Warren Down the Rabbit Hole

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  • 02/03/2015

When it comes to myths about healthcare, one of the great shibboleths is that Big Pharma profits from innovation “that comes primarily from the NIH.” It’s never been true – and now a new study confirms it.

A study in Health Affairs by Bhaven N. Sampat and Frank R. Lichtenberg (What Are The Respective Roles Of The Public And Private Sectors In Pharmaceutical Innovation?) http://content.healthaffairs.org/content/30/2/332.full.html puts the issue in a data-driven perspective that gives the NIH its due – but in the proper frame of reference.

For example, according to Sampat and Lichtenberg, fewer than 10 percent of drugs had a public sector patent, and drugs with public-sector patents accounted for 2.5 percent of sales, but that the indirect impact was higher for drugs granted priority review by the FDA. (Priority review is “given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists.)

478 drugs in our sample were associated with $132.7 billion in prescription drug sales in 2006. Drugs with public-sector patents accounted for 2.5 percent of these sales, while drugs whose applications cited federally funded research and development or government publications accounted for 27 percent.

This is an important article that contains much data analysis worthy of careful consideration by the healthcare policy community.

Specific consideration should be given by Senator Elizabeth Warren, whose new draft legislation, the so-called “Medical Innovation Act,” would result in less R&D investment by the true drivers of progress – the private sector – resulting in less innovation. Senator Warren’s suggestion that a percentage of private sector profits be used as a “fee” would have a chilling effect on future investments in R&D by biopharmaceutical companies subject to the legislation. 

Senator Warren’s proposal inaccurately argues that because the proposed fee would only be coming from net profits – after business and R&D expenses have been accounted for – it will not impact investment in drug development. Given the lengthy R&D process to develop new medicines – an average of at least 10 years for one new drug – biopharmaceutical R&D is characterized by long-term R&D investment strategies across R&D portfolios. Thus, a portion of profits earned by innovative biopharmaceutical companies today are used to fund future research. If a percentage of those profits are used for the proposed fee, then there may be a chilling effect on future investments in R&D by biopharmaceutical companies subject to the rule.  Facts are pesky things.

The National Institutes of Health plays a vital role in basic research and early discovery, but is robbing Productive Peter to pay Government Paul the best bang for the buck when it comes to advancing public health?

As Sampat and Lichtenberg show, the engine of innovation is the biopharmaceutical industry, which spends in excess of $50 billion annually on research and development. It's not a competition; the NIH and industry complement each other's efforts. But context matters.

The NIH focuses on basic research, the study of fundamental aspects of phenomena without specific applications. The biopharmaceutical industry addresses most of its R&D toward clinical research, science focused on the actual development of new medicines. The NIH provides grants to academic institutions. Industry employs the scientists who do the work and, increasingly, funds academic research.

Alas, headlines for hyped and misleading "NIH-funded cures" are far sexier than those for "more money for drug regulation." Pursuing misguided policies that siphon funding from the groundbreaking medical research happening in the biopharmaceutical industry will have devastating consequences for patients and society. The proposed legislation would result in fewer medicines for patients and lost jobs at a time when our economy can least afford it. Senator Warren and others should pay heed to the facts and avoid the fiction. They are inversely important to advancing 21st-century healthcare.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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