American Chamber of Commerce Pharma Committee
Medical Innovation: The Link Between Health and Economic Growth
John C. Lechleiter, Ph.D.
Chairman, President and Chief Executive Officer Eli Lilly and Company
March 13, 2012
Thank you. It’s an honor to address the American Chamber of Commerce here in Korea. Lilly has long been a member and supporter of AmCham, and Korea is an important focus for us.
Let me say just a few words about Eli Lilly and Company. Our company was founded nearly 136 years ago, and we are committed to pharmaceutical innovation. Our mission is to make medicines that help people live longer, healthier, more active lives. Lilly makes medicines that treat cancer, diabetes, cardiovascular conditions, depression and schizophrenia, and other conditions. Our scientists are engaged in research in these and other areas to find and develop new medicines that can make a real difference for patients.
I am delighted to be here in Korea to meet face-to-face with Lilly employees, thought leaders, and health care providers, and listen to their views about how Lilly can best meet the needs of Korean patients. Since 2009, Lilly has increased its investment in Korea to reach more patients with innovative medicines, and provide health care professionals with more options that can benefit patients. I am pleased to report that Lilly Korea has outpaced the growth of the overall market in Korea and achieved 21 percent volume growth in 2011.
Today, I want to talk about medical innovation and how it can contribute to better health and economic growth in Korea and around the world, in both developed and developing countries. I’ll address some of the key requirements to allow innovation of all types to thrive in a society, and then apply that perspective to discuss how Korea can benefit from pharmaceutical innovation to meet growing health care demands and create economic opportunities for the Korean people.
Let me begin with the observation that health and economic development are inextricably linked. We know that a growing economy makes it possible for countries to invest more in improving health, and there is also a strong case that good health is a fundamental precondition for economic development.
Medical innovation is a critical factor on both sides of the link between health and economic growth – not only creating good jobs and income in the life sciences, but also helping to meet the growing health care needs of people in Asia and around the world. Indeed, new medicines are arguably one of the most effective ways to improve health and contain health care costs.
In the past century, average life expectancy has increased significantly throughout most of the world – dramatically so in East Asia, where life expectancy increased from 39 years in 1960 to 67 years in 1990 … a remarkable and almost unparalleled achievement.
In Korea specifically, the average life expectancy for males increased from 51 years in the 1960s to about 77 years in 2009. The increase in life expectancy for females is even greater, from about 54 years in the 1960s to over 83 years in 2009.
Researchers at Harvard University have found evidence that better health played a key role in East Asia’s sustained economic growth in the second half of the 20th century. Better health contributed to a rapid increase in the supply of labor, and longer life expectancies led to an increase in savings for retirement, driving exceptionally high rates of capital accumulation that also helped accelerate economic growth. Some research indicates that 30 to 50 percent of East Asia’s economic growth between 1965 and 1990 can be linked to demographic and health changes.
While there are many factors that have contributed to these astonishing gains, medical innovation has played a significant role. An independent analysis of disease data and death rates from 52 countries, rich and poor, found that just one area of innovation … new medicines … accounted for 40 percent of the increase in life expectancy during the 1980s and 1990s.
Now let me turn to what this all means for Korea today. Nowhere is the link between health and wealth more apparent than in this country. Korea’s economic future depends on meeting the growing demand of its people for health care. That demand growth reflects three important trends:
- first, the aging of the population,
- second, the increase in non-communicable diseases, such as cancer and diabetes,
- and, third, the rapid improvement in the standard of living.
Let’s look at each of these factors.
The first trend is aging. While Korea is still a youthful nation, it is home to the world’s most rapidly aging population. As recently as 2005, people over 65 years of age made up just 9 percent of the population, far below the average of 15 percent among developed countries. But by 2050, the elderly share of the Korean population is predicted to reach 38 percent, making Korea one of the oldest countries on earth, along with Japan, Italy, and Spain. The median age of Koreans in 2050 is projected to be 57 years, up from 37 years today, and much higher than the median age of 43 in what is currently the oldest country in the world, Japan.
Already, the increase in the elderly Korean population has led to an increase in medical expenditures for chronic degenerative diseases, and this increase can only be expected to accelerate.
The second trend is the increased prominence of non-communicable diseases, or NCDs. According to the World Health Organization, the incidence of NCDs in Korea began to rise in the 1980s among the entire population – not just the elderly – due in part to changes in living standards and lifestyle. In the past, the main causes of death in Korea were acute and communicable diseases, but these have been replaced by chronic and non-communicable diseases, including cancer, heart diseases, and diabetes.
