For the sake of patients, we need to strike a delicate balance in policies that achieve both biopharmaceutical innovation and access. The study by Motzer et al. in this issue of the Journal (pages 1803–1813) provides a good example of current innovation, showcasing two important drugs that offer options to patients with renal-cell carcinoma and other cancers. More important, the study reflects a broader, deeper pattern that cuts across diseases. New therapeutic approaches such as immunooncology, for example, have helped increase the 5-year survival rate across all cancers by 42% since 1975, according to the National Cancer Institute. Hepatitis C is now curable in more than 90% of treated patients, and progress in endocrinology has expanded our arsenal of weapons against diseases such as diabetes, obesity, osteoporosis, and hypertension. Motzer and colleagues highlight just 2 of the more than 500 new medications that have been approved in the United States since 2000. Yet even with these new options for treating or curing disease, the proportion of health care spending devoted to retail prescription medications remains about the same as it was in 1960. Moreover, despite the pipeline's promise, drug spending is projected to remain at about 14 cents out of every health care dollar between 2015 and 2024, even when nonretail medications, such as those administered by physicians, are included.1 Medications also generate benefits that cascade through our health care system, by improving patients' productivity and quality of life, extending lives, and averting more costly hospital and institutional care. It's possible to deliver so many new medications to patients while still managing costs because the United States relies on competitive markets to set prices and encourage innovation — a system that, as I see it, is working well. After approval by the Food and Drug Administration, a new medication enters a market that is increasingly characterized by competition from other brand-name and generic drugs in the same therapeutic class. This market then does its work. Payers demand demonstration of value and drive patients to the lowest-cost options using aggressive cost-containment strategies: tiered cost sharing, prior authorization, step therapy, and incentives for prescribers to adhere to preferred clinical pathways. Drug purchasing is dominated by a few very large and sophisticated payers. By the end of 2015, the top four pharmacy benefit managers are expected to control more than 80% of all prescriptions.2 These payers bargain fiercely for rebates and other discounts (resulting in prices lower than a new drug's list price). The new breakthrough hepatitis C medications, with cure rates above 90%, are a good case study: within a year, competing medications entered the market, driving down prices by about half3 while broadening access to the long-term benefits these cures deliver to a heavily burdened health care system. At the end of a brand-name medication's lifecycle, generic competitors enter the market, mostly capitalizing on innovative biopharmaceutical companies' prior work. The United States makes more efficient use of generics than other countries: nearly 90% of all U.S. prescriptions are filled with generics that are sold at a fraction of the price of the original brand-name medication, helping ensure long-term affordability. And the new biosimilars pathway is expected to deliver additional cost savings. No other part of the health care system delivers this type of built-in savings. Our system recognizes the considerable challenges and expense of the research and development process and the need to reward innovation, and it balances these needs against access. Recent history shows that we can find answers that bring value to our health care system. After all, in the 1980s there was no effective treatment for HIV–AIDS, and many observers warned that the disease would bankrupt the system as increasing numbers of patients began requiring acute end-of-life care. But instead of spiraling toward bankruptcy, we developed new medications, and today we can treat many more patients with HIV–AIDS, keep them out of the hospital and the costs of their care stable, and provide them with a near-normal lifespan. Rather than cutting off progress, we innovated and got more for our health care dollar and for patients. Of course, this balanced U.S. system is by no means perfect. All of us in the health care system can do better for our patients so that they have access to affordable care while we add to our arsenal of medications. By working with other stakeholders, we can achieve both. It won't be easy. But if we can first agree that we all share a commitment to value, our next steps become clearer. I recommend that we first close gaps in the evidence base across the continuum of care. Biopharmaceutical companies are committed to actively collaborating with government, academia, payers, physicians, and patients to fill these gaps (our participation in the Patient-Centered Outcomes Research Institute is just one example). Second, the health care system can empower physicians and patients with the best available evidence through shared decision making, well-designed care pathways, and decision-support tools. Third, as the Medicare Payment Advisory Commission, the National Academy of Medicine, and others have noted,4 we can refine our ability to measure care quality and performance — particularly clinical outcomes, consideration of patients' preferences, and quality of life. And we can do so in ways that are administratively feasible for physicians and that enhance, rather than impede, their interactions with patients. We in the United States are fortunate to have biopharmaceutical product approval, lifecycle, and market-based–purchasing systems that work to balance cost and value, and our ongoing innovation benefits patients and society. As we move forward, I believe we must recognize that what determines value is varied and individual, and any centralized government-purchasing model would probably result in drastically limited choices for physicians and patients. In the United Kingdom, for example, use of a national cost-effectiveness standard has created barriers to patients' access to many important new cancer treatments. In fact, in 2013, the U.K.'s National Institute for Health and Care Excellence recommended against coverage of all six cancer medications it reviewed.5 As we strive to advance both innovation and access, I argue that we must also avoid creating new systems that would eliminate the very incentives that have fostered U.S. innovation for decades. After all, U.S. research and development has vastly outperformed that of former biopharmaceutical powerhouse countries such as Germany and Switzerland, which have instituted price controls that limit patient choice. Meeting the health care challenges we face starts with a shared commitment to improving patients' lives and advancing value in a competitive health care market. I believe it requires payers, government, academia, health care providers, patients, and industry to pull in the same direction. By doing so, we can improve the delivery of patient-centered, high-quality care, accelerate continued progress toward addressing unmet needs, and ensure continued access to affordable care. U.S. patients deserve nothing less, and industry is ready to help.Disease, EconomyDecreasing prescription drug prices collapses medical innovation, leads to more disease outbreaks, and undermines US competitivenessCastellani 15 (John J. Castellani is past President and Chief Executive Officer of the Pharmaceutical Research and Manufacturers of America, “Secretary Clinton’s proposal would turn back the clock on medical innovation”, Catalyst, September 22, )The sweeping proposals outlined in Secretary Clinton’s plan to regulate prescription drug prices would restrict patients’ access to medicines, result in fewer new treatments for patients, cost countless jobs across the country and could end our nation’s standing as the world leader in biomedical innovation. Researchers and scientists across the biopharmaceutical industry have dedicated their lives to the search for new treatments and cures for patients. They do so against tremendous odds, knowing that despite years of work on potential medicines, nine out of ten will fail during clinical trials and the process will start over. This persistence and dedication to patients has resulted in tremendous advances against some of life’s biggest enemies, including cancer, hepatitis c, heart disease and other devastating diseases. These proposals are driven by the false notion that spending on medicines is fueling overall health care cost growth and ignores how the current marketplace for medicines helps keep spending in check. In reality, the share of health care spending attributable to medicines is projected to continue to grow in line with overall health care cost growth for at least the next decade. This is because competition and negotiation by payers result in steep discounts in medicine prices, and as a result of the current patent system 90 percent of medicines used are low-cost generic copies. It may not be known for decades the full consequences of policies that shift time, resources and energy away from searching for cures for the most challenging and complex diseases, such as Alzheimer’s, Parkinson’s and the most difficult forms of cancer. And yet the stakes could not be higher for the patients who are waiting for new medicines that can improve their lives and offer them more time with loved ones. Specifically, the Clinton proposal: Places arbitrary spending caps on the most research-intensive industry in America, which invests one in every five dollars spent on domestic R&D by U.S. businesses. This would erode the U.S. leadership in biomedical innovation, slash high-tech STEM jobs and undermine U.S. competitiveness. Would result in higher costs and fewer coverage options for the tens of millions of seniors who rely on the successful and hugely popular Medicare Part D program. Risks patient safety by permitting the importation of medicines from abroad with no evidence of savings. Ignores the considerable return taxpayers already receive from investment in basic research and the reality that biopharmaceutical companies perform the vast majority of research and development of new medicines. Would halt medical innovation and chill R&D investment by reducing data protection for biologics.Disease - ExtinctionInnovation solves global pandemics that risk extinctionSachs 14 (Jeffrey, Professor of Sustainable Development, Health Policy and Management @ Columbia University, Director of the Earth Institute @ Columbia University and Special adviser to the United Nations Secretary-General on the Millennium Development Goals) “Important lessons from Ebola outbreak,” Business World Online, August 17, 2014, )Ebola is the latest of many recent epidemics, also including AIDS, SARS, H1N1 flu, H7N9 flu, and others. AIDS is the deadliest of these killers, claiming nearly 36 million lives since 