Leadership in Decline: Assessing U.S. International Competitiveness in Biomedical Research

7/29/2019 Leadership in Decline: Assessing U.S. International Competitiveness in Biomedical Research

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United for medical research | 1

Leadershipin decLine

assessing U.s. internationaL competitivenessin BiomedicaL research

the information technoLogyand innovation foUndationand Unitedfor medicaL research

By RoBeRt D. Atkinson, stephen J. ezell, l. VAl GiDDinGs, luke A. stewARt, AnD scott M. AnDes | MAy 2012


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2 | leadership in decline

means that, i current trends in biomedical

research investment continue, the U.S.

governments investment in lie sciences

research over the ensuing hal-decade is

likely to be barely hal that o Chinas in

current dollars, and roughly one-quarter

o Chinas level as a share o GDP. And

China already has more gene sequencing

capacity than the entire United States and

about one-third o total global capacity.

Other countries are also investing more

in biomedical research relative to the sizes

o their economies. When it comes to

government unding or pharmaceutical

industry-perormed research, Koreas

government provides seven times more

unding as a share o GDP than doesthe United States, while Singapore and

aiwan provide ve and three times as

much, respectively. France and the United

Kingdom also provide more, as shares o

their economies.2

Yet the challenge to U.S. biomedical

research competitiveness is not just that

other countries are investing relatively

more in biomedical R&D as a share o

their economies. Nor is it simply that

ederal unding or biomedical research

peaked in 2003, in both ination-adjusted

dollars and as a share o GDP, and has

been slipping since. Another problem is

the lack o consistency and predictability

in the level o U.S. biomedical research

unding. o be sure, the 2009 American

Recovery and Reinvestment Act (ARRA)

biomedical research that once propelled it

to global lie sciences leadership.

At the same time, global competition

has intensied, as a growing number o

countries, including China, Germany,

India, Singapore, Sweden, the UnitedKingdom, and others have recognized that

lie sciences represents a high-wage, high-

growth industry and have taken measures

seeking to wrest lie sciences leadership

rom the United States.

Tese nations have not only signicantly

expanded their nancial support or

biomedical research, they have also

implemented a range o policies designed

to enhance their biomedical innovation

ecosystems, such as tax incentives through

patent boxes, regulatory reorms to

speed drug approvals, and immigration

and education policies designed to attract

and to educate the best lie sciences

talent. As this report demonstrates, in an

increasing number o indicatorsrom

trade balances in pharmaceuticals to

shares o global pharmaceutical-industry

outputsuch policies and investmentshave enabled several countries lie sciences

industries to become competitive with that

o the United States.

China, or example, has identied

biotechnology as one o seven key strategic

and emerging (SEI) pillar industries and

has pledged to invest $308.5 billion in

biotechnology over the next ve years. Tis

Advances in lie sciencesincluding

pharmaceuticals, biotechnology, and

medical deviceswere a major driver o

global economic growth in the second hal

o the twentieth century. Since World War

II, the United States has stood rmly at

the oreront o the lie sciences revolution,

with this leadership built upon a solid

commitment to robust and sustained

ederal investment in biomedical research

and development (R&D), channeled

primarily through the National Institutes

o Health (NIH).

Tis public investment laid the

oundation or the development o

scores o breakthrough pharmaceuticaldrugs and therapiesrom personalized

gene therapies to synthetic skin to cures

or certain types o cancerand has

catalyzed the development o a globally

competitive, high-wage lie sciences

industry in the United States. oday, the

U.S. lie sciences industry supports more

than 7 million jobs and contributes $69

billion annually to U.S. gross domestic

product (GDP).1

But U.S. leadership in the global lie

sciences industry is today under threat

on two ronts. First, ederal investment

in biomedical research through NIH

has decreased, both in ination-adjusted

dollars and as a share o GDP, nearly

every year since 2003. Put simply,

the United States is not sustaining

the historically strong investment in

ExEcutivE Summary

2 | information technology and innovation foUndation


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United for medical research | 3United for medical research | 3

Finally, the report concludes by

demonstrating that the United States

commitment to NIH has been a decisive

actor in building U.S. lie sciences

leadership and driving economic growth.

