Amgen: Innovation on a tightrope: Balancing cost and benefit in biotech medicine

Amgen's Perspective

Innovation continues to fundamentally change the world in which we live. Innovation encompasses the application of knowledge and insight into the creation, production and distribution of new products and services. At its best it has advanced the human condition.

It has been a catalyst that has helped reduce poverty, spread democracy, increase life expectancy, drive economic growth and protect human rights. Innovation has the power to forever alter the human experience by breaking down geographic barriers, providing cures for diseases once thought incurable and creating new sources of energy. While the potential of innovation and the value it can provide to people around the world are limitless, innovative industries face many challenges.

Governments are faced with tough constraints and choices in the wake of the recent economic crisis. The difficult choice is how to achieve short-term budgetary caps without undermining policies that are critical for long-term health, growth, productivity, innovation and investment. Nowhere is this choice more evident than in the biotechnology sector.

Governments are under extreme pressure to cut health budgets and, in particular, expenditures on medicines. Short-term cost containment policies, though, in the long term may only serve to increase overall health expenditures, undermine the well being of patients, decrease productivity and lessen foreign investment. Instead of drastic price cuts, governments should enact policies that will decrease overall healthcare costs in the years to come, support biotechnology innovation and investment, and provide value to people around the world.

Over the last 30 years, biotechnology has led to cures and treatments for diseases where there was previously no hope. In 2006, half of all the medicines that treat serious diseases were biotech products providing tangible value to patients and the economies in which they live. Biotech drugs are now used to treat anemia, autoimmune diseases and cancer, vastly improving both the length and the quality of millions of patients' lives.

It is the promise of future breakthroughs that drives the scientists at Amgen, who are constantly seeking novel treatments for serious illness through cutting-edge biomedical research that constantly pushes the boundaries of scientific inquiry.

Serious diseases are the most common and costly of all health problems in both developed and developing countries alike. Serious diseases not only place substantial strains on national healthcare systems but also on a country's overall economic productivity. Decreasing healthcare spending on medicines may achieve status quo budgetary objectives. But at what cost? Such decreases can simultaneously create the potential for substantially greater costs in the future as patients need greater and more expensive treatments that could have been prevented through the use of innovative medicines.

Medicines that treat serious illness and allow patients to remain contributing members of their countries provide significant economic benefit. Healthier people have higher earnings, are more likely to be employed and work more hours. According to the British Medical Journal, increases in health improved economic growth by 30%. Without access to innovative medicines, these economic benefits may not be realized.

As the population ages and more people become hindered by serious diseases, patients will look to governments—especially those that control access to medicine—to have policies in place that will provide medicines to help their population live stronger, healthier, more productive lives.

The process of bringing a biotech medicine to market is a lengthy one, infused with risk and cost at each step along the way. Only one out of every 10,000 new compounds ever receives regulatory approval. New medicine development takes an average of 10–15 years and costs approximately $1.3 billion per new medicine. As biotech companies expand, they look for investment climates that support innovation and that will enable patient access to medicines.

Unfortunately, in response to pressures to decrease healthcare costs and expenditures on medicines, many governments around the world are only considering the direct and indirect healthcare costs. Attracting inward investment and supporting the ecosystem of innovation requires a policy framework that looks to the future and includes: 1) robust intellectual property protection; 2) government pricing policies that reward high quality and innovation; 3) consistent, transparent and inclusive government reimbursement policies; 4) harmonized regulatory systems; and 5) holistic approaches to healthcare reform. It is possible to support the ecosystem of innovation and meet budgetary constraints.

Budgetary constraints need not impact innovation; rather, it is possible to support innovation, provide access to patients and decrease overall costs. Proposed budgetary costs should be evaluated not only in terms of decreased spending, but also on their overall impact on and value to an economy. Cost containment measures that do not do so, in the long term, undermine growth and job creation, and slow access to critical medicines and, ultimately, progress. Everybody can win if Ministries of Health, Finance, Economy, and Science and Technology, as well as academia and the private sector work collaboratively to develop policies that recognize the value of innovation while acknowledging the need to reduce spending and other constrains faced by governments.

Emerging countries are beginning to recognize the interconnectivity between health and wealth and are starting to prioritize innovation. In Brazil and China, both governments have identified biotechnology as a priority sector for growth. The value is apparent—attracting investment in biotechnology not only provides for economic growth, but it also helps achieve domestic priorities such as improving access to medicine, raising the quality of life and growing science and education in the community. Governments seeking to grow biotechnology in their countries should create predictable and transparent policy environments that recognize and reward innovation critical to ensuring that innovative medicines reach patients who need them most.

Policies that support innovation are built around four key principles. First, governments should take a comprehensive approach and assess all elements of value that a new medicine will provide to patients. Second, new policies should contain mechanisms that allow for flexibility over time. It is critical to assess the total benefits and costs of a medicine over time, by segment and population in a real-life context. Third, it is crucial that policies ensure that patients get timely access to innovative medicines. Lastly, governments, health providers and manufacturers should work together to explore new pragmatic ways of managing spending on medicines. If implemented, these principles will help governments attract investment and spur economic growth.

At Amgen, for example, we are seeing increasing demand for our biotech products beyond our traditional U.S. borders. We see not only a great business opportunity in these emerging economies, but we see a clear way of bringing the health and economic benefits of biotech drugs to new populations that are most in need of innovative solutions.

In order for companies like Amgen to focus on these markets, it will be vital for governments to demonstrate their commitment to innovation. Medical innovation clearly improves patient health, creates a productive workforce and a high performing economy. Investing in innovation is an investment in a country's people and future. Proactive, long-term policies are a win-win for governments and patients alike.

ABOUT AMGEN

Amgen (NASDAQ:AMGN), a biotechnology pioneer, discovers, develops and delivers innovative human therapeutics. Our medicines help millions of patients in the fi ght against cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses. With a deep and broad pipeline of potential new medicines, we continue to advance science to serve patients.