1981. Of course, even larger and more sudden epidemics are possible, such as the 1918 influenza during World War I, which claimed 50-100 million lives (far more than the war itself). And, though the 2003 SARS outbreak was contained, causing fewer than 1,000 deaths, the disease was on the verge of deeply disrupting several East Asian economies including China’s. There are four crucial facts to understand about Ebola and the other epidemics. First, most emerging infectious diseases are zoonoses, meaning that they start in animal populations, sometimes with a genetic mutation that enables the jump to humans. Ebola may have been transmitted from bats; HIV/AIDS emerged from chimpanzees; SARS most likely came from civets traded in animal markets in southern China; and influenza strains such as H1N1 and H7N9 arose from genetic re-combinations of viruses among wild and farm animals. New zoonotic diseases are inevitable as humanity pushes into new ecosystems (such as formerly remote forest regions); the food industry creates more conditions for genetic recombination; and climate change scrambles natural habitats and species interactions. Second, once a new infectious disease appears, its spread through airlines, ships, megacities, and trade in animal products is likely to be extremely rapid. These epidemic diseases are new markers of globalization, revealing through their chain of death how vulnerable the world has become from the pervasive movement of people and goods. Third, the poor are the first to suffer and the worst affected. The rural poor live closest to the infected animals that first transmit the disease. They often hunt and eat bushmeat, leaving them vulnerable to infection. Poor, often illiterate, individuals are generally unaware of how infectious diseases -- especially unfamiliar diseases -- are transmitted, making them much more likely to become infected and to infect others. Moreover, given poor nutrition and lack of access to basic health services, their weakened immune systems are easily overcome by infections that better nourished and treated individuals can survive. And “de-medicalized” conditions -- with few if any professional health workers to ensure an appropriate public-health response to an epidemic (such as isolation of infected individuals, tracing of contacts, surveillance, and so forth) -- make initial outbreaks more severe. Finally, the required medical responses, including diagnostic tools and effective medications and vaccines, inevitably lag behind the emerging diseases. In any event, such tools must be continually replenished. This requires cutting-edge biotechnology, immunology, and ultimately bioengineering to create large-scale industrial responses (such as millions of doses of vaccines or medicines in the case of large epidemics). The AIDS crisis, for example, called forth tens of billions of dollars for research and development -- and similarly substantial commitments by the pharmaceutical industry -- to produce lifesaving antiretroviral drugs at global scale. Yet each breakthrough inevitably leads to the pathogen’s mutation, rendering previous treatments less effective. There is no ultimate victory, only a constant arms race between humanity and disease-causing agents.Disease - AT BurnoutDiseases causes extinction—no burnoutMacPhee et al. 13 (Ross D. E., Former chairman of the Department of Mammalogy at the American Museum of Natural History, Alex D. Greenwood, Professor of wildlife diseases in the Department of Veterinary Medicine of the Freie Universit?t Berlin, “ Infectious Disease, Endangerment, and Extinction,” Hindawi Publishing Corporation, , Date Accessed: 4-14-16)Infectious disease, especially virulent infectious disease, is commonly regarded as a cause of fluctuation or decline in biological populations. However, it is not generally considered as a primary factor in causing the actual endangerment or extinction of species. We review here the known historical examples in which disease has, or has been assumed to have had, a major deleterious impact on animal species, including extinction, and highlight some recent cases in which disease is the chief suspect in causing the outright endangerment of particular species. We conclude that the role of disease in historical extinctions at the population or species level may have been underestimated. Recent methodological breakthroughs may lead to a better understanding of the past and present roles of infectious disease in influencing population fitness and other parameters. 1. Background Although lethal epi- or panzootics are obvious risk factors that can lead to population fluctuation or decline in particular circumstances, infectious diseases are seldom considered as potential drivers of extirpation or extinction—that is, of the complete loss of all populations or subunits comprising a given biological species. For example, in conservation biology, infectious disease is usually regarded as having only a marginal or contributory influence on extinction, except perhaps in unusual circumstances (e.g., [1–4]). In their examination of 223 instances of critically endangered species listed by the IUCN (International Union for Conservation of Nature) as allegedly threatened by infectious disease, Smith et al. [4] found that in the overwhelming majority of cases there was no conclusive evidence to support infectious disease as a contributing threat. Although this record should improve with increasing awareness of the effects of infectious diseases on wildlife, as this paper illustrates progress has so far been slow. Both of the authors of this paper are primarily concerned with mammals, which is the group that will receive the bulk of attention here. However, at the pragmatic, data-gathering level, the issues concerned with properly accounting for and evaluating the effects of infectious diseases on natural populations differ little from one phylogenetic grouping to another. First, narrowing down extinction events or even catastrophic population declines to single causes is almost always problematic. In most real cases, extinction is multicausational, even if one cause can be identified as being predominantly responsible [5]. Habitat fragmentation and climate change are currently regarded as the leading prime movers behind most instances of extreme endangerment, to which other stressors such as pollution, invasive competitors, and so forth, might be of greater or lesser importance in particular circumstances. Disease, however, is rarely mentioned as a possible contributing factor in such contexts (but see [6]). Another difficulty is lack of knowledge about pathogen diversity and susceptibility in wildlife. In the absence of sufficient means of detection and characterization, it is difficult to assess or to give quantitative expression to the degree to which pathogens might influence population decline or extinction. Thus it has been estimated that only a small fraction of bacterial diversity has been identified at even the most basic systematic level. This problem is exacerbated in the case of viruses, which often evolve rapidly and defy, in any case, classical methodologies for identifying “species” [7]. For example, bat viruses have only recently begun to be described systematically, even though many chiropterans are known vectors of numerous zoonotic diseases and corporately represent the second largest grouping (by species richness) of mammals after rodents [8, 9]. A similar lack of knowledge affects our understanding of parasites and fungi that affect wildlife. The foregoing difficulties are compounded when one considers that, unless a species is studied extensively during and up to the actual extinction event affecting it, all extinction studies are retrospective. Retrospective investigation of losses in which disease is possibly implicated is often severely hindered by limitations in the number and quality of samples available for study, as well as the inability to satisfy Koch’s postulates—especially if both host and pathogen became extinct simultaneously [10]. Performing isolation, reisolation, and reinfection experiments to directly establish that a particular pathogen was indeed the causative agent behind a given infection is either very difficult or impossible to do retrospectively. Isolation and recreation of the 1918 H1N1 influenza A virus [11], for example, were performed by sequencing from extractions derived from individuals thought to have died of the disease in WWI, not by directly isolating the infectious virus from tissues (as would be required to formally comply with Koch’s postulates). Although most studies will have to be correlative rather than dispositive, one can nevertheless test hypotheses concerning plausible causal agents and examine samples for presence/absence of specific pathogens [12]. Forensically, decay, degradation, and chemical changes in DNA post mortem produce severe methodological challenges to retrieving and accurately determining sequences [13]. In addition, in any retrospective investigation involving “ancient DNA,” pathogen nucleic acids will be less abundant than those of the host, and this dilution effect will make sequence retrieval even more complex [10]. For example, relatively abundant mitochondrial DNA is generally easier to retrieve from fossils or historical samples than lower copy per cell nuclear DNA. Pathogen nucleic acids are generally even lower copy than host DNA sequences in a given extraction. These and other factors reviewed here may help to explain the paucity of conclusive studies of disease-mediated extinction, except in the very few instances in which sampling and methodological roadblocks could be overcome. Nonetheless, in favorable circumstances it should be possible to genetically analyze ancient pathogens with sufficient accuracy to make the endeavor worthwhile, especially because next-generation sequencing methods are beginning to make such endeavors ever more feasible [14–18]. Why should the possible role of infectious disease in endangerment and extinction be regarded as a critical issue in modern conservation? Whether or not disease was ever a major cause of extinction in the fossil record [19], in our times it plays an acknowledged but perhaps underestimated role. Pathogen-driven population declines have been identified in a wide array of invertebrate and vertebrate taxa (cf. [20]), suggesting that the phenomenon is probably universal. Yet without the kinds of monitoring methods now available, some and perhaps most of these declines would have gone undetected, or attributed to other causes. Further, the processes forcing such declines are as diverse as the pathogens themselves and are far from being clearly understood. The apparent increase in zoonotic diseases during the last few decades [21] may be objectively real or merely due to better monitoring, but it seems highly likely that loss or reduction of pristine habitats and the overall impact of invasive species should promote the introduction of opportunistic pathogens into wildlife with increasing frequency. Thus, understanding the dynamics of disease-mediated species declines may be critical to conservation missions concerned with a wide variety of species and habitats. Recent advances in molecular biology and microbiology have permitted the detection and identification of hosts of novel microorganisms, many of which are pathogenic, and the technology needed to assess threat levels is becoming increasingly available. 