It is thereore paramount, even in times

o tight budgets, that Congress, not

only preserve, but expand NIH unding

and reject automatic, across-the-board

spending cuts. Congress should strive

to und NIH consistently at a level

representing at least 0.25 percent o GDP.

Our nations baseline policy going orward

should be to grow NIH unding at a

rate that accounts or ination, embraces

emerging avenues o research that can

propel U.S. innovative leadership, and

reects the catalytic eect biomedical

research has on our nations economy.

economy, these countries are choosing

to secure their uture well-being, not by

just sustaining, but by increasing their

investments in biomedical research. Tey

are doing so because they recognize

that the most viable solution to such

challenges is to help grow key sectors o

their economies, such as lie sciences. And

they recognize that the only way they

can do this is by making the necessary

investments in research that provide the

undamental oundation or lie sciences

innovation and a bio-based economy,

including new drugs, diagnostics,

therapies, and devices.

Tis report documents the oundational

role public investment plays in

underpinning a nations competitiveness

in the lie sciences. It assesses the

intensiying competition or global

lie sciences leadership through case

studies o our countriesthe United

States, China, the United Kingdom,

and Singaporethat illustrate the

commitments that competitor nations are

making to enhancing their lie sciences

competitiveness through increased

public investments and comprehensive

policy reorms. It then assesses countries

perormances in the lie sciences-

industries as measured by a variety o

indicators, including countries share o

total patents granted in biotechnology and

trends in countries levels o trade balances,

employment, and share o global output in

the pharmaceutical industry.

included a welcome, albeit temporary,

increase in NIH unding.3 But the positive

impact o that ephemeral surge has not

been maintained, and NIH unding is

threatened with a drastic rollback by

the looming automatic sequestration

scheduled to be triggered January 2, 2013

(unless Congress reaches a budget deal in

the interim).

Te sequestration would slash NIH

unding by at least 7.8 percent, leading to a

$2.4 billion reduction in 2013, the largest

cut in the agency s history. Tis whipsaw,

boom-bust cycle introduces tremendous

uncertainty into the biomedical research

enterprise, making it difcult or

researchers, research institutions, and

businesses to make long-term planning

and investment decisions. In such an

environment o constrained and uncertain

unding levels, private investigators with

promising biomedical research proposals

who cant secure unding in the United

States will increasingly look to pursue

opportunities abroad. In other words,

part o the challenge to U.S. international

competitiveness in biomedical research

stems rom uncertainty generated by the

inability to sustain robust levels o unding

or biomedical R&D on a consistent basis.

It is striking that, while many competing

countries, such as the United Kingdom,

ace the same challenges as the United

States in terms o budget decits and

high unemployment in a sluggish global

thiSrEportdocumEntSthEfoundational

rolEpublicinvEStmEntplaySinundErpinninganationS

compEtitivEnESSinthElifESciEncES.


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Chinahastheworldslargestnext-generationsequenCing

CapaCity, withmoresequenCingCapaCitythantheentire united

statesandaboutone-thirdoftotalglobalCapaCity.

the united statesaCCumulateda $136.7 billion

tradedefiCitinpharmaCeutiCalproduCtsoverthe

lastdeCade,atatimewhenthepharmaCeutiCaltrade

balanCesofmanyCompetitorssteadilyinCreased.

Koreasgovernmentprovidesseventimesmorefundingfor

pharmaCeutiCalindustry-performedresearChasashareofgdp

thandoesthe united states, while singaporeand taiwanprovide

fiveandthreetimesasmuCh, respeCtively.

the united Kingdoms strategyfor uK life

sCienCessetsagoalthatthe uKwillbeComethe

globalhubforlifesCienCesinthefuture.


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Whether in the United States, the United

Kingdom, China, or other countries, public

investment has played a critical role in

catalyzing the development o nations lie

sciences industries. As an analysis o the

economic impact o the lie sciences sector

on the British economy ound, publicly

unded research has played a central role

in the origins o the U.K. biotechnology

industry.4 Likewise, ederal unding

through the National Institutes o Health

has made possible the development o a

robust lie sciences sector in the United

States. Moreover, once developed, the

competitiveness o a countrys lie sciences

industry is sustained and improved through

public research investment. Public invest-ment in biomedical research is especially

eective or two reasons: rst, it lays the

oundation o knowledge upon which

industries can build; and, second, it gener-

ates extremely high rates o return, both as

private return and return to society at large.

