Value of Medical Innovation

The Value of Medical Innovation: An Overview

Innovation value of medical innovationThe mission of the life sciences community — in New Jersey, across the United States and around the world — is as ambitious as it is straightforward:

To research and develop new medicines, therapies, medical devices, technologies and diagnostic tools that will be used to treat and cure myriad illnesses, including the world’s most dreaded disease states.

Driven by innovative research and cutting-edge technologies, the life sciences community — which includes biopharmaceutical, biotechnology, and medical technology, device and diagnostics companies — has helped people live longer, with less pain and enjoy a better quality of life.

As a result, costs related to health care are significantly reduced.


Medical Innovation: Improving Lives — Saving Lives

Collectively, new therapies have been among the greatest contributors to increased life expectancy over the past century.

The President’s Council of Advisors on Science and Technology in 2012 stated that innovative medicines had played a “profound role” in this impressive life-expectancy progress.

  • U.S. life expectancy has risen from 47 years at the turn of the 20th century to 79 years today.
  • Between 1980 and 2010, medical advancements helped add 5 years to U.S. life expectancy.
  • New medicines have contributed to a 23 percent decline in cancer deaths in the U.S. since the peak in 1991.
  • U.S. cancer survivorship alone has more than tripled since 1970, with nearly 14.5 million cancer survivors alive in the country last year.
  • By 2024, there will be an estimated 18.9 million U.S. cancer survivors.
  • The 5-year relative survival rate for all cancers diagnosed in 2004-2010 was 68 percent, up from 49 percent in 1975-1977.
  • Globally, between 1960 and 1997, new therapies accounted for 45 percent of the increase in life expectancy in 30 developing and high-income countries.
  • Between 2000 and 2009, new therapies accounted for 73 percent of the increased life expectancy for these same 30 developing and high-income countries.
  • The HIV/AIDS death rate has dropped nearly 85 percent since the introduction of highly active antiretroviral treatment (HAART) in 1995.
  • An estimated 862,000 premature HIV/AIDS deaths were avoided in the U.S. alone as a result of this class of drugs (HAART) and all the medical innovations that followed.
  • A range of hepatitis C treatments today offer cure rates upwards of 90 percent, with few side effects in as few as 8 weeks, up from 41 percent, though with debilitating side effects, in 2010.
  • Over 161,000 patients started treatment for hepatitis C in 2014, nearly ten times more than in the previous year.

Medical Innovation’s Underappreciated Benefit: Cost Savings

With medical innovation — past, present and future — comes an often underappreciated benefit:

The incalculable billions of dollars in savings to patients, their families, insurers, employers, governments and hospitals in avoided medical expenses associated with keeping people healthy or curing them of a life-long, chronic condition.

By eradicating a disease, people no longer need to seek or spend money on treatment.  And by better managing and preventing more serious complications from an existing disease, people avoid more costly medical care.

