The report and Whitehead's comments come ahead of discussions about implementing the U.K. government's proposed value-based pricing system, which is slated to come into effect at the start of 2014.
When it comes to innovation in health-care technologies, there are some tough but important basic principles:
Innovation is slow. As any medical scientist will tell you, there are few "Eureka!" moments in health research. Progress comes step by step, one incremental innovation at a time. Biopharmaceutical companies more often profit by improving existing molecules and making processes more efficient than by revolutionizing the whole field with new "miracle" products.
Innovation is difficult. Today, it takes about 10,000 new molecules to produce one FDA-approved medicine. And if that's not frightening enough, only three in 10 new medicines earn back their research and development costs. And here's the kicker: Unlike other R&D-intensive industries, biopharmaceutical investments generally must be sustained for more than two decades before the few that make it can generate a profit.
Innovation is expensive. In 2003, researchers at the Tufts Center for the Study of Drug Development estimated the costs to bring a new medicine to market at $802 million. Others suggest that the total cost is closer to $1.7 billion. And that number is on the rise.
Innovation is under attack. From accusations of the "me-too" variety, to crackpot schemes to replace pharmaceutical patents with a "prize" system, life for innovator pharmaceutical companies is rough and tough. The late Israel Makov, founder of the generics giant Teva, once said that he wasn't really in the pharmaceutical business, but rather "the litigation business."
But innovation is important -- and not just for biopharmaceutical industry profits. Increases in life expectancy resulting from better treatment of cardiovascular disease from 1970 to 1990 have been conservatively estimated at bringing benefits worth more than $500 billion annually. In 1974, cardiovascular disease was the cause of 39 percent of all deaths. Today, it's responsible for about 25 percent.
Cerebrovascular diseases were responsible for 11 percent of deaths back then. In 2004, they caused 6.3 percent of deaths. Kidney diseases were linked to 10.4 percent of deaths then, and now they're associated with 1.8 percent. And that's just in the United States.
And, with all due respect to the pharmaceutical industry, innovation mustn't be only about medicines. We have to embrace innovative technologies for medical records and prescribing medications. We need innovative clinical trial designs and molecular diagnostics so that we can develop better, more personalized medicines faster and for far less than the current $1 billion-plus delivery charge.
So we'd better start taking innovation -- of both the incremental and discontinuous varieties -- seriously. And that means spending more on more complex developmental R&D (with concomitant higher investment risks).