2. Disease as an Agent of Extinction: Some Considerations Although the fossil record clearly establishes that the fate of all species is to eventually die out, it is obvious from the same record that the rate of disappearance of individual species varies significantly [22]. As already noted, inferences about how (as opposed to when) an individual species disappeared must be developed inductively and retrospectively. An important guideline is that apparent causes of extinction that are diachronic (repeatedly affect species across time) are inherently more plausible than ones that are claimed to have occurred only once, or apply to only one taxon. Although this means that explanations about individual extinctions are not strictly testable, they can nevertheless be evaluated in terms of likelihood, which is the approach currently taken by the International Union for Conservation of Nature (IUCN) and several other conservation organizations interested in compiling extinction statistics [23, 24]. It is an accepted tenet in conservation biology that any severe, continuing threat to a species might eventually contribute to its extinction [25]. From this perspective, it is also accepted that diseases presenting with very high levels of mortality—as in the case of a highly transmissible infection that is newly emergent in a population—can cause outright endangerment. But are there conditions under which a disease, probably in combination with other threats, might so imperil a species to cause its complete disappearance? MacPhee and Marx [19] considered this issue from the standpoint of model pathogenic features that a disease-provoking organism might exhibit in forcing the extinction of a given species. These features include: (1) a reservoir species presenting a stable carrier state for the pathogen, (2) a high potential for causing infections in susceptible species, affecting critical age groups, (3) a capacity for hyperlethality, defined here as mortality rates in the range of 50–75%. Only under the most extreme conditions is it conceivable that a species would suffer extinction in a single epizootic event. Much more likely would be repeated outbreaks over a period of years gradually reducing the fitness level of the species, with final disappearance potentially caused by stochastic events (such as causally unassociated climate change). One way in which this condition might be achieved would be through a stable carrier (i.e., a species other than the target, living in similar circumstances in the same environment, and in which the infection is inapparent or at least sublethal). A well-studied example is the transfer of simian acquired immunodeficiency virus from one species of macaque to another [26]. Although this instance occurred under captive conditions, repeated outbreaks of distemper in lions and African wild dogs have long been thought to be due to transfer from domestic dogs (although the mechanism is debated; see [27]). Obviously, for a disease to have a very severe impact, it would be necessary for the pathogen to occur in highly lethal, aggressive strains that strongly impact the target species before attenuated strains arise and become common. High potential for causing infections in a susceptible species is usually associated with the ability to successfully enter the organism through a major portal, such as the respiratory tract, where it can be lodged and transmitted easily (e.g., via aerosol). To achieve hyperlethality and produce serious mortality, all age groups within a species would probably have to be susceptible, not just the very young or very old (or the immunocompromised), with death the usual outcome. In large-bodied mammals, a fundamental consideration is that any process that deleteriously affects young individuals will have a pronounced effect on survivorship because of the lengthy intervals in birth spacing [19]. Lethality in the range of 50–75% is obviously extremely high and thus extremely unusual, although historically seen in Ebola infections in humans and in experimental transmission studies from pigs to macaques [28]. High percentages may have also been achieved in rinderpest outbreaks among East African bovids in the early 20th century [29], although quantitative data on this are largely lacking. An important issue here, however, is whether pathogens causing this level of lethality could maintain themselves in nature long enough to seriously imperil a species. Speculatively, a possible outcome with hyperlethal infections producing a rapid, fatal outcome is that affected populations would be reduced to small numbers of widely dispersed and/or relatively or completely immune individuals. Under these circumstances, the epizootic would necessarily abate as it ran out of new hosts, leading to the conclusion that exceptionally lethal diseases cannot be indefinitely maintained in a population or species under normal circumstances. However, if reservoirs exist from which the pathogen could repeatedly emerge, in principle epizootics might resurge year after year until population sizes were reduced below viable levels (~50–500 individuals). At this point stochastic effects might intervene and lead to complete loss of the species. Among possible examples of this “perfect storm” of circumstances and consequences is the loss of Christmas Island rats, detailed elsewhere in this paper. Among birds, the severe impact of avian malaria on Hawaiian honeycreepers is also pertinent and discussed later in this paper. Although a number of honeycreeper species survive at high elevations, above the limit at which introduced Culex mosquitos can survive, there are multiple adventitious threats, such as deforestation and competition from invasive species, which add to their endangerment picture [30].EconomyPharma innovation is key to the economy – it employs millions and drives investmentDaemmrich 11 (Arthur Daemmrich is the director of the Lemelson Center for the Study of Invention and Innovation. Arthur previously was an associate professor at the University of Kansas School of Medicine, assistant professor at Harvard Business School, a visiting professor at the China Europe International Business School. He holds a Ph.D. from Cornell University in Science and Technology Studies and a B.A. from the University of Pennsylvania in the History and Sociology of Science, “US Healthcare Reform and the Pharmaceutical Industry”, Harvard Business School, September 14, 2011) The United States provides the world’s largest and least restricted pharmaceutical market once the Food and Drug Administration (FDA) authorizes drugs for marketing. In 2010, total prescription drug sales exceeded $250 billion, some 30-35 percent of the global total of $850 billion. 90 Despite its larger population and more encompassing insurance coverage, Europe’s share of global pharmaceutical sales was ten percent less than that of the United States (see Table 2). The difference is largely explained by higher drug prices; for many of the top-selling drugs, the U.S. wholesale price was between two and three times as high as in Germany or the United Kingdom, and consumers (or their insurer) paid retail prices between two and four times as high as in other countries.91 Thus, even though the number of prescriptions filled annually in Canada (an average of 14 per person) and the United Kingdom (an average of 15 per person) exceed the United States (an average of 12 per person), international pharmaceutical firms are drawn to the U.S. market. 92 In many instances, European-based pharmaceutical companies have sought market authorization first in the United States, despite the FDA’s international reputation for rigorous review.93 Even though pharmaceuticals are easily shipped internationally, world-leading sales appear to have contributed to spending on research and development in the United States by pharmaceutical firms. Seven of the top fifteen global pharmaceutical and biotechnology firms are headquartered in the United States, and all of the top twenty firms have research labs in the country. Total R&D spending in the United States exceeded $45 billion in 2010. Of approximately 6,500 drugs in clinical development worldwide in 2007, over 40 percent were discovered in the United States.94 As a consequence, pharmaceutical firms in the United States provided employment for more than 700,000 workers in 2010, along with approximately 2.5 million jobs in supporting industries.95 Likewise, the opportunity to price drugs at high levels has helped create an investment climate in which venture funds with high risk tolerances support entrepreneurial new biotechnology firms. The biotechnology industry started in the United States in 1980 when the Supreme Court ruled that genetically modified organisms were patentable, Congress allowed recipients of federal research to take out patents, and Genentech held the biotech industry’s first initial public stock offering.96 Biotech as an industry has undergone repeated cycles of boom and bust; nevertheless, in 2010 there were 1,452 biotech companies in the United States employing 180,000 people.97 Remarkably, the United States has in recent years maintained and even increased its leading position in clinical testing. While press attention has focused on the outsourcing of clinical trials to developing countries, the vast majority of trials underway are located in North America and Europe (see Table 2, above). Location decisions by the industry for clinical trials appear to align far more closely with pharmaceutical sales than with available patient populations. The United States thus benefits from a virtuous cycle linking R&D investment to testing to new drug availability. Despite predictions in the mid-2000s that India, China, and other developing countries would soon gain comparative advantage in running clinical trials, the number of trials underway in the United States has remained above 50 percent of the global total. Life Expectancy – Pharma KeyInnovation in new chemical entities increases life expectancy more than releases of non-NCEsLichtenberg 05 (Frank Lichtenberg, 2005. "The Impact of New Drug Launches on Longevity: Evidence from Longitudinal, Disease-Level Data from 52 Countries, 1982–2001," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 47-73, January. )Until recently, there appears to have been a consensus among health economists (or at least authors of health economics textbooks) that the contribution of medical care to longevity increase and other health improvements has been quite modest. But some recent research has indicated that technological innovations in medicine have had important positive impacts on health. In this paper, we have performed an econometric