  • For every dollar spent on innovative medicines, total healthcare spending is reduced by $7.20.
  • The use of key medical technologies to address just four health conditions — diabetes, heart disease, musculoskeletal disease and colorectal cancer — expanded U.S. gross domestic product by $106.2 billion in 2010 and provided a net annual benefit of $23.6 billion to the economy, aided by savings from improved health care outcomes and increased labor force participation and productivity.
  • Treating people with chronic diseases accounts for 86 percent of our nation’s health care costs.
  • Chronic diseases (e.g., heart disease, stroke, cancer, diabetes, obesity, arthritis) are responsible for 7 of 10 U.S. deaths each year.
  • 117 million people (i.e., about half of all U.S. adults) in 2012 had one or more chronic health conditions; one in four U.S. adults had two or more chronic health conditions.
  • By investing in prevention and treatment of the most common chronic diseases, the U.S. could decrease treatment costs by $218 billion per year and reduce the economic impact of disease by $1.1 trillion annually.
  • For diabetes, the total costs of this chronic disease rose to $245 billion in 2012 from $174 billion in 2007.
  • Without a cure for diabetes, in the next 25 years, annual spending on the disease is forecast to increase to approximately $336 billion annually.
  • The insulin pump, an innovative technology for diabetes patients, improves management of the disease.  Among insulin pump users and caregivers, the average annual savings per person was $5,886 compared to non-users of the device.  Most of that benefit came from savings to GDP, as patients and their caregivers missed fewer workdays and were more productive.  Expanding innovation in diabetes management would increase aggregate savings by $225.4 billion.
  • Alzheimer’s disease is the costliest disease to society. Total 2015 payments for caring for those with Alzheimer’s and other dementias were estimated at $226 billion, of which $153 billion is the cost of Medicare and Medicaid alone.
  • A treatment in 2025 that delays the onset of Alzheimer’s by five years would reduce the total costs of care immediately. With a treatment, total costs to all payers in 2030 would decrease from $451 billion under the current trajectory to $368 billion, a savings of over $83 billion.  In 2050, total costs to all payers would decrease 33 percent from $1.101 trillion under the current trajectory to $734 billion, a savings of $367 billion.

  • Cancer treatment results in an estimated tenfold increase in productivity — specifically, $37 billion in cancer treatments resulted in an estimated $373 billion in increased productivity.
  • With HIV/AIDS, medical innovation has delivered an astounding 3 million life years, which has produced an economic value of $1.3 trillion, according to a 2006 published paper.
  • Angioplasty, an innovative procedure used to treat heart disease, is likely to generate substantial savings in the future. This technology, in combination with electrocardiogram, echocardiogram, chest x-ray, and pacemakers, saved $1,930 per person affected annually compared to those who did not use technology. Increased incentives, which spur technology innovation and expand use, would lead to longterm savings of $809 billion compared to the continued incentives scenario.
  • Colonoscopy and sigmoidoscopy detect colorectal cancer, and colonoscopy can prevent the ailment through the removal of polyps. These technologies led to an average annual savings of $97,302 per person affected compared to unscreened patients. In addition, screening that prevented colorectal cancer saved $53,063 per case. Aggregate savings associated with innovation in this field would amount to $178.2 billion due to improved detection and prevention.
  • Joint replacement can elevate quality of life for musculoskeletal disease patients and even cure disease. This technology, in conjunction with MRI screening, saved $24,518 annually among users and caregivers compared to non-users. Increasing the incentives for innovation in musculoskeletal disease technology would save $281.1 billion compared to continuing current incentives.


Medication Adherence’s Critical Role to Human Health

Medication adherence plays a critically important role in health-care savings, as medical innovations can provide no benefit if patients do not use their treatments as prescribed by their physician.

  • Of the approximately 187 million Americans who take one or more prescription drugs, it is estimated that up to one-half do not take their medications as prescribed.
  • Studies have consistently shown that 20 to 30 percent of medication prescriptions are never filled.
  • Prescription non-adherence costs the U.S. roughly $330 billion annually in unnecessary medical complications, Express Scripts estimated in 2015.
  • A 2013 study estimated that the U.S. health care system could save $213 billion annually if medicines were used properly.
  • An extra $1 spent on medicines for adherent patients with congestive heart failure, high blood pressure, diabetes and high cholesterol can generate $3 to $10 in savings on emergency room visits and inpatient hospitalizations.


Life Sciences Research: Research and development (r&d)

Despite the dramatic, life-saving advancements that the life sciences sector has achieved, our work is far from done.

Every day, teams of scientists at life sciences companies in New Jersey go to their labs to research and develop the next generation of medicines, therapies, devices, technologies and diagnostic tools that will alleviate life-altering and life-saving diseases.