Cockburn and Henderson nd that even

when productivity is narrowly dened to

the lie sciences sector (with no broader

eects), public-sector biomedical research

unding has a private rate o return o

30 percent per year. Other authors have

ound even higher public rates o return,

at least 37 percent, rom investment in

biomedical research.5 (When combined,

this rate o return is 35 times greater than

the current cost o capital to the United

States reasury.) Tis broad impact can

be seen quite clearly in the United States,

where between 1965 and 1992, teen o

the twenty-one top-grossing drugs were

developed in part on discoveries enabled

by ederally unded research, seven o

which drugs were directly related to the

NIH.6 Tese included breakthrough anti-

depressant drugs that leveraged discover-

ies about neurotransmitters to develop

selective serotonin reuptake inhibitors

(SSRIs), anti-AIDS drugs, and drugs used

in heart surgery. More recently, NIH-

unded research into monoclonal antibod-

ies has supported the development o new

monoclonal therapy-based drugs that, in

2010, accounted or ve o the top twenty

best-selling drugs in the United States.7

As one survey concluded, while it is verydifcult to be precise about the pay-os

o publicly unded research [in biomedical

science], we conclude rom a survey o a

wide variety o quantitative and qualitative

academic studies, that the returns rom

this investment have been large, and may

be growing even larger.8

Te evidence that public-sector R&D

plays a undamental role in develop-

ing basic knowledge or drug discovery

is also consistent with ndings by other

authors. Rake nds that because there

is a positive association between tech-

nological opportunities and the number

o new pharmaceuticals, public support

o scientic research directed to certain

diseases may enhance the relevant tech-

nological opportunities and consequently

the number o new pharmaceuticals.9 Bosi

and Laurent developed an econometric

model that shows that the optimal level o

public unding or medical R&D is higher

than the current one. Bosi and Laurent

conclude that, in 2011, a $1 billion public

investment in medical R&D would in-

crease GDP by 0.048 percent annually, or

roughly $6 billion.10

Some will assert that public R&D is not

needed, because private-sector R&D will

expand to compensate or decreases in

ederal unding. But, in act, economic

research shows clearly that public R&D

unding is a complement, not a substitute

or alternative, to private sector R&D und-ing. One reason or this is that industry

is able to build on the knowledge and

understanding o discoveries rom publicly

supported lie sciences research, mak-

ing their own research more productive

and eective. Tese spillovers provide

rms with a common platorm o basic

knowledge, and thus precipitate even

greater levels o innovation.11 In general,

an additional dollar o public contract

research added to the stock o govern-

ment R&D has the eect o inducing an

additional twenty-seven cents o private

R&D investment.12 However, or the lie

sciences industry, a dollar o NIH support

or research leads to an even greater in-

crease in private medical research, roughly

thirty-two cents.13 One survey o over sixty

academic articles on whether public-sector

thE rolEof public invEStmEntin lifE SciEncESinduStry compEtitivEnESS



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R&D crowds out private sector invest-

ments concludes, Tere are a number o

econometric studies that, while imperect

and undoubtedly subject to improvementand revision, between them make a quite

convincing case or a high rate o return to

public science in this [lie science] indus-

try. It is worth noting that there are, so ar

as we are aware, no systematic quantitative

studies that have ound a negative impact

o public science.14

Moreover, the literature suggests that

public-sector unding disproportionately

aects small rms. Small biotechnology

rms allocate much larger portions o

their budgets to R&D, and small, venture

capital-backed rms deliver a dispro-

portionate share o technological break-

throughs.15 Similarly, NIH and venture

capital unding increase employment and

R&D within small lie sciences rms to a

greater degree than capital rom tradi-

tional nancial institutions.16

aken together, the evidence is clear thatpublic investment in biomedical research

generates very high rates o public and

private return, proving to be among the

most eective ways o stimulating broader

economic growth.