This is no surprise: NCDs are by far the leading cause of death in the world today. While the increase in NCDs reflects in part the aging of the population, one in four who died from NCDs in 2008 … 9 million people worldwide … were under the age of 60. And by the very nature of these diseases, many more people live with them for years, often with debilitating effects. So NCDs have an enormous impact on the health care system and the entire economy – in Korea and around the world.
The third trend is rising income. Very few nations on earth have seen the growth in production and incomes that Korea has achieved over the past half-century. Better health care is universally one of the top priorities for people with rising incomes, so the improvement in Korean living standards has inevitably raised expectations for health care. This is a problem that many other nations would like to have, but it is a nevertheless a serious challenge for the Korean health care system.
As I explained earlier, medical innovation played a part in the increases in both life expectancy and incomes in Korea, and medical innovation is an essential element in meeting the challenges of health care for the Korean people of today.
I believe that wise investments in health care innovation will be among society’s most productive investments in the years ahead. And innovative medicines have proven themselves time and again to be the most effective way to reduce costs and improve quality in health care. Let me cite a few examples that demonstrate how pharmaceuticals can reduce overall costs to society:
- The power of new cardiovascular medications in the past 30 years to prevent or delay heart disease already has eliminated the need for hundreds of thousands of costly surgeries and hospitalizations each year.
- Other medicines have kept thousands of patients with mental illness from facing institutional confinement for months or years.
- A 2005 study of people with diabetes in the U.S. found that, as adherence with their prescribed course of medicine increased, the costs of prescription drugs rose (as you would expect), but the total cost of treatment declined significantly.
Innovation can and must play a part in meeting the pressures of rising health care costs today and tomorrow. Here’s just one example: A report issued in 2010 on Alzheimer’s disease said that the global costs for caring for people with dementia that year would surpass $600 billion – equal to about 1 percent of the world’s GDP. Imagine the savings to our health care systems – not to mention the alleviation of human suffering – if we can find and develop new medicines that slow the progression of this terrible disease.
And, even as pharmaceutical innovation helps to reduce health care costs, a robust pharmaceutical industry can play a key role in the next phase of Korea’s economic growth. Let me turn to a discussion of the policies necessary to sustain the benefits of innovative pharmaceuticals to Korea’s economy and health care system.
Last November, I had the opportunity to attend the Asia-Pacific Economic Cooperation CEO Summit in Honolulu, and I participated in a discussion about how improved health care outcomes can reap substantial economic benefits in Asia.
Based on that discussion, let me offer three essential policy ingredients for Korea to harness the power of medical innovation to improve health and economic growth:
- trade and collaboration through agreements such as the Korea-United States Free Trade Agreement,
- sound intellectual property policies that facilitate and protect innovations in health care and other industries, and
- predictable, transparent regulation that supports innovation.
Let me address each of these from the perspective of pharmaceutical innovation.
The first key to medical innovation is trade and collaboration. The free trade agreement between our two countries, which goes into effect just two days from now, contains many important commitments that will impact research-based pharmaceutical companies in both the United States and in Korea. These provisions will provide important incentives to develop and produce new medicines that will benefit patients and further research here in Korea.
With a well-educated population, and good scientific and clinical infrastructure, Korea is well-positioned to take advantage of the FTA and improve the ability of Korean companies to produce and export new, innovative medicines.
In particular, the FTA promotes continued collaboration between multinational pharmaceutical companies and Korean researchers and health care professionals. The global pharmaceutical industry has made a significant investment in clinical trials in Korea. This collaboration is helping to build a global capability in clinical research here in Korea. Furthermore, by including Korean patients in global clinical trials, we get data on a potential medicine’s safety and effectiveness in this specific population … and that, in turn, makes it possible for patients in this country to gain earlier access to medical advances.
The second key to innovation, strong intellectual property protection, is essential for increasing U.S. companies’ ability to invest in Korea. High standards of IP protection are critical to innovative industries, such as pharmaceuticals.
In particular, I believe it is essential to establish a patent linkage system in Korea, to ensure that the intellectual property of a patented medicine can be appropriately respected while the patent is still in force.
Lilly believes that generic medicines are a vital component of health care, delivering powerful treatments at low cost, and we support a legal pathway for generic and biosimilar medicines.
Today, in Korea, as in the U.S., more than seven out of 10 prescriptions filled are with generics. These typically tend to be priced lower than branded medications and, as such, represent good value for the health care system. In the next several years, generic versions of currently branded medicines will displace tens of billions of dollars of current pharma industry sales.