  • The research and development-driven (R&D) biopharmaceutical sector generates high-quality jobs and powers economic output for the U.S. economy, serving as the “the foundation upon which one of the United States’ most dynamic innovation and business ecosystems is built,” according to the Battelle Technology Partnership Practice.
  • The U.S. biopharmaceutical sector accounts for the single largest share of all U.S. business R&D, representing 4 percent of all domestic R&D funded by U.S. businesses in 2013.
  • 91 percent of drugs are developed by the private sector with no direct government role.
  • Biopharmaceutical companies have brought more than 500 new medicines to U.S. patients in the past 15 years.
  • In 2014 alone, the U.S. Food and Drug Administration’s Center for Drug Evaluation and Research (CDRR) approved 41 novel new drugs, the most since 2001. Novel new drugs are often innovative products that serve previously unmet medical needs or otherwise significantly help to advance patient care and public health.
  • More than 7,000 medicines currently are in development — or in the “pipeline” — around the world, including for cancers, cardiovascular disorders, diabetes, HIV/AIDS, immunological disorders and infectious diseases.
  • Of those 7,000 treatments, approximately 3,400 medicines are being developed in the U.S., an increase of 40 percent since 2005.
  • Of those 7,000 treatments, 70 percent are potential first-in-class therapies, meaning they use a completely new approach to fighting a disease.
  • Of those 7,000 treatments, 42 percent have the potential to be personalized medicines, a term described as providing “the right patient with the right drug at the right dose at the right time.”
  • Over the past decade, 42 percent of the late-stage R&D pipeline is now specialty medicines up from 33 percent ten years ago.
  • The number of orphan drugs launched peaked again with 18 in 2014 and 61 in the last five years. Orphan drugs, biologics, devices, or medical foods are those that demonstrate promise for the diagnosis and/or treatment of rare diseases or conditions.
  • Cancer remains the most common orphan category, and increasingly very rare “ultra-orphan” drugs, for populations fewer than 10,000, are being developed.
  • Clinical trials account for about half of the average $2.6 billion cost of developing new drug and are a good revenue source for New Jersey research institutions.
  • $245.9 million was invested in clinical trials in New Jersey in 2013, which yielded a total state economic impact of $617.5 million.


The Cost of Medical Innovation: Money, Time, Risk

For patients, medical innovations result in fewer hospitalizations, improved quality of life, increased productivity and, importantly, extended lives.

However, medical innovation is a costly, lengthy, risky, and scientifically and regulatory complex process.

  • Developing a new prescription medicine that gains marketing approval, a process often lasting longer than a decade, is estimated to cost $2.87 billion.
  • This $2.558 billion includes the cost of failures — and it is important to note that there is far more failure than success in researching, developing and bringing to market medical innovations.
  • Only five in 5,000 compounds that enter preclinical testing make it to human testing. One of these five compounds tested in people is approved by the FDA.
  • Less than 12 percent of the candidate medicines that make it into Phase I of clinical trials will be approved by the FDA.
  • 2 in 10 approved drugs are ultimately commercial successes — in other words, they produce revenues that exceed average R&D costs.
  • Companies have, on average, 12.6 years to recoup their R&D costs before a generic enters the marketplace.
  • Reporting member companies of the Pharmaceutical Research and Manufacturers of America (PhRMA) in 2015 invested an estimated $75 billion in the research and development of new innovative treatments and cures.
  • Reporting HINJ member companies — which include biopharmaceutical and medical technology companies — in 2012 indicated that their New Jersey-based facilities increased R&D spending to $8.67 billion.


Conclusion: Medical Innovation Is a Key Part of the Solution

Medical innovation is complex, high-risk, time-consuming and extremely expensive.

However, it is clear that medical innovation is, despite claims to the contrary, a key part of the solution — not only to alleviating human suffering, but also to reducing significantly the incalculable costs associated with treating that suffering.

As a society, we need to recognize the enormous multifaceted return on the investment in medical innovation, and nurture — rather than stifle — the virtuous cycle of better health, longer life and economic benefit resulting from life sciences innovation.


Medical Innovation Resources:


Updated 08/29/17


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