BiomedicaL researchcompetitiveness

coUntry

case

stUdies

Following are case studies assessing the

biomedical research competitiveness o

our countries: the United States, China,

the United Kingdom, and Singapore.17

Tese examine trends in these countries

investments in biomedical research

over the past decade and document the

broader policies they have implemented

to bolster the competitiveness o their

lie sciences sectors. Te countries chosen

to compare with the United States

each illuminate certain acets o the

intensiying global competition or lie

sciences leadership. Chinas government

is investing hundreds o billions in lie

sciences research even as the country is

attracting signicant amounts o venture

capital and oreign direct investment and

is producing more and more lie sciences

innovations. Te United Kingdom has

adopted a lie sciences-competitivenessstrategy and has renewed its investments

in biomedical research. Singapore has

made competitiveness in the lie sciences

a national priority. Te picture that clearly

emerges rom these case studies is that

other countries are targeting the lie

sciences-industry as a key driver o their

economies and are implementing concerted,

comprehensive, and aggressive policies

designed to position their lie sciencesindustries among the worlds leaders.

United statesTe lie sciences industry is one o

Americas strongest perormers in terms

o creating many high-wage jobs. Lie

sciences-industry jobs pay an average wage

o $84,992.00almost double the average

U.S. wage.18 In part because o these high

wages, 1.2 million jobs in the lie sciences

industry support an additional 5.8 million

jobs indirectly.19 Employment in the lie

sciences grew 5.7 percent rom 2001 to

2006, almost twice the rate o the 3.1 per-

cent increase in employment in the overall

private sector.20 In total, the lie sciences

industry accounts or $69 billion in U.S.

economic activity and represents one o

the countrys most vital industries.21

Te most important reason the U.S. liesciences industry is so strong is that the

United States has a long tradition o

public support or biomedical research.

U.S. policy toward biomedical research is

rooted in a strong bipartisan consensus on

the value o basic research that emerged

ollowing World War II. During that war,

investments in research led to undamenta

new knowledge and increased understand-

ing, applications o which were centralto the war eort. For example, proound

discoveries in biology, such as the value o

antibiotics, saved tens o thousands o lives

that would otherwise have been lost to

inectious disease. Tis bipartisan consen-

sus led to steady increases in support or

basic scientic research, beginning in the

late 1940s (a 150-old increase, rom 1945

to 1961, to $460 million, and a urther

pUBLicsectorinvestmentinBiomedicaLresearchfUndinghasaprivaterateofretUrnof 30

percentandapUBLicrateofretUrnofatLeast37 percent.



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increase to $1 billion by the late 1960s).22

Biomedical research was singled out or

special attention with the passage o the

National Cancer Act o 1971.23 Although

the war on cancer was very much aimed

at ameliorating the human suering and

economic eects o cancer, it rested on a

strong appreciation that critical advances

were most likely to ollow rom undirected

basic research, an argument supported by

robust empirical data.24 As Figures 1 and

2 show, the bipartisan, postwar consensus

in support o substantial investment in bio-

medical research culminated in a doubling

o unding or the National Institutes o

Health, beginning in the late 1990s and

continuing throughout the early 2000s. Tis

increase in NIH unding was supported by

both the Clinton and George H. W. Bush

Administrations and Congressional appro-

priators rom both sides o the aisle.

Te doubling o NIH unding that had

been enacted by the early 2000s was

intended to dene a new baseline or sus-

tained investment in biomedical research

through NIH. However, NIH unding

since then has ailed to keep pace with

ination, and the gains made in the prior

decade are eroding. Tis is illustrated in

both Figure 1which shows the ed-

eral governments investment in NIH inination-adjusted dollars rom 1995 to

2013and Figure 2which displays NIH

unding as a share o GDP over the same

time period. Using ination-adjusted dol-

lars, NIH unding peaked in 2003 and has

decreased in every year but one since. 25

In ination-adjusted dollars, the NIH

unding level requested or 2013 will

nih fUndingpeakedin 2003 andhasfaLLennearLyeveryyearsince25

|Figure 1 | NIH Appropriation, constant 1995 dollars (millions), 1995-2013

|Figure 2 | NIH Appropriation, share o GDP, 1995-2013

0.00

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

2013201220112010200920082007200620052004200320022001200019991998199719961995

Supplemental appropriation (ARRACurrent Dollars (millions)


0

$5,000

$10,000

$15,000

$20,000

$25,000

ARRACurrent Dollars (millions)

2013201220112010200920082007200620052004200320022001200019991998199719961995


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actually roll unding back to 2001levels. While the American Recovery

and Reinvestment Act did result in an

ephemeral bloom o unds, NIH unding

in constant dollars has subsequently

resumed its downward trend. Likewise,

as a share o GDP, baseline U.S. unding

or NIH (aside rom the one-o

supplementary ARRA investment) peaked

in 2003 at 0.24 percent o GDP and has

been on the decline since, standing now at

0.19 percent o GDP. As a share o GDP,

U.S. investment in NIH has reverted back

to 2001 levels. Tese trends contrast starkly

with those seen in many other countries.

