Speeches & Presentations

PhRMA Inaugural Address

John C. Lechleiter, Ph.D.

Chairman, President and Chief Executive Officer — Eli Lilly and Company

April 13, 2012

Boston Massachusetts

Thank you so much, Chris, and good morning everyone.

I want to begin by again thanking Chris for his strong leadership of PhRMA. He’s led us through a challenging year-and-a-half – with no extra pay! – with no lack of significant issues on the domestic and international policy fronts. Chris, you’ll be a tough act to follow.

I also want to thank John Castellani and our PhRMA staff and all the member company staff who champion the importance of innovative medicines for patients.

I’m honored to represent this great organization and to assume this office in front of so many friends and colleagues who represent patients. I plan to continue to champion medical innovation in every way I can and help ensure that our companies can continue the heroic work of healing and saving lives well into the future.

To succeed, we’ll need all of us – PhRMA, our member companies, and all who understand the critical importance of our work – to stand up for policies that support innovation to continue to build trust with our stakeholders and to get our powerful story out!

Yesterday’s date is famous in the annals of innovation. On April 12, 1961, Yuri Gagarin became the first human to fly in space. On April 12, 1981, Columbia blasted off – launching the space shuttle program.

But – with no disrespect to our space programs – April 12, 1955 gave birth to an innovation that would have even greater human impact. On that date, the world heard one of the most eagerly anticipated announcements in medical history: Dr. Jonas Salk’s polio vaccine worked. The vaccine turned a disease that once horrified America into a memory – and, over time, would do so for most of the world.

The fact is, medical innovation over the past century transformed the basic expectations of human life that had prevailed since the dawn of civilization. Tens of millions of death sentences were lifted and once dread diseases became manageable chronic conditions. Take our progress against our two leading killers:

  • The death rate from coronary heart disease in the U.S. has declined by about two-thirds since it peaked in 1968. There are one million Americans who lived last year – one million – who would have died in 2011 at the 1960s’ rate.
  • And the American Cancer Society says that from 1991 to 2007, the death rate for all cancers dropped 17 percent. Over 100,000 more people in this country are alive every year because of this decline.

The cumulative impact of the medical innovation of the past century is nothing short of mind-boggling.

In 1900, the average American life expectancy was 47. In 2000, it was 78. That’s an increase of 66 percent in one century – unprecedented in human history.

Folks, the industry we represent is a big reason we’ve gained these extra decades. An analysis by Columbia University Professor Frank Lichtenberg found that the launches of new medicines accounted for 40 percent of the increase in life expectancy during the 1980s and 1990s alone. That’s five months of every additional year.

And people are living not just longer, but better. A 2006 study found that, from 1982 to 2005, the prevalence of chronic disability among elderly Americans dropped by more than 25 percent.

This jibes with our own experience. We all know people in their 70s – and even 80s – who have left behind rocking chairs for sea kayaks and cross-country skis. And while we’re all frustrated with the rise in overall healthcare spending, a big chunk of it is due to the fact that these folks are now healthy enough to get a knee replacement or a coronary bypass or cancer treatment in their 70s and 80s and continue their active lifestyle, which sounds a lot better than the alternative to me!

If the sole impact of biopharmaceutical innovations was additional decades of life and health, we’d be hard-pressed to find their equals. But the economic payback from these gains is also difficult to overstate. The payback is years of productive work, economic value added, consumer spending, and tax dollars paid – which together outweigh the costs of treatment overwhelmingly, even if you resist putting a number on the intrinsic value of being alive!

There’s also compelling evidence that innovative medicines are the most cost-effective part of health care. A couple years ago, former Medco CEO David Snow visited Lilly. He reminded us that Americans with chronic and complex diseases account for 75 percent of U.S. health care spending and that, nearly 90 percent of the time, medicines are the first choice for medical intervention.

One example David used was diabetes; he said it cost half as much to treat patients with diabetes who adhered to their prescribed course of medicine compared to those who didn’t.

And last year, as many of you know, the Journal of the American Medical Association reported that when seniors who didn’t have comprehensive prescription drug coverage received coverage through Medicare Part D, they saved an average of $1,200 per year in hospital, nursing home, and other medical costs. That translates into $12 billion per year in savings across Medicare.

David Snow summed it up well. He said: "Drugs used properly are part of the solution, not part of the problem."

Now, because of our track record of innovation, some take ongoing progress for granted or think we have all the innovation we need. But we must build upon – not rest upon – the contributions of the past. For all our tremendous progress, much, much more remains to be done.

With 10,000 American Baby Boomers turning 65 every day, it’s not surprising we’re seeing a sharp increase in the incidence of diseases associated with aging: cancer, Type 2 diabetes, osteoporosis, neurodegenerative diseases, and more. The Alzheimer’s Association says that by 2050 – absent effective treatments – more than 13 million Americans will be afflicted by the disease, and costs in the U.S. alone could surpass $1 trillion a year!

Let’s face it: the only way to make further inroads against these and other conditions is to sustain medical innovation!

The good news is that advances in the life sciences are bringing treatments, once beyond our reach, finally into view. One need look no farther than the 36 new molecular entities approved by FDA in 2011. As John Castellani reminded us yesterday, they include:

  • 11 new medicines for rare diseases;
  • two breakthrough medicines for Hepatitis C;
  • and the first new medicine for treating lupus in more than 50 years.
  • And I am proud to say, many of these came from PhRMA member companies.

Just last week, the FDA approved a Lilly imaging agent designed for use with PET scans to detect for the first time beta-amyloid plaques in the brains of patients who are being evaluated for suspected Alzheimer’s disease and other causes of cognitive decline.