analysis of the effect of new drug launches on longevity. Drugs are much more research-intensive than most other goods and services utilized in the health care sector, so new drug introductions account for a substantial fraction of medical innovations. Our sample included data on virtually all of the diseases borne by people in 52 countries during the period 1982-2001. Analysis of the relationship between new drug launches and longevity using these data enabled us to control, to an unusually great 21 extent, for the effects of other potential determinants of longevity, e.g. education, income, nutrition, the environment, and “lifestyle”. We used data from the IMS Health Drug Launches database to construct estimates of the number of drugs launched to treat eleven different diseases in each country in each year. This database has tracked new product introductions worldwide since 1982, and contained over 165,000 records of individual product introductions. We obtained data on the age distribution of deaths, by disease, country, and year, from the World Health Organization (WHO) Mortality Database. These data enabled us to compute the fraction of deaths that occur above (or probability of surviva l until) certain ages, such as 55 and 65 years of age. We found that launches of New Chemical Entities (NCEs) have a strong positive impact on the probability of survival. The estimates indicated that it takes at least three years for new NCE launches to have their maximum impact on survival rates. This is probably due to the gradual diffusion of drugs to consumers following launch; data on pharmaceutical expenditure were consistent with this interpretation. Launches of (older) drugs that are not NCEs—many of which may already have been on the market—do not increase longevity. Indeed, some estimates indicated that, conditional on the cumulative number of NCE launches, the greater the cumulative number of non-NCE launches, the lower the probability of survival to age 65. This is consistent with the view that increasing the ratio of non-NCE to NCE launches reduces the fraction of people consuming NCEs, which in turn reduces longevity. Heterogeneity with respect to NCE launches appears to explains very little of the international variation in longevity. But NCE launches appear to account for a significant fraction of the long-run increase in longevity in the sample as a whole. Between 1986 and 2000, average life expectancy of the entire population of sample countries increased by almost two (1.96) years. Our estimates imply that NCE launches accounted for 0.79 years (40%) of the 1986-2000 increase in longevity. The average annual increase in life expectancy of the entire population resulting from NCE launches is .056 years, or 2.93 weeks. 22 Previous authors have shown that countries with lower prices or smaller market size experience longer delays in access to new drugs; our results imply that launch delays reduce longevity. The cost per life-year gained from the launch of NCEs appears to be extremely low. Pharmaceutical expenditure per person per year divided by the increase in life-years per person per year attributable to NCE launches is about $4500--far lower than most estimates of the value of a life-year. Moreover, since the numerator includes expenditure on old drugs as well as on recently-launched NCEs, it probably grossly overstates the cost per life-year gained from the launch of NCEs.Life Expectancy - GlobalPlan leads to a reduction in global life expectancy – we need pharma innovationLakdawalla and Goldman 8 (Darius Lakdawalla is the director of research at the Bing Center for Health Economics at RAND. Dana Goldman is chair and director of health economics, finance, and organization; Pierre-Carl Michaud is an associate economist, Economics and Statistics; Neeraj Sood is an economist; Robert Lempert is a senior physical scientist, Technology and Applied Sciences; and Ze Cong is an assistant policy analyst, all at RAND, HealthAffairs, “US Pharmaceutical Policy In A Global Marketplace”, December 2008) )Pharmaceutical pricing and access involve a trade-off between current and future generations. The prospect of higher future profits creates stronger incentives to innovate, which benefit the future generations who will use tomorrow’s inventions. Conversely, policies that ensure high profits typically impose greater spending burdens on patients using today’s innovations. As a result, policies that promote higher revenues benefit future generations, but possibly at the expense of today’s patients. Some critics have questioned the empirical validity of the link between profits and pharmaceutical innovation; however, a great deal of evidence suggests an underlying relationship between the two.2 The second important trade-off in pharmaceutical pricing is global in nature, because new treatments are of value to the entire globe. Thus, spending by Americans encourages innovations that benefit both Europe and the United States. As a result, U.S. spending cuts may harm Europeans…..Exhibit 1? illustrates the impact of introducing U.S. price controls on the longevity of cohorts ages 55–59, using our baseline parameter values. It shows that the introduction of price controls would reduce life expectancy by two-tenths of a year for Americans ages 55–59 alive in 2010 and by one-tenth for Europeans ages 55–59 alive in the same year. In percentage terms, these correspond to 0.8 percent and 0.7 percent declines from the status quo. The longevity effects are larger for the older cohorts, because the effects of price controls take time to set in. The early cohorts are not exposed to innovation reductions for a number of years. This dampens the impact on their life expectancy. By 2060, Americans and Europeans in this age group lose almost 0.7 years of life expectancy as a result of U.S. price-control implementation. These represent reductions of approximately 2.8 percent. On the benefit side, U.S. price controls reduce spending on drugs and medical care. Exhibit 2? quantifies this effect. Price controls adopted in 2005 would reduce lifetime per capita health spending by $9,000 in the United States and $400 in Europe, for those ages 55–59 alive in 2010. Reductions in Europe come about as a result of reductions in life expectancy. The U.S. effects combine life expectancy reductions with direct reductions in cost. For those ages 55–59 alive in 2060, Americans can expect $14,400 less in lifetime spending; Europeans, $2,100 less. Exhibit 3? shows that U.S. price controls have very modest benefits in the present but substantial costs in the long run. For the 2010 cohort, price controls produce $1,100 of net per capita benefit in the United States but $8,000 of net per capita cost to Europeans in that cohort. By 2060, the cohorts ages 55–59 lose $51,000 and $54,000 in the United States and Europe, respectively. Life Expectancy - Key to EconomyLife expectancy increases contribute to the US economyMurphy and Topel 06 (Murphy, K. M., & Topel, R. H. (2006). The value of health and longevity. Journal of political Economy, 114(5), 871-904. )We have developed a framework for valuing improvements in health based on willingness to pay and used this framework to estimate the value of past and prospective health advances. The resulting values are large. Reductions in mortality from 1970 to 2000 had an (uncounted) economic value to the 2000 U.S. population of about $3.2 trillion per year. Cumulative longevity gains during the twentieth century were worth about $1.3 million per person to the representative member of the 2000 U.S. population. Valued at the date they occurred, the production of longevity-related “health capital” would raise estimates of per capita output in the United States by from 10 to 50 percent, depending on the time period in question. Prospectively, even modest progress against diseases such as cancer and heart disease would have enormous social values. A 1 percent reduction in mortality from cancer or heart disease would be worth nearly $500 billion to current and future Americans. These estimates ignore the value of health advances to individuals in other countries, so they understate aggregate social values of possible innovations. They also ignore corresponding improvements in the quality of life—which evidence suggests may be even more valuable than gains in longevity— and for these reasons as well they are likely to be conservative. We show that these values will increase in the future because of economic growth and, more interestingly, because health itself continues to improve. Large as they are, these values may be offset by the costs of developing and implementing health improvements. Current public and private spending on health-related research is a tiny fraction of potential benefits, yet such investments may not be worthwhile if the costs of implementing new technologies are large. Social transfer programs and other third-party methods of financing health care can distort both utilization decisions and research, with the result that some health improvements are socially inefficient.DA Turns CaseTurns Case – HC CostsInnovation lowers costs – turns the caseLichtenberg 07 (Frank R. Lichtenberg, 2007. "Benefits and costs of newer drugs: an update," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 485-490. )In previous work, we found strong evidence to support the hypothesis that the replacement of older drugs by new drugs resulted in reductions in total medical expenditures. In this study, we update and extend our previous study of the effect of drug age—years since FDA approval—on total medical expenditure, in several respects: (1) the unit of analysis is a medical condition, rather than a prescription; (2) the sample is much larger, including data for three years, rather than one year; (3) we obtain estimates for the Medicare population as well as for the entire population; and (4) within the Medicare population, we examine the effect of drug age on Medicare expenditure as well as on expenditure by all payers. The estimates indicate that, in the entire population, a reduction in the age of drugs utilized reduces non-drug expenditure 7.2 times as much as it increases drug expenditure. For example, reducing the mean age of drugs used to treat a condition from 15 years to 5.5 years is estimated to increase prescription drug spending by $18 but reduce other medical spending by $129, yielding a $111 net reduction in total health spending. Most of the savings are due to reductions in hospital expenditure ($80) and in physician office-visit expenditures ($24). In the Medicare population, a reduction in the age of drugs utilized reduces nondrug expenditure by all payers (i.e., Medicare and various forms of Medicare supplemental insurance, Medicare for dually eligible individuals and Medicare beneficiaries’ out of pocket payments) 8.3 times as much as it increases drug expenditure; it reduces Medicare non-drug expenditure 6.0 times as much as it increases drug expenditure. About two-thirds of the non-drug Medicare cost reduction is due to reduced hospital costs. The