One consequence o the relative decline in

NIH unding in constant dollars is reect-

ed in Figure 3, which presents the success

rate o applications or investigator-ini-

tiated basic research grants at NIHthe

R01 grantsrom 1962 to 2011.26

While this rate declined steadily romthe 1960s to the early 1990s, it improved

or held steady rom 1993 to 2003, in large

part through the increases in NIH unding

during that window. But ater peaking in

2003, success rates resumed their downward

slide, with no indicators today providing

any hope or a reversal o this trend.27

Tis means that ewer than one in ve

basic research grant applications to

NIH is successul today. Although thereare several reasons or this, the most

important is simply insufcient unds.

Te consequences o a rejected grant

application are most severe or rst-time

applicants, oten delaying careersor

derailing them at their outset. NIH

data show that the average age o Ph.D.

applicants at the time they win their rst

grant approval increased rom thirty-

our in 1970 to orty-two in 2005.28 Te

negative implications o such low successrates are proound. Te opportunity

costs o so many ununded opportunities

or exploration are difcult to calculate,

though certainly large. But perhaps the

most pernicious and stiing consequence

is that, in such a competitive climate,

applicants are discouraged rom pursuing

the most innovative ideas because those

are usually seen as the most risky, the most

uncertain o returns. Tey are thereore

discriminated against by grant reviewers,

understandably reluctant to take a chance

and risk scarce unding. In a world acing

so many challenges or which the solutions

can only be ound in innovations in

the lie sciences, this situation is highly

counterproductive. Moreover, promising

young researchers who are unable to

get their research grants unded may be

increasingly attracted to opportunities

abroad, especially as a number o oreign

countries ramp up their governments

investments in biomedical research. Tis is

particularly troubling given that, o all the

SEM (science, technology, engineering,

and math) elds, the United States has the

highest share o native-born U.S. scientists

in the biomedical elds.29

Indeed, the slackening pace o ederal in-

vestment in R&Dnot only in biomedi-cal research, but across the broader elds

o U.S. science and technologyis quite

real and signicant. From 1987 to 2008,

ederal R&D investment grew at just 0.3

percent per year in ination-adjusted dol-

larsmuch lower than its average annual

growth rate rom 1953 to 1987, o 4.9

percentand ten times lower than the rate

o GDP growth over that period. In act,

LowgrantappLicationsUccessratesdiscoUrageresearchersfrompUrsUinghigher-riskideas29

| Figure 3| NIH R01-equivalent Application Success Rates, 1963-2011

10%

20%

30%

40%

50%

60%

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962



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to restore ederal support or research as ashare o GDP to 1987 levels, the United

States would have to increase its total

ederal support or R&D by almost $150

billion per year.30 Recognizing the ex-

tent o this underinvestment, the Obama

AdministrationsA Strategy or American

Innovation: Securing Our Economic Growth

and Prosperity, released in February 2011,

called or the largest increase in ederally-

unded research in history, which would

make continuous investments to double

unding or three key basic research agen-

cies: the National Science Foundation, the

Department o Energys Ofce o Science,

and the National Institute o Standards

and echnology laboratories.31 While

increased unding or these agencies is

important, the administration should

not have neglected to include NIH or

increased unding to at least restore, i not

exceed, the commitment the country made

in 2003 to investing in biomedical research

as a share o the economy. While the

administration did introduce a National

Bioeconomy Blueprintin April 2012,32

which contains numerous welcome and

needed recommendations to strengthen

the U.S. biomedical innovation system, the

Blueprintcannot be implemented without

increased ederal unding.