As a scientist myself, I believe that the juxtaposition of new insights into human biology, coupled with the application of new tools and advanced technologies, has the potential to revolutionize our business more in the next 10 years than in the past 50!

That is – if we don’t stop the revolution cold in its steps.

As we know, the bar for innovative medicines is rising inexorably higher.

  • Many of the diseases we’re tackling have defied treatment throughout human history.
  • Costs per drug have skyrocketed and, with the exception of 2011, new drug approvals have trended downwards, not upwards.
  • And we’re in the midst of a five-year period when some $150 billion of branded pharmaceutical products lose patent protection. This is great news for consumers but translates into $150 billion less annual revenue for the industry as a whole to invest in R&D.

Partly as a result of these forces, over the past 20 years, 26 major independent pharma companies have consolidated into nine.

So, here is our challenge: What can we do to ensure we sustain the innovation required to conquer diseases, control costs, and maintain the trajectory of longer, healthier lives? How do we win the case that what we do is – in David Snow’s phrase – part of the solution?

Let’s look at:

  • first, what we need to do to shape our external environment
  • and second, what we, as an industry, must do ourselves.

When it comes to health care policy, we need to speak up for policies that sustain and encourage innovation and against those that would undermine it.

What we’ve heard referred to as an "ecosystem" of innovation has four important elements:

  • first, intellectual property;
  • second, open access to health care markets;
  • third, market-based pricing; and
  • fourth, a regulatory system that keeps pace with 21st century science.

Each of these elements is indispensable, and when we see them under attack, we need to stand our ground and call out the potential consequences.

For example, we believe that doctors and patients must remain the ones to choose, in an informed way, from all available treatment alternatives.

This is why we call for the repeal of the Independent Payment Advisory Board. IPAB’s goal may be to slow the growth of health care spending – which we agree with – but a board that focuses only on cost cutting – not on quality and health outcomes – has dangerous or potentially fatal consequences for patients and for biopharmaceutical R&D.

We must continue to speak out against government price controls in Medicare Part D. These would in effect constitute a new $100 billion tax on the biopharmaceutical industry – and would have serious and possibly disastrous consequences on many levels.

For patients, the proposed price controls could put access to medicines at risk, and have the unintended consequence of increasing other Medicare costs, including insurance premiums paid by enrollees. I’m likewise concerned about the harm to innovation:

  • Add an additional $100 billion to the $150 billion in revenues we’re losing due to patent expirations, and you’re looking at potentially 200 medicines that will be delayed – or never developed at all.

And we need to continue to partner with the FDA and other agencies to refine a regulatory process that is timely, predictable, consistent, transparent, and scientifically rigorous. PDUFA V provides a great opportunity to address some of our concerns and is a top priority for PhRMA and for me this year.

But if we’re to be seen as credible advocates – and if we’re to have our voices heard and understood – we must do more: we must live out our values and continue to build trust in our industry and what we do. A key step, of course, is to adhere to the codes we’ve developed on:

  • interactions with healthcare professionals;
  • clinical trials;
  • the publication of clinical trials;
  • health outcomes research;
  • and direct-to-consumer advertising.

All five require that we:

  • hold ourselves to the highest ethical standards;
  • provide useful information and educate about both the benefits and risks of our products;
  • remain constantly vigilant about product safety;
  • and be transparent about our business practices.

These guidelines are important and they have helped improve our industry’s image and our standing. For them to remain effective, all of us need to be diligent in following not only the letter but the spirit of our codes.

In addition, we need to do a better job than ever of getting our story out and making our case with force and frequency.

I’ll admit – our arguments don’t fit on a bumper sticker. But there’s a compelling logic to them. Name a product that creates greater value than one that provides potential months, years, even decades of precious life! (Hint: it ain’t an iPad!)

In addition, treatments for many of today’s seemingly unsolvable diseases will most likely come from labs like ours, and for a growing number of conditions, innovative medicines are not only the most medically effective, but also the most cost-effective treatments.

But logic alone is insufficient. We need to make our stories human and personal as we build our case. In this room, in the halls of Congress, in the offices of our customers, there’s not one of us who hasn’t been touched by the power of medicine – who doesn’t have a story.

In fact, I’d like to close with one.

Last month at Lilly, we received an email from a colleague who works in information technology at our subsidiary ImClone. It begins:

"I am sitting here looking out my window over New Brunswick, and I have a great view, in my opinion. Most people would see tall buildings, railroad tracks, and office buildings and highways in the distance. I see life! Cars driving by; the train going back and forth carrying hundreds of passengers; people walking along the sidewalk – Life!"

She reveals that she had been diagnosed with acute myelogenous leukemia, but she says: "I’m strong, a warrior – and I don’t want a single one of you to worry about me for a minute."

Then she writes this: "Here is what I want from you: in addition to going home and appreciating your family and loved ones more than ever, I want you to do your jobs.

"In IT, we often get locked in to our day-to-day jobs. I would often forget that I worked for a company that does oncology research. But we do. Your job is every bit as important as one of our scientists doing research. Let that sink in and don’t forget it. I will never walk through the office doors again without remembering what we do at ImClone, as a company, as a family. We have awesome jobs!

"And make no mistake – I WILL be walking through those office doors again."

I can think of no better tribute to our colleague than for all of us to "do our jobs" –

  • to stand up for the policies that foster innovation;
  • to continue to build trust in our industry by earning that trust; and
  • to proudly tell our story –
  • all to preserve the innovation that’s at the heart of what we do and that people are counting on us to deliver.

So, I appreciate so much the honor – and it is an honor and a privilege – of representing a group of people who devote their lives to alleviating suffering, inspiring hope, and providing additional years of precious life to millions of people around the world.

Thank you ever so much.

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