Risk of Losing Its Edge in Medical Innovation
By Grace-Marie Turner
Special to The Mid-South Tribune and the
Black Information Highway
United States has been the undisputed leader in medical research for
decades. But today, our leadership is at risk. Other countries are
working aggressively to lure high-paying biomedical jobs and
lucrative research facilities away from the U.S.
A new report by Battelle, an international science and technology
company, found competing nations are offering a friendlier
regulatory environment so research-based companies can get their
products to market faster. They also are offering incentives, such
as lower taxes, to boost private investment in biopharmaceutical
Meanwhile, our outdated regulations and burdensome taxes are
actually facilitating the drain. Once these jobs are lost, they
will be extraordinarily difficult to get back.
High corporate tax rates in the U.S., in particular, deter
investment. Our top corporate income tax rate is 38 percent compared
to an average of 15 percent in other countries.
Unfortunately, instead of reversing these destructive policies, the
U.S. has doubled down with new legislation -- the Affordable Care
Act (ACA) -- that law will add additional layers of bureaucracy
and expense that will delay getting new medicines and medical
products to patients.
Developing a new drug now costs more than $1.3 billion and takes an
average of 12 years. Yet only a small percentage of new molecular
entities ever reach the market. Instead of mitigating the risks
that go along with these huge investments, the U.S.
government has been erecting ever higher hurdles for private
Consider ZOLL Medical Corporation, a medical device company that now
finds itself in the bull's eye of the ACA. It imposes a 2.3 percent
tax on the gross revenue that medical device manufacturers collect
-- revenue, not profits! This will increase ZOLL's tax rate to more
than 50 percent, completely wiping out its R&D budget.
As ZOLL President Jonathan Rennert explained in a recent forum,
"every one of the jobs in our company is now in the United States.
But [when the medical device tax takes effect in 2013] we will have
every incentive to move jobs offshore ... the tax will lead to less
innovation, fewer jobs, and fewer lives saved."
In addition, many countries have instituted strong and permanent
incentives for research and development, but the United States has
kept its R&D tax credit "temporary" for decades. America now ranks
17th out of 21 countries in the Organization for Economic
Cooperation and Development in the effective rate of its R&D tax
Our edge is not gone yet, but U.S. legislators must quickly act to
stop the drain. The United States produced more than half of the
world's new medicines over the last decade. Today, 12 of the top 20
medical device companies still are headquartered here. Last year,
U.S. companies had more than 3,000 new pharmaceutical products in
This superior medical innovation not only creates life-saving drugs,
but boosts our economy. Battelle found the biomedical industry
contributed $917 billion to the U.S.
economy in 2009 and supported more than four million jobs.
Whether they're promoting healthy lifestyles or developing
diagnostic tests, American companies, large and small, still are
working to drive innovation in the medical field. Washington needs to enact reforms that will allow
their groundbreaking advances in the health sector to continue.
As one example, companies are working with the FDA to improve
clinical trials so they can be smaller and better targeted, getting
drugs to patients faster. Pfizer, for example, was able to bring
its newest drug for lung cancer, Xalkori, to market in just four
years using new research models that target drug trials to patients
genetically tested to be most likely to respond. In one study
reported at an American Society of Clinical Oncology meeting, 60
percent of patients were alive after two years, compared to only
nine percent in historical trials.
engine of medical enterprise has always been strong. But it will
eventually stall out in the face of competition from other countries
if Washington doesn't reverse its destructive regulatory and tax
Real solutions in the health sector have come not from government,
but from entrepreneurs working to find new treatments and improve
care. These are the people and companies who will bring
transformational change for the 21st century -- provided Washington gets out of their way.
Grace-Marie Turner is president of the Galen Institute, a public
policy research organization focusing on market-based health reform.