Transcript Health Care Costs

Health Care Costs:
Issues for Business
Connecticut United for Research Excellence, Inc.
(CURE)
Paul R. Pescatello, President & CEO
Economic Summit & Outlook 2006
presented by CBIA and MetroHartford Alliance
Thursday, January 5, 2006
The Connecticut Convention Center, Hartford, CT
CURE Mission
• CURE, as an educational organization and trade
association, seeks to foster connectedness among
pharma companies, biotech firms, colleges & universities,
and firms that help core members do business, especially
R&D.
– Represent the biotechnology and pharmaceutical sectors
before the state legislature and policy makers
– Build a critical mass of biotech and pharmaceutical
companies
– Foster relationships between academic and industry
research that lead to technology transfer
– Be the “go to” source for information about bioscience in
Connecticut
The Mission, distilled
• Advocate
At legislatures and administrative
agencies and/or with news
media/opinion makers
• Build critical mass
• Facilitate tech
transfer
Often, the same thing
• Resource
For the public, opinion makers,
state economic development efforts
• BioBus
Workforce development and public
education
Bioscience
• Jobs Multiplier highest of any industry
sector (3.3)
CURE & The BioBus Programs
–Build student interest in
science
–Relay new scientific
techniques to educators
–Show how bioscience is
relevant
–Show students bioscience
careers other than M.D. and
nursing programs
From Compound to Cure
What is a biotech?
A company that wants to be
a pharmaceutical company
Changing Face of Biotech
Pharmacogenomics – the study of how
genes affect the way individuals
respond to drugs.
Diagnostics, then Therapeutics
XDx’s AlloMap
From 10+ cardiac tissue biopsies to
blood test
Genomic knowledge creates
cheaper, less invasive diagnostic
HistoRx
Using biomarkers as
companion diagnostics
for new pharmaceuticals
What we’re really talking about costs of illness
•
•
•
•
•
•
Medications
Hospitalizations
Doctor visits
Physical therapies
Surgeries
Lost productivity
Healthcare costs are rising . . .
– But share of healthcare dollar
attributable to medicines has held
steady at 10%
Health Care Dollar
All Other
Health Care
Expenses
Drugs
0
20
40
60
80
100
U.S. Annual Health Care Spending
$1.6 TRILLION
1.4
PERSONAL MEDICAL EQUIPMENT
AND NON-PRESCRIPTION DRUGS
NURSING HOME AND HOME
HEALTH CARE
1.2
PRESCRIPTION DRUGS
1.0
NET COST OF PRIVATE HEALTH
INSURANCE, ADMINISTRATIVE COSTS,
AND PUBLIC HEALTH PROGRAMS
RESEARCH AND CONSTRUCTION
0.8
HOSPITAL CARE
0.6
0.4
DOCTORS, DENTISTS, AND OTHER
PROFESSIONAL SERVICES
0.2
0
‘65
‘70
‘75
‘80
Source: Health And Human Services Department
‘85
‘90
‘95
‘00
NOTE: 2001 AND 2002 DATA PROJECTED
Health Care Dollar
Drugs
All Other Health
Care Expenses
Health Care Dollar
90
80
70
60
50
40
30
20
10
0
Drugs
All Other Health Care
Expenses
Health Care Dollar
Drugs
All Other Health
Care Expenses
Production Costs
PEN + INK ≠ TEXTBOOK
ACTIVE + INACTIVE INGREDIENTS ≠ MEDICINE
Secret Ingredient
KNOWLEDGE
Drug Discovery Basics
5
=
Number of compounds
investigated that are tested in
clinical trials
=
Number of compounds in
clinical trials that are approved
for patient use
10,000
1
5
Cost of researching and developing
a drug from idea to pharmacy:
$800,000,000 to $1,500,000,000
Birth of a Drug
Drug Development - A Risky and
Expensive Proposition
Compound Success
Rates by Stage
Years
Discovery
(2–10 Years)
0
2
4
Preclinical Testing
Laboratory and
Animal Testing
5,000–10,000
Screened
6
Phase I
20–80 Healthy Volunteers
Used to Determine Safety
and Dosage
Phase III
1,000–5,000 Patient
Volunteers Used to
Monitor Adverse Reactions
to Long-term Use
8
10
12
14
Additional
Post-marketing
Testing
Phase II
100–300 Patient Volunteers
Used to Look for Efficacy and
Side Effects
16
FDA Review Approval
250
Enter Preclinical
Testing
5
Enter
Clinical
Testing
1
Approved by
the FDA
Source: Tufts Center for the Study of Drug Development
Attrition is High in the
Knowledge Business
Millions of
Compounds Screened
Preclinical
Pharmacology
Preclinical Safety
1 –2
Products
Clinical Pharmacology
& Safety
Discovery
Exploratory Development
Phase I
0
Idea
Full Development
Phase II
Phase III
10
5
11 - 15 Years
-----TIME-----
15
Drug
Healthcare Economics:
Prescription Drugs Save Money
• Stroke – 40,000 fewer strokes per year
• HIV/AIDS – Death rate cut by 70%
• High Cholesterol – 1/3 fewer
hospitalizations
• Cancer – Survival rate up to 62.7% from
50% in 1971
Impact of Drugs on Spending and
Mortality for HIV/AIDS
. . . While Monthly Costs for AIDS
Patients Decreased by 16% after
HAART Introduced
Deaths per 100,000 Population
HIV Mortality Declined Dramatically
after Introduction of First
“Expensive” Antiretrovirals . . .
First new Drugs
Introduced, 1995
18
15
Highly Active
Antiretroviral
Therapy (HAART)
introduced,
1996-97
12
Total: $1804
$2,000
$1,600
$1,200
$1,193
Other
Costs
Decrease
by 41%
Total: $1521
$700
9
$800
6
$400
3
0
$611
Drug
Costs
Increase
by 34%
$821
$0
82
86
90
Year
94
98
Jan-96
Rx Drugs
Mid-1997
All Other Costs
Source: Costs - Bozette et al., New England Journal of Medicine Vol. 344, No. 11, March 15, 2001; Mortality - Centers for
Disease Control; data on drug development from PhRMA and the NIH Office of Technology transfer; Pfizer.
New Drugs Reduce Visits to Hospital and
ER: Asthma Management Program Improves
Outcomes for Children with Asthma
Concept that Leads to Cures
Revenues from
successful medicines cover
the cost of much, much
“unsuccessful” research
Only 3 of 10 Marketed Drugs Produce Revenues
That Match or Exceed Average R&D Costs
If biotechs and
pharmaceutical companies
don’t do the R&D,
who will?
Not the NIH
2004 NIH Budget for administration,
government research & grants (total): $27.9 billion
Biotech/pharmaceutical
total R&D spending:
$49 billion
Biopharma does the clinical trials, translates basic
science into practical medicines
Why risk investment in a company
needing tens of millions of dollars and a
decade or more to have a chance of
marketing a product?
Commensurate reward
Reduce the reward
• Less research
• Less knowledge creation & discovery
• Fewer medicines
The answer to high drug costs?
Importation?
No, only shorthand way for politicians to
show empathy for high cost of health
care
But side effect worse than cure:
– Importation of price controls
– Innovation stagnation
What are we really talking about?
An international relations/trade issue.
– Motivating other developed economies to pay more for
the R&D that makes up the price of prescription drugs
– Figuring out a way to spread the cost of healthcare
across the entire population
Hint #1:
Greatest cost components of healthcare are the 1st and last six
months of life
Hint #2:
The annual tab for a daily cup of Starbucks is $1,003.75