remaining third is approximately evenly divided between reduced Medicare home health care cost and reduced Medicare office-visit cost. We also show that Medicare enrollees with private prescription drug coverage tend to use newer drugs than those without such coverage: the mean age of drugs used by 2 Medicare enrollees with private Rx insurance is about 9% lower than the mean age of drugs used by Medicare enrollees without either private or public Rx insurance.Turns Case – HC CostsPharma innovation key to cheap drugsPope 13 (Christopher M. Pope, PhD, is a Graduate Fellow in the Center for Health Policy Studies at the Heritage Foundation, “Legislating Low Prices: Cutting Costs or Care?”, The Heritage Foundation, August 9, 2013) Although price controls can trim budgetary expenses in the short run by undermining patents, patents cover drugs for only a temporary period, so the only lasting effect is to undermine future drug development. Indeed, since drugs are much cheaper to provide than inpatient hospital care, facilitating drug innovation that provides effective substitutes may even save taxpayers money in the long run. [104]Turns Case – Health CarePharmaceutical Innovation Essential for Improving HealthcarePharmaceutical Research and Manufacturers of America 10 (PhRMA represents the country’s leading biopharmaceutical research companies and supports the search for new treatments and cures, “R&D by US Companies Remains Strong”, March 16, 2010) Despite a fragile economy, America’s pharmaceutical research and biotechnology companies invested a record $65.3 billion last year in the research and development of new life-changing medicines and vaccines – an increase of more than $1.5 billion from 2008, according to analyses by the Pharmaceutical Research and Manufacturers of America (PhRMA) and Burrill & Company. This investment reflects the continued commitment of America’s biopharmaceutical research companies to lead the world in the pursuit of new, life-saving and life-enhancing medicines. PhRMA-member companies alone spent an estimated $45.8 billion on pharmaceutical R&D last year, according to the PhRMA survey. The Burrill & Company analysis shows that non-PhRMA pharmaceutical research companies in the United States spent an estimated $19.5 billion on R&D in 2009. Investment in R&D by America’s pharmaceutical research and biotechnology companies remained strong last year, in the face of a weak economic environment and historically low growth in drug spending. While companies have been forced to make difficult business decisions, research spending as a percentage of sales remained high in 2009. Over the past nine years, America’s pharmaceutical research companies have consistently invested around 18 percent of domestic sales on R&D activities. “America’s biopharmaceutical research sector takes great pride in its global leadership in the development of new life-saving treatments and cures,” said PhRMA President and CEO Billy Tauzin. “Over the past year the economic challenges have been enormous, but our industry’s continued commitment to R&D is bringing hope to millions of patients around the world who are battling potentially devastating diseases such as cancer, heart disease and diabetes.” U.S. biopharmaceutical companies’ focus on research has been observed by many independent experts. For instance, the nonpartisan Congressional Budget Office (CBO) has said: “The pharmaceutical industry is one of the most research-intensive industries in the United States. Pharmaceutical firms invest as much as five times more in research and development, relative to their sales, than the average U.S. manufacturing firm.” Last year, University of Connecticut researchers similarly found that over the past 25 years, investment in R&D by the pharmaceutical and biotechnology sectors greatly exceeded that of all other industries in the U.S. Importantly, this investment has produced results. According to a 2006 CBO analysis, “Many examples exist of major therapeutic gains achieved by the industry in recent years.... [A]necdotal and statistical evidence suggests that the rapid increases that have been observed in drug-related R&D spending have been accompanied by major therapeutic gains in available drug treatments.” For instance, independent research shows that cancer patients are living, on average, three years longer – and 83 percent of those survival rate gains are due to new treatments, including medicines. Heart failure and heart attack deaths fell by nearly half from 1999 to 2005. And since the advent of highly active anti-retroviral therapy in 1995, the annual number of U.S. deaths due to AIDS has plummeted by more than 70 percent. As in past years, an increasing number of potential new drugs are entering clinical testing. Today, there are more than 2,900 medicines in clinical trials or awaiting review by the Food and Drug Administration in the U.S., compared with 2,400 in 2005. The current pipeline includes more than 800 medicines to treat cancer, over 300 specific to rare diseases and more than 300 medicines for heart disease and stroke. “This exciting research not only carries the potential to dramatically change and improve the lives of countless patients, it supports valuable and rewarding jobs for millions of American workers,” said Tauzin. “With unemployment rates remaining high, our nation must embrace strong sectors such as ours. If we want to maintain our leadership in biopharmaceutical R&D – and the subsequent value it brings to our state and national economies – it’s critical that the U.S. preserve policies that make such research possible.”Answers ToAT Plan Causes InnovationPharmi research funded by Medicare does not produce innovative products Dranove et al 15 (Dranove, D., Garthwaite, C., & Hermosilla, M. (2015). PHARMACEUTICAL PROFITS AND THE SOCIAL VALUE OF INNOVATION. )The expansion of pharmaceutical insurance for the elderly in the United States caused an increase in clinical trial activity in the biotechnology sector. This suggests a strong link between expected profits and research investments. To provide some sense of the magnitude of these findings, we consider the estimated change in revenue from Part D suggested by Duggan and Scott-Morton (2010). Based on these estimates, the average product in our sample should expect a revenue increase of approximately 9 percent.25 Our estimates show that Part D increased clinical trials for the average product by approximately 18 percent. This suggests an elasticity of clinical trials with respect to the expected change in market size of approximately 2. This implied elasticity is less than the earlier estimates in BKS for clinical trials as well as the estimate in Acemoglu and Linn (2004) for new molecular entities. Our smaller elasticity likely results from the combination of two factors. First, products from biotechnology firms may be more difficult to develop than the average product. Second, these products may be more likely to be partially covered by Part B and therefore the profit shock from Part D for these products may be smaller than for the average small molecule product with a similar MMS. An open question in the existing literature is whether these new products represent welfare improvements or simply rent seeking by pharmaceutical firms. At the broadest level, the biotechnology sector has been found to be generally innovative and the complexity of the products suggests that it is difficult to make small changes to generate a “me-too” product. In fact, the complexity of these molecules makes it more difficult to even make generic versions of these products. Therefore, new products emerging from this sector are more likely to represent some form of scientific advancement rather than only the me-too products cited by many critics of the pharmaceutical industry. Our results are quite different when we examine whether the new biotech products spurred by Part D provide innovative treatments as measured by the absence of existing pharmaceutical treatments for the same conditions and by FDA designations of novelty. We find no evidence that the passage of Part D caused the emergence of innovative products across these dimensions. The research activity following a demand shock is primarily for products targeting conditions with five or more treatments. For these products we estimate an implied elasticity of clinical trials to change in revenues of 3.3 – far closer to the estimates of the earlier literature. In addition, we see no evidence of an increase in products receiving FDA designations. It could be that true breakthroughs take longer to develop than incremental innovations. This is particularly true if biotech firms have a cache of potential products that are marginally unprofitable before a small change in market demand and their immediate response to a shift in demand is to bring these products “off the shelf.” While there is no systematic method of calculating the time from basic science to human trials, we do note that we examine a relatively long window after the passage of Part D and that there are prominent examples of compounds being identified and reaching human trials in far less time. For example, the hepatitis C cure Solvaldi discussed earlier was primarily the result of the 33 work of Michael Sofia at Pharmasset. Sofia joined the firm in 2005 and Sovaldi entered clinical trials five years later (Gounder, 2103). Similarly, Merck’s insomnia treatment Suvorexant moved from first concept to clinical trials in four to six years (Parker, 2013). While these provide only anecdotal evidence, they do demonstrate that the time period we consider after Part D is sufficient for some socially valuable products to reach market. That being said, we realize that we cannot rule out the possibility that over an even longer horizon more innovative products could enter clinical trials as a result of this marginal demand shock. As the debate about the rate of growth of health care spending in the United States continues it will almost certainly continue its focus on the profits earned by pharmaceutical firms. For example, the Centers for Medicare and Medicaid Services is currently not allowed to exploit its market power to negotiate lower prices for drugs purchased by Medicare Part D. Examining the prices paid by other government agencies without this restriction, such as the Veterans Administration, suggests that changing this policy would lead to lower prices and profits for pharmaceutical firms. Our results suggest that this would decrease the number of new biotechnology products available for individuals suffering conditions with a large elderly patient share. That being said, it also appears that this would have little effect on the emergence of new products for conditions with few existing treatments or those deemed by the FDA to require a swift approval process. Future work should examine whether the new treatments following Part D that target conditions with many existing options represent a welfare increase on a dimension not recognized by the FDA rather than simply lower prices. It is also