But these medicines become available only after companies like Lilly make investments of more than $1 billion over many years to develop molecules that are worth copying. We cannot make that investment if we don’t have the opportunity to earn a good return on our inventions during a fair and predictable period of patent protection. And without the research and the investments made to bring new medicines to market in the first place, there would be no generics at all!
The third key to innovation is predictable, transparent regulation. Indeed, among the provisions of the free trade agreement that are most critical to our industry is language emphasizing the need for transparency, accountability and predictability in government processes and policies.
Such protections will provide a measure of stability to the pharmaceutical market … which in turn will create a business environment that encourages companies to invest more in new research and development … thus creating new, high-value jobs and bringing new biopharmaceutical products to people.
In this context, let me address recently announced price cuts for medicines in Korea. I well appreciate the pressures of rising costs on the health care system, but I believe that the recently announced decision undermines the transparency and predictability necessary for companies like mine to bring medicines to the Korean market.
More broadly, I think it is important that decisions within the health care system reflect the value of a treatment, rather than a narrow focus on its cost. Focusing exclusively on the cost of specific therapies, under the pressure of current budget constraints, can have the unintended and counterproductive effect of increasing health care spending over time. That will be the result if this focus on cutting costs creates an environment where bringing innovative, cost-effective treatments to patients is not economically sustainable.
At Lilly, we’ve made an unequivocal commitment to innovation. And we advocate policies like those I’ve just outlined that make it possible for us sustain the investment necessary to develop more new medicines.
But, first, we must successfully develop medicines that truly create value … that alleviate unmet medical needs and improve outcomes for individual patients. Lilly scientists are developing potential new medicines to improve treatment for patients with cancer, diabetes, and mental illnesses, for whom existing options fall short. And we’re pursuing diseases – such as Alzheimer’s – for which there is currently no effective treatment at all.
We must discover and develop innovative medicines that make it possible for Korea … along with societies around the world … to meet the growing health care needs of your aging citizens while maintaining economic prosperity and opportunity for all your people.
We must increase the speed of research and reduce the cost to bring a new medicine to patients. Equally, we must build an understanding of patients’ needs into the earliest stages of research … and assess the potential of new molecules in terms of what’s truly valued by patients, physicians, and society.
I believe these goals are within our reach. The challenge of what we call “reinventing invention” … the scope of what’s required … is vastly beyond what I could hope to cover today. Let me offer just one example of how we’re changing the way we find and develop new medicines that can make a real difference for patients.
In 2009, we launched a whole new way of accessing promising molecules around the world by collaborating with scientists in academia and small biotech companies.
Through a program we call Open Innovation Drug Discovery, Lilly carries out screening tests—free of charge—on compounds submitted by outside researchers. In return, we retain first rights to negotiate an agreement with them. If no such agreement results, external researchers receive no-strings-attached ownership of the data report from Lilly to use as they see fit in publications, grant proposals, or further research.
By the end of 2011, more than 200 universities, research institutes, and small biotechs representing 25 countries – including Korea – were affiliated with the program, and we received some 84,000 chemical structures uploaded into our database for evaluation. Of these, we’ve evaluated more than 14,000 physical samples, the vast majority of which are structurally distinct from those in our compound collection. We’ve entered five collaborations, all ongoing.
We believe that open innovation significantly complements our internal efforts, leveraging our resources to discover potential new medicines. And it’s a demonstration of our commitment to make pharmaceutical innovation work for the benefit of patients around the world.
In conclusion, Korea is an example to the world of the strong positive link between health and wealth. As your country looks ahead, I believe that medical innovation is an essential element in sustaining the progress of the past half-century.
At Lilly, we know that better treatments for tenacious diseases such as cancer and diabetes – and dare I say, even cures – will most likely come from labs like ours … and that finding innovative medicines is both a moral – and an economic – imperative.
- Only through innovation will we be able to provide more effective health care to a rapidly aging population.
- Only through innovation can we make progress against growing scourges – such as Alzheimer’s disease … diabetes … and cancer.
- Only through innovation can we alleviate the staggering toll of non-communicable disease and other health challenges in the developing world.
- Only through innovation can we sustain the last century’s progress in longevity and quality of life.
More than 30 years of experience in the industry tells me we can do this. For the sake of patients here in Korea and around the world, we must do this.
By nurturing medical innovation, by recognizing fully the value it creates, and by putting in place sound public policies, we will continue the amazing progress that transformed human life in the 20th century … and create value that stands above all other: the value of greater health … productivity … and life itself.
Thank you for your kind attention. Now I will be happy to take your questions.
# # #