By Robert J. Hariri, MD, PhD, Chairman, Founder and Chief Scientific Officer of Celgene Cellular Therapeutics.
Medical innovation is the source of dramatic improvements in the quality and length of life and also creates enormous value for society and the economy at large. For example, in 1900, the average U.S. life expectancy was 49 years. Today, it is 79. It is estimated by 2040, U.S. life expectancy will reach 85 years. This is primarily the result of innovation in medicine and improvements to public health. New medical treatments accounted for 45 percent of the increase in U.S. life expectancy between 1960 and 1997 and for nearly three-quarters of the increase in U.S life expectancy in the first decade of the 21st century.
Living longer, healthier lives translates to economic health as well. Economists’ Kevin Murphy, PhD, and Robert Topel, PhD, calculate that life expectancy gains from 1970 to 2000 have added approximately $3.2 trillion per year to national wealth. They also estimate that a 1% reduction in cancer mortality would be worth $500 billion to the U.S. economy.
Unfortunately, there are a number of misconceptions about new medical treatments that are based on outdated information, or failing to consider medical innovation in perspective. One misconception is that prescription drug spending is growing rapidly. In fact, is it not — spending on prescription drugs actually declined by 3.5 percent per capita in the U.S. last year. And the small portion of health care spending accounted for by prescription drugs actually saves money by reducing the need for other medical services.
Research conducted by Columbia University Professor Frank Lichtenberg, PhD, provides strong evidence that use of newer drugs actually reduces total healthcare spending. In one study, he estimates the use of a newer drug would result in an increase in prescription drug spending of $18. However, it would also result in a reduction in other medical spending by $129, with most of the savings being due to reduced hospital and physician office-visit expenditures.
Medicare Part D is another example that supports Professor Lichtenberg’s research. In Part D’s first year, we saw a $14 billion reduction in other medical expenditures and now the Congressional Budget Office estimates that each one percent increase in use of prescription drugs in Part D reduces spending on other Medicare services by two-tenths of one percent.
Continuing this medical progress, improved quality and length of life and resulting economic benefit requires a supportive environment for the ecosystem of medical innovation, which includes government agencies such as NIH, FDA and CMS, academic medical centers, clinical investigators, research based biopharmaceutical companies, investors and voluntary health associations. All elements of this ecosystem play an important and collaborative role in medical innovation. Yet it is not well enough understood that when any element of this ecosystem is weakened, the health and productivity of the entire ecosystem suffers.
Some policymakers and pundits question whether our country and our economy can afford to invest in the American ecosystem of medical innovation and support policies that promote and incentivize breakthrough advances in health care. Given the cost of disease and disability to patients and our economy, we can’t afford not to.
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