important to note that our estimates represent the causal effect from a marginal change in expected profits. We posit that the reason why there is little effect from this change on true scientific breakthroughs is that these products are always profitable and therefore research investments in them are inframarginal with respect to small profit changes. Another possibility is that the scientific barriers are largely impenetrable and firms will not attempt to overcome them without substantially higher profit potential than what was conferred by Part D. Thus, large changes in profits from a single payer health 34 system, a dramatic reduction in patent length, or some form of compulsory licensing would likely have far different effects.AFFLink Turn – Pharma SpendingMedicare part D increased pharmaceutical R&D spending, plan would be good for pharmaBlume-Kohout & Sood 13 (Blume-Kohout, M. E., & Sood, N. (2013). Market Size and Innovation: Effects of Medicare Part D on Pharmaceutical Research and Development.?Journal of Public Economics,?97, 327–336. )In addition to our primary analyses described above, we also investigated short-run effects of Medicare Part D on firms’ R&D expenditures, and longer-run effects on worldwide drug launches. Medicare Part D could have affected firms’ R&D expenditures both to its expansion of expected future markets for products still in pipeline, and also via two supply side mechanisms. First, after Medicare Part D was implemented in 2006, established firms selling drugs for the Medicare market would have seen an increase in current sales revenues, and prior research indicates that short-run increases in cash flow yield contemporaneous increases in R&D expenditures at pharmaceutical firms (Scherer, 2001; Vernon, 2005b). Second, per Friedman (2009), stock prices for firms introducing high Medicare share drugs increased dramatically after Part D, and increases in stock prices may decrease the cost of external capital, thereby increasing R&D expenditures (Golec et al., 2010). Large, established firms with relatively diverse baseline R&D portfolios could have responded to Medicare Part D by changing their research priorities, for example by in-licensing higher Medicare share products. In contrast, among firms that have smaller and more focused R&D portfolios—and therefore less flexibility to adapt to changing market conditions—the effect of Medicare Part D might have been stronger. For example, all else equal, a small firm that specializes in treatments for Alzheimer’s disease should have experienced a larger increase in R&D than a firm specializing in childhood vaccines. Exploiting variation in firms’ pre-Part D research portfolios, specifically their portfolios’ average expected Medicare market share, we do find evidence of a significant increase in R&D expenditures after implementation of Medicare Part D at firms with positive (non-zero) sales, but with less than $2 billion in market capitalization. In contrast, we find no effect of Part D on R&D expenditures among firms with the greatest stock market exposure ($10 billion or more), nor at start-up firms that had no revenue from sales. Finally, with Phase III trials significantly increasing (p<.01) in 2006 and beyond, then typically lasting three years or more, and an estimated 18 months between submission for marketing approval and product launch, we expected any long-run changes in U.S. FDA approvals due to Part D would likely not be seen until 2010 or later. As a first approximation to U.S. approvals, we assessed possible Part D effects using Pharmaprojects’ worldwide market launches as an outcome variable. In a Poisson regression with class-specific time trends, we do find a significant effect of Part D beginning in 2008, with a MedicareShare*(Year>2007) coefficient estimate of 0.74 (p=.013), corresponding to an elasticity of new drug approvals with respect to market size of about 2.8.No Link – Prices StableNo link - drug prices don’t decrease for Medicare patronsSchondelmeyer 2016 (Schondelmeyer, Stephen W. "Trends in Retail Prices of Prescription Drugs Widely Used by Older Americans, 2006 to 2013." AARP Public Policy Institute (2016): n. pag. . Feb. 2016. Web. < prices for a combined set of widely used prescription drugs consistently increased faster than general inflation in every year from 2006 to 2013. For a consumer who takes a prescription drug on a chronic basis, this translates into an annual cost of therapy of over $11,000 in 2013. These findings are entirely attributable to strong drug price growth among brand name and specialty drugs, which more than offset substantial price decreases among generic drugs. AARP’s Public Policy Institute finds that average price increases for prescription drugs widely used by older Americans, including Medicare beneficiaries, far outstripped the price increases for other consumer goods and services between 2006 and 2013. Prescription drug prices have routinely increased much faster than general inflation over the more than 10 years that AARP has been publishing this report series.1 In 2013, the average annual increase in retail prices for AARP’s combined market basket— which included 622 brand name and generic versions of traditional and specialty prescription drugs widely used by Medicare beneficiaries— was 9.4 percent. The general inflation rate was 1.5?percent over the same time period. Increases in the retail price of prescription drugs have a corresponding impact on the cost of drug therapy for the individual and all other payers. In 2013, the average annual retail cost of drug therapy for a prescription drug, based on the AARP combined market basket used in this study, was over $11,000 per year. This average annual cost was almost three-quarters of the average Social Security retirement benefit ($15,526).2 It was also almost half of the median income for Medicare beneficiaries ($23,500)3 and more than one-fifth of the median US household income ($52,250)4 over the same time period. Prescription drug price increases also affect employers, private insurers, and taxpayerfunded programs like Medicare and Medicaid. For example, the Medicare Payment Advisory Commission recently attributed the majority of “excess” growth in Medicare Part D spending to growth in the average price of drugs provided to enrollees.5 Spending increases driven by high and growing drug prices will eventually affect all Americans in some way. Those with private health insurance will pay higher premiums and cost sharing for their health care coverage6 and, over time, higher drug prices could also lead to higher taxes and/or cuts to public programs to accommodate increased government spending.No Link - No R&D SpendingNo tradeoff – pharma spends on lobbying, not R&DHancock et al 17(Jay Hancock, MSJ in Journalism from Northwestern University and senior correspondent at Kaiser Health News, Elizabeth Lucas, Masters in Journalism from University of Missouri-Columbia, Sydney Lupkin, BA in Journalism from Boston University,“A Drug Maker Spends Big in Washington to Make Itself Heard,” The New York Times, 7/21/27, , HW)Mallinckrodt, however, has been increasing its spending in another area: It has been writing checks to politicians. After making meager donations in 2015, the company’s political action committee began raising its contributions for congressional campaigns last year. Lawmakers in both the House and Senate collected $44,000 from Mallinckrodt in 2017’s first quarter, nearly nine times what they got from the company in the same period two years ago. Mallinckrodt also spent $610,000 lobbying Congress, triple the amount of 2015’s first quarter. The company, which makes pain-control drugs as well as H. P. Acthar, an injectable gel prescribed for multiple sclerosis and other diseases, has lobbied on issues related to opioids, patents, Medicare and other matters, regulatory filings show. Mallinckrodt is far from unique. This year, a critical and risky one for drug companies, the industry as a whole is ratcheting up campaign donations and its presence on Capitol Hill, a new database compiled by Kaiser Health News shows. “The stakes are really high right now,” said David Maris, who follows pharmaceutical stocks for Wells Fargo, given that President Trump has joined Democrats to demand action on drug costs. Mallinckrodt acknowledges that it has increased its political spending to help its particular causes. “We actively participate in the political process on issues that matter to us and our patients,” Rhonda Sciarra, a Mallinckrodt spokeswoman, said by email. “Our PAC’s absolute spend remains small in relation to other companies in our industry.” Congressional donations from pharmaceutical PACs rose 11 percent in this year’s first quarter, compared with the first three months of 2015 (the comparable point in the previous election cycle), according to a Kaiser Health News analysis. The increase accompanied a spike in pharma lobbying for the period. Contributions to powerful committee members who handle health policy matters also increased in the face of public anger over the opioid crisis as well as anticipated renewal of legislation that determines the “user fees” companies pay for regulatory drug approval. A dozen Republican committee heads and ranking Democrats on health-related panels collected $281,600 from pharma-related PACs in the first quarter, up 80 percent from what people in the same positions collected in the first quarter of 2015, the data shows. Such initial donations often set the pace for a two-year election cycle, and suggest whom corporate interests are trying to cultivate in a new Congress, with implied promises of more to come, analysts say. No Link - No R&D SpendingBig pharma unwilling to tackle pressing problems – won’t push for the right drugsMary O’Hara and Duncan 16. 1-27-16. (O’Hara: Award winning social affairs journalist. Duncan: data journalist “Why ‘Big Pharma’ Stopped Searching for the Next Prozac” The Guardian. Accessed 7-30-17. JSD)When the last major wave of “blockbuster” psychiatric drugs such as Prozac arrived on the market in the late 1980s and 90s, they ushered in a new era in the treatment of depression. With fewer serious side effects than their predecessors and aggressively marketed as a new class of “wonder drug”, they were prescribed very quickly to tens of millions of people living with depression and other debilitating conditions worldwide while pharmaceutical companies made a fortune. A quarter of a century later, questions are being asked about what, if anything, will be the next significant leap forward in psychiatric pharmacology, be it for depression or other diagnoses such as schizophrenia or anxiety. . With a quarter of the population likely to experience some kind of mental health difficulty in their lifetime, it is a pretty important question. Since the heyday of SSRIs (selective serotonin reuptake inhibitors) such as Prozac, “big pharma” has withdrawn from psychiatric drugs research and development, and industry experts are warning the pipeline is running dry. According to Harry Tracy, whose newsletter NeuroPerspective tracks developments in drug treatments for psychiatric problems as well as neurological conditions such as Alzheimer’s and Parkinson’s disease, the number of psychopharmacological drugs research programmes in larger drug firms has shrunk by 70% in the past decade. “In general the larger companies have walked away from psychiatry,” he says. “There are a few companies who have maintained efforts in the area but 70% tells you it’s been a pretty remarkable departure. Many withdrew from neuroscience entirely.” The question is, why? SSRIs have proved a huge cash cow for the industry. In the US, prescriptions have risen dramatically over the past two decades, with four times as many adults taking antidepressants in the late 2000s as in the early 90s and industry profits in the tens of billions of dollars. In 2014 in England, 57m prescriptions were written, up 7% on the previous year and twice the number prescribed in 2004. The US market researchers Kalorama Information note that generic competition has strengthened to the point where “earnings for the firms that make these drugs area are a shadow of the past”. “SSRIs with major brands being Celexa, Lexapro, Zoloft, Prozac have greatly suffered over the years from generic competition,” publisher Bruce Carlson, of Kalorama, said. This pattern is reflected in sales projections compiled by Thomson Reuters Cortellis for Competitive Intelligence. It projects that by 2019 the worldwide sales of the antidepressant market leaders will be half that achieved in 2004. hey are also controversial and expensive to research. Some of the bigger industry players “decided it was easier to make money in oncology or diabetes and so they weren’t investing”, says Tracy. “It’s probably not over-pejorative to say they got lazy. As patents started to expire they realised it was pretty hard to replace those with anything that was truly new. I think the attitude has been that psychiatry is a black hole and that you put money in and nothing good comes come out – at least nothing particularly novel in a long time has come out.” Richard Friedman, professor of clinical psychiatry at Weill Cornell Medical College in New York, writes extensively on drug development and agrees with Tracy. He says that the “risk averse” industry “all but shut down their brain research”, meaning there are few signs of real innovation from drug makers. Friedman says the lack of interest in finding the next potentially groundbreaking medications is in part due to the difficulty of bringing psychotropic drugs to market. Testing is notoriously problematic and there have been questions about how well they perform compared with placebos. “It really costs a lot of money,” Friedman explains of the development process. “It’s really hard to design, execute and get a positive clinical trial. [Drug companies] are so conservative. They have basically been making minor tweaks of existing drugs as soon as the patent runs out.” Stuart Watson, a psychiatrist and industry lead with the National Institute for Health Research’s clinical research network (mental health), echoes Friedman, adding that even when trials of new drugs show promise in early stages they often fall at the final hurdle, reducing the incentives for investment: “There are real challenges. We did see AstraZeneca, and GlaxoSmithKline, the big boys, pulling out of mental health. And you can see why. We’ve got a lot of generic drugs available that are OK. There’s a huge risk. Failing at the final hurdle doesn’t mean [something doesn’t] work, it can just mean that the trial failed to show the benefit of the drug.”No Impact – Similar DrugsNo impact to innovation – new drugs too similar to existing therapiesWechseler 13 (Jill, True Pharma Innovation Lies in Quality not Quantity of Approvals say FDA analysts, Aug 06 2013) this focus on the quantity of new drug approvals is misleading, according to FDA analysts, because it fails to distinguish between truly innovative new therapies and those that are similar to medicines already on the market, explains Mike Lanthier, operations research analyst on the economics staff of FDA’s Office of Planning. While all NMEs offer some therapeutic advantage, those that are “first-in-class” and “advance-in-class” medicines represent important advances, he explains. Alternatively, “addition-to-class” therapies may provide useful options for patients, but not substantial advances over existing products. And it is this last category that has experienced the much-hyped decline in approvals in recent years, while more vital therapies are holding steady or increasing in number, Lanthier points out in an FDA Voice blog posted Aug. 6, 2013. This “more nuanced and informative” assessment of NME categories thus refutes fears of an “innovation gap” that threatens drug discovery. We’re already embroiled in the annual speculation game about whether FDA approvals this year will keep pace with last year’s near-record of 39 new molecular entities (NMEs) brought to market. The tally is closely watched as a sign of the state of biopharmaceutical innovation and the health of the pharmaceutical industry and biomedical research enterprise. One factor may be a rise in small biopharma companies developing more innovative drugs, while large drug companies have focused on refining blockbuster drugs for large patient populations. NMEs from small companies have increased notably since 1996 and now account for 50% of approvals, compared to roughly one-third in the past, Lanthier and colleagues explain more fully in an article in the August 2013 issue of Health Affairs [“An Improved Approach to Measuring Drug Innovation Finds Steady Rates of First-In-Class Pharmaceuticals, 1987-2011,” Health Affairs, 32, No. 8, ]No Innovation - R&D FailsBig pharma innovations don’t deliver quality resultsBernard Munos, 16. 3-18-16. (Munos: Contributor. Heavily involved in pharmaceutical innovation – published and on a few boards and all. “A New Look At The Most Innovative Pharma Companies (And Whether They Are Sustainable) -- Part I” Forbes. Accessed 7-30-17 JSD)While some of these provide useful independent insights, the acid-test of innovation ultimately is the impact it has on public health. Innovation that is not widely embraced by the medical community—for whatever reason—is essentially wasted innovation. With this in mind, this blog assesses the quality of drug innovation by using the “freshness index”—sales from recently approved drugs—as a proxy for the public health impact of new drugs. More precisely, it looks at sales derived from products approved during the last five years (2011-2015), and the last ten (2006-2015) for the 13 historic big pharma companies. Though these metrics are imperfect—as they partly depend on pricing aggressiveness and marketing muscle—they are still useful since breakthrough drugs are often commercially successful because of the value they bring to patients. Kalydeco, Sovaldi, Opdivo, Eliquis, Invokana and Ibrance are recent examples. Figure 1 plots the 2015 sales from drugs approved during 2011-2015 against the percentage of sales that these drugs represent for each of the 13 companies in the sample (5-year freshness index). Several observations are glaring: Two companies stand out: Johnson & JohnsonJNJ +0.78% and Bristol-Myers SquibbBMY +1.9%. Both their sales of new drugs and their Freshness Index dwarf their competitors’. They are indisputably the leading innovators today. The average performance of the 13 companies is troubling. The underlying data shows that these companies spend about $75 billion annually in drug R&D, but the 77 NMEs they got approved since 2011 only brought in $37 billion in 2015—11% of their sales. If one takes out J&J and BMS, the remaining 11 companies spent $64 billion yearly in R&D, but their 62 NMEs (since 2011) only brought in $24 billion. However one does the math, this is not a great return on investment—if it is at all positive. Only three companies—J&J, BMS, and GlaxoSmithKlinenull +0%—exceed the average on both sales and Freshness Index. Eight companies fall below average on both dimensions. Figure 2, plots the 5-year freshness index against its 10-year variant. Again, several observations are clear: J&J and BMS remain standouts, with over 50% of their sales coming from drugs approved in the last ten years—the only companies in the sample to do so. They seem to have found a way to deliver innovation on a steady basis, a necessary condition for sustainability. Or, to use a familiar metaphor, they seem to have evaded the curse of the black swan. At the other extreme, six companies—nearly half of the sample—have a 10-year freshness index lower than 22%, and a 5-year one lower than 11%. Companies in that territory do not have innovation models that deliver new drugs reliably. If they did, they would produce more of them. Instead, they depend upon chance, and marketing muscle to keep pumping aging drugs when chance is not forthcoming. This is in fact the traditional pharma model whose key weakness—its randomness and dependence upon “black swans”—has defeated many once-successful companies. Several companies in that group ( AmgenAMGN +1.48%, Abbvie, Rochenull +0% and Sanofinull +0%) manage to turn in a respectable performance because of their reliance upon biologicals, which have not seen generic competition in the U.S. This may change, however, with the impending arrival of biosimilars. Between these two groups, five companies ( Bayernull +0%, GSK, Mercknull +0%, Novartisnull +0%, PfizerPFE +0.45%) are slightly better than average on one or both dimensions. With the exception of Bayer, these companies are experiencing surging drugs approvals that have risen well above their historic output. However, their legacy business (off-patent drugs) is so large that they struggle with generic erosion. These companies have a scale problem that they must address before they can achieve sustainability. The picture that emerges from the above is one of an industry that is still struggling. This is supported by the 2015 results, which show that half of the companies in the sample experienced shrinking pharma sales. In addition, R&D spending for the 13 companies was about $75 billion, but the sales from products approved during the last 10 years was only $104 billion. These two figures are not in sync. If all years are similar, the companies in the sample are not getting enough revenues from their new products to recoup their R&D investment over the roughly 10-year period during which they enjoy patent protection. (Readers can easily verify that using their favorite assumptions for the percentage of revenues that goes to manufacturing, sales, marketing, administrative and other expenses.) To make ends meet, big pharma must carry large legacy businesses that distract them from their focus on innovation, subject them to patent cliffs, or force them into ill-advised mergers to ward these off. There is another, even bigger problem, which is that legacy marketing and innovation don’t mix, and when they do, innovation is often the one that suffers. Why? Because they require very different skill sets.No Innovation - R&D FailsR&D invests don’t produce innovation – empirically provenPammolli 11-(Fabio, Member of the EFSI Investment Committee. Full Professor, Economics, Management, Economics, and Industrial, Politecnico di Milano. “The productivity crisis in pharmaceutical” , pg.429, June 1,2011,) JiayingSince the mid-1990s, pharmaceutical R&D productiv- ity has experienced a downturn. From 1998 to 2008, the number of NMEs approved per year declined (although it has been roughly constant since 2005), whereas attrition rates, development times and R&D expenditures have all increased9,14,16–18,21–24. FIGURE 1 shows the dramatic growth in attrition rates — the proportion of failures out of the total number of projects entering any given stage of R&D — across all phases, but especially in Phase II and Phase III clinical trials. Estimation of attrition rates is complicated by the fact that the process of drug develop- ment lasts several years. According to recent estimates, the average time to pass through US clinical trials ranges from 6 years to 8 years13,21. We considered phase-specific suc- cess rates within 4 years from initiation of phase for R&D projects that entered clinical trials from 1990 to 2004 in Europe, the United States and Japan. We expect the time cut-off to introduce a minor bias in the reported attrition rates, as the majority of successful projects pass to the next stage within 4 years: 93% in preclinical, 86% in Phase I, 82% in Phase II and 75% in Phase III. Overall, the POS for each stage of drug development has declined over time. At the same time, the average development time — from patenting to product commer- cialization — has increased for more recent products. By taking into account the time from patent filing to market launch in the United States and in the 15 European Union countries (EU-15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom), the average time of development has increased from 9.7 years for products launched during the 1990s to 13.9 years for products launched from 2000 onwards.No Innovation – Slowing NowInnovation failing now – rate of innovation is slowingPammolli 11-(Fabio, Member of the EFSI Investment Committee. Full Professor, Economics, Management, Economics, and Industrial, Politecnico di Milano. “The productivity crisis in pharmaceutical” , pg.436, June 1,2011,) JiayingPharmaceutical R&D has become increasingly challeng- ing for various reasons, including the proliferation of plau- sible targets to pursue for therapeutic innovation resulting from advances in molecular biology, most of which are yet to be validated40–43. Innovation in pharmaceuticals is a cumulative process, and markets in which the POS is high are those in which effective compounds are already avail- able. However, both private and public payers discourage incremental innovation and investments in follow-on drugs in already established therapeutic classes, mostly by the use of reference pricing schemes and bids designed to maximize the intensity of price competition among dif- ferent molecules. Indeed, in established markets, innova- tive patented drugs are often reimbursed at the same level as older drugs. As a consequence, R&D investments tend to focus on new therapeutic targets, which are character- ized by high uncertainty and difficulty, but lower expected post-launch competition25. Our empirical investigation indicates that this reorienting of investments accounts for most of the recent decline in productivity in phar- maceutical R&D, as measured in terms of attrition rates, development times and the number of NMEs launched.Collapse InevitableAlt cause to big pharma collapse – fragmentationVivian Hunt et al, 11. December 2011 (Hunt: Director in McKinsey’s London office. “A Wake-up Call for Big Pharma” McKinsey. Accessed 7-3-17. JSD.)The era now drawing to a close may have brought outstanding innovations to patients and profitability to Big Pharma, but the industry’s composition evolved considerably during this period, and not necessarily in favor of large companies (Exhibit 2). Conventional wisdom, perhaps fed by high-profile mergers, holds that the industry has consolidated. But on the contrary, our analysis shows that it has become more fragmented: the number of companies competing for the profit pool has more than doubled (Exhibit 3). As a result of that fragmentation, Big Pharma must compete for parts of the value chain with focused players—for example, generics companies that excel at manufacturing; life-science service providers that offer flexible, specialized services (such as managing clinical trials) at scale; and biotechnology companies that generate innovative ideas and products. Fragmentation is especially troubling for Big Pharma because it would be natural to expect that economic rents will accrue to an industry’s most innovative companies. Since some Big Pharma players can’t deliver innovations as quickly as biotech players can, only brand strength and a global commercial footprint would allow it to go on charging premium prices. A parallel might be drawn with the consumer goods industry, where companies operate on margins about half of those that big drugmakers enjoy. Continuing with this scenario, we would expect Big Pharma’s current level of R&D spending to become a luxury that investors no longer tolerate. We already see these signs today, as some investors and analysts believe that many of Big Pharma’s R&D investments destroy value. A look at the evolution of the automotive industry may offer some lessons. For many years, it was vertically integrated and dominated by large, primarily Western corporations. But the value chain has been disaggregated into companies specializing in narrow parts of the process. Today, component manufacturers, design houses, and basic-materials companies share much of the industry’s revenues: the automakers are responsible primarily for the design of major components (such as engines), assembly, sales, and marketing. Similar trends are already apparent in the pharmaceutical industry: Big Pharma increasingly focuses on sales and marketing, relies on in-licensing for innovative products, and outsources portions of activities such as research and manufacturing. This approach has helped pharma and medical-product service providers to grow at a disproportionate pace. Of course, the analogy can be taken only so far—the functions that big companies retain in the two industries will differ. The key message, though, is that the value chain has been disaggregated and that the role of incumbent, soup-to-nuts players is much diminished.No Risk of Failure - LobbyingDrug patent laws through big pharma lobbying proves their influence – they can’t failLudwig 15(Mike Ludwig, BA in journalism from Ohio University, “How much of big pharma’s massive profits are used to influence politicians?”, Truthout, 9/30/15, , HW)The pharmaceutical industry's lobbying expenditures steadily increased from 1998 to 2009, when spending hit a $273 million peak as Congress debated the Affordable Care Act, according to CRP. In 2014, drug companies and their lobbying groups spent $229 million influencing lawmakers, legislation and politicians. The Pharmaceutical Research and Manufacturers of America (PhRMA), the industry's lead lobbying group, has spent nearly $150 million on lobbying since 2008, and ranks sixth among the nation's top lobbying spenders, outspending powerful interests like defense contractors and the oil and gas industry, according to records retrieved from the MapLight lobbying database. The group has spent more than $10 million on lobbying so far this year. In contrast, PhRMA made $491,000 in political contributions during the 2014 election cycle. Pfizer ranks among the top 25 lobbying spenders in the nation, with $94 million spent since 2008 and $8.5 million spent in 2014 alone. Political contributions, which are typically made by individuals and political action committees within a corporation, can curry favors from candidates in the future, but lobbying allows Big Pharma to take advantage of Washington's revolving door and directly influence legislation. Consistent themes quickly emerge when reviewing records filed by the industry's top lobbying groups, with patent and trademark policies, Medicare and Medicaid, and international trade all ranking as top issues for Big Pharma. Strict patent and trademark laws in the United States allow pharmaceutical companies to maintain monopolies on drugs for up to 20 years before generics can enter the market and drive down prices. Other countries that manufacture drugs, such as India, have looser patent laws and sometimes allow select manufacturers to make generic versions of certain patented drugs in order to keep prices of live-saving treatments from going through the roof. No Risk of Failure - LobbyingBig Pharma invests more money into the GOP- giving them more power over the current CongressLudwig 15(Mike Ludwig, BA in journalism from Ohio University, “How much of big pharma’s massive profits are used to influence politicians?”, Truthout, 9/30/15, , HW)Large pharmaceutical firms are some of the most profitable companies in the world, so what do they spend all their money on, besides advertising and hefty salaries for rich kid CEOs? Sure, some profits are reinvested to fund research and clinical trials, but hundreds of millions of dollars are also spent on political operations every year, and federal law requires that drug companies disclose this political spending to the public. The government has long singled out the pharmaceutical industry for premium patent protections while leaving drug pricing up to the whims of the market, and consumers in the United States now pay some of the highest prices in the world for many life-saving drugs. Recent reports show that critical cancer medicines, for example, cost as much as 600 times more in the United States than other countries. The industry has a clear interest in maintaining the political status quo. Pharmaceutical and health product companies injected $51 million into the 2012 federal elections and nearly $32 million into the 2014 elections, according to the Center for Responsive Politics (CRP). The industry has already spent nearly $10 million on the 2016 elections and is expected to spend more, especially now that Democratic presidential candidates Hillary Clinton and Bernie Sanders have made drug prices a campaign issue with separate proposals to rein them in with new regulations. Big Pharma tends to spend more on Republicans than Democrats, and the GOP benefited from 58 percent of the industry's federal contributions in 2012 and 2014 while Democrats received 42 percent, according to the CRP. Perhaps unsurprisingly, it's a group of 18 House Democrats, not Republicans, who are demanding that the CEO of Valeant Pharmaceuticals, Michael Pearson, join Shkreli in front of the House Oversight Committee during the first week of October to answer questions about recent price hikes on two drugs produced by his company. ................
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