Several commentators have raised concern

about the eroding levels o U.S. public

investment in biomedical research. As

noted previously, economists have argued

that the optimal level o public unding

or medical R&D is higher than current

expenditures.33 Te Federation o Ameri-

can Societies or Experimental Biology

concurs, recently concluding that, Te

current level o United States investmentin research is insufcient. Tere are clear

indicators o unmet need, and other coun-

tries are substantially increasing their con-

tributions. . . . Other nations are seeking to

capitalize on the abundant scientic op-

portunities. Between 1999 and 2009, the

Asian regions share o worldwide research

and development expenditures grew rom

24 percent to 32 percent, while U.S. R&D

expenditures declined rom 38 percent to

31 percent. Te European Community

has recently urged its member nations

substantially to increase their investment

in research, recommending budgets o 80

billion ($108 billion) in 20142020, a 40

percent increase over the previous seven

year period.34

Likewise, a recent paper in theJournal o

the American Medical Association argues,

Te United States position as the domi-nant investor in a range o research and

development programs is declining. Bio-

medical research requires a new strategic,

comprehensive, long-term policy-making

ramework, with ocused decision-making

mechanisms that permit efcient and

eective governmental planning. Leader-

ship on research policy to conceptualize

this new ramework is required. A new

unding model within this ramework isalso needed to ensure US preeminence in

biomedical research. Without these steps

the consequences could be devastating.35

chinaChina has committed itsel to developing a

globally competitive lie sciences industry

by the end o this decadei not sooner

and has aligned its policies regarding

investment, technology, and talenttoward becoming a world leader. In act,

biotechnologyincluding biopharmacy,

bio-engineering, bio-agriculture, and

bio-manuacturingis one o the seven

priority strategic and emerging industries

(SEIs) identied in Chinas welth

Five-Year Plan (2011-2015).36 Beijing has

announced it will invest $1.5 trillion over

the next ve years in these seven SEIs,

aiming to increase their contribution to

GDP rom 2 percent in 2008 to 8 percent

by 2015 and 15 percent by 2020.37 o put

this in context, or the United States to

match Chinas commitment to these SEIs

as a share o its GDP, it would have to pass

an American Recovery and Reinvestment

Act every year or the next ve years and

dedicate close to 100 percent o the unds to

industry.38Chinas government has pledged

to invest 2 trillion yuan ($308.5 billion) on

biotechnology, a strategic pillar industry,

over the next ve years.39 By comparison,

the United States will und the National

Institutes o Health at approximately $30.7

billion in 2012. Projecting that level with

modest increases (i nothing changes)

over the next ve years, the United States

government will invest approximately

$160 billion in lie sciences research. In

other words, as a share o GDP, the U.S.

governments investment in lie sciencesresearch over the ensuing hal-decade is

likely to be roughly one quarter Chinas.

Te consequences o Chinas out-investing

the United States are already becoming

visible, and could ultimately be proound.

Ample government unding has put

China on the cusp o becoming the

world leader in genome sequencing.


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Te countrys recent $60 million purchaseo 128 cutting-edge genome sequencers

through the Beijing Genomics Institute

(BGI) has given it the worlds largest

next-generation sequencing capacitywith

more sequencing capacity than the entire

United States or about one-third o total

global capacity.40 With China now able to

rapidly and inexpensively produce individual

human genome sequences, one expert argues

that, Chinas sequencing power has the

potential to tip the balance in innovation: the

inventions and ideas that currently underlie

the success o U.S. biotechnology.41

A key insight into Chinas lie science

competitiveness strategy is that it seeks

to create a public investment lead relative

to other nations, which will allow it to

attract a signicant share o private-sector

investment.42 Evidence that aggressive

public investment leads to expanded pri-vate investment is already emerging rom

Chinas biotechnology venture-capital

market. On February 4, 2011, the website

ChinaBiooday.com reported that venture

capitalists invested more than $1 billion

in Chinas lie science market in 2010

an increase o 319 percent over 2009.43

By contrast, although, at $4.4 billion in

2010, U.S. venture-capital biotechnol-

ogy investment is over our times Chinaslevel, it has allen 20 percent since 2007.

China has already become the worlds

second largest source o venture capital

or inventions involving medical technol-

ogy, ater the United States. As Scientifc

American notes, Tis disparity o VC

dollars reects a transition in which

emerging markets are ushering in a new

era o biotechnology enterprise.44

Te