Industry Asks Washington To Protect U.S. Leadership In Health Product Innovation

Milken Institute and the Council for American Medical Innovation issue report calling for greater regulatory clarity, lower taxes and R&D support for emerging technology.

Nonprofit and trade groups representing the medical device, diagnostics and pharmaceutical industries are calling for a bipartisan push from Congress and the Obama administration to protect the U.S. leadership role in biomedical innovation.

A new report on the global biomedical industry says policy-makers can bolster U.S. innovation through greater regulatory clarity, lower taxes and R&D support for emerging technologies. In addition, greater investments in clinical trials, regulatory staffing and math and science education in the U.S. would also help, the report says.

Released Sept. 22 by the Milken Institute and the Council for American Medical Innovation, the report includes findings highlighted during a same-day press briefing in Washington, D.C., moderated by Dick Gephardt, co-chair of CAMI and former House majority leader.

According to Ross DeVol, chief research officer for the Milken Institute, the leadership role in biomedical research that the U.S. has cultivated over the past 30 years is eroding as Europe and Japan make serious attempts to close the gap, and emerging countries make impressive strides.

"Other countries are really trying to support entrepreneurship and commercialization processes to compete with the U.S.," DeVol said, "but the good news is this is our industry to lose."

According to the report, private-sector employment in the U.S. biomedical industry - defined as jobs in biopharmaceuticals, medical devices and related R&D, testing and labs - was roughly 1.2 million in 2009. In the same year, the average wage in the industry was $78,600, more than 70% higher than for the average U.S. job.

In addition to directly fueling the U.S. economy through job creation, biomedical innovation has also been "a tremendous engine for medical progress," said Stephen Ubl, CEO of the medical device trade group AdvaMed. Moreover, significant cuts in heart disease death rates, for example, help increase gross domestic product, he said.

Before 1980, European firms dominated the biomedical industry, the report notes. However, several policies enacted over the past three decades, including attention to intellectual property rights that encouraged collaboration between academia and business, gave the U.S. a commanding lead in biomedical innovation, the report contends.

It adds that current factors, including potential funding cuts to FDA and the National Institutes of Health could threaten the country's position. "Success can breed complacency," DeVol warned.

Tax Incentives Could Keep Jobs In U.S.

Other countries competing in the global biomedical industry have dropped their corporate tax rates over the decades, putting the U.S. at a disadvantage in attracting and keeping industry, DeVol suggested. He noted that the U.S. has the second highest corporate tax rate, behind only Japan.

"Talent and investment dollars flow," DeVol explained. "They're more mobile than they've ever been. And if you want to be successful, it's hard to compete when other countries have much lower corporate income taxes."

DeVol also recommended making the longstanding R&D tax credit permanent to alleviate industry and investor uncertainty.

"With the substantial risk of product failure in this industry, these tax incentives can mitigate the risks," he said.

Jim Greenwood, president and CEO of the Biotechnology Industry Organization, warned that venture capitalists shy away from the biomedical industry if tax policies do not support it.

"My admonition to you is to understand the basic rule: you tax something more and reward it less, and you'll get less of it; you tax something less and reward it more, and you'll get more of it," he explained. "And if you would like to have more cancer cures than iPads, you have to make sure that investment in cancer cures gets a good return on investment."

Patient advocate Margaret Anderson, executive director of FasterCures, said investment in FDA and NIH will impact the U.S. in both the short and long terms.

"If we don't pay attention to these things, we will wake up in five years, 10 years, and not only won't we have these industries in the United States, we're not going to have the products, and we're not going to have primed the pump in terms of NIH investment."

Call For Action

Anderson asked for all the stakeholders at the Sept. 22 meeting to pull together to address the challenge.

"I don't think it's going to work if we all kind of attack this individually," she said. "There's going to need to be a united front."

AdvaMed's Ubl praised the report as a wake-up call that he hopes will activate a "leadership moment" within the federal government.

"The president has been talking about winning the future and out-innovating, and it's clear that the 21 century is going to be the century of the life sciences," Ubl said. "The open question is whether it's going to be made in America or made somewhere else. We need this to become a priority again."

Ubl backs the idea of an Office of Innovation within the White House that could spur cross-governmental attention to the matter (" (Also see "AdvaMed Pushes For Medical Innovation Office In White House" - Medtech Insight, 13 Jun, 2011.)).

According to Milken's DeVol, "the first step in winning the future is encouraging American innovation. I'd say the logical place to start is where we're at the forefront and where we hold a large lead today to make sure we don't lose it."

Gephardt urged industry, patient groups and other stakeholders to speak up as lawmakers debate budget cuts that could impact medical reimbursement, R&D and funding for regulatory oversight.

"It is worth [it for] those of you who are involved in these industries and [patient advocacy] efforts to really get up and scream, and if you can't scream, just to plead with the leaders of the country to solve these problems," Gephardt said.

He suggested that support for biomedical innovation should be an area both political parties can support.

Democrats may need to rethink their reflexive reaction against any kind of tax breaks that might help corporations or the moderately wealthy, "and we might get some of our friends in the Republican party over the idea that government has no function in our society," Gephardt said.

"We're really saying that both things are needed in order to succeed in this very important area to create jobs and to cut health care costs."

Below is an overview of concrete steps outlined in the Sept. 22 report to help preserve U.S. leadership in the global biomedical industry:

- Strengthen research and development tax incentives by making the R&D investment tax credit permanent and increasing it by 25%.

- Cut corporate tax rates to 22% (essentially matching the Organization for Economic Cooperation and Development member country average) to help keep industry within the U.S.

- Extend R&D support to emerging biomedical fields - such as nanotechnology, personalized medicine and stem cell research - with new trial designs and adequate scientific expertise within FDA and NIH.

- Provide adequate funding to FDA and NIH to expedite regulatory reviews and clinical trials.

- Increase U.S. exports by streamlining approvals for export licenses to developing countries such as China and India.

- Strengthen science, technology, engineering and math education to nurture homegrown talent for industry.

- Allow permanent residence status for foreign researchers who commit to participating in U.S. biomedical R&D for a certain length of time.

- Adopt best practices for university technology transfer and commercialization.

- Address barriers to partnerships between academia and industry, such as restrictive conflict-of-interest policies.

[Editor's note: This story appears courtesy of the editorial staff of 'The Gray Sheet,' your source for coverage of devices and diagnostics. For a free trial, call customer service at 800-332-2181.]

-Monica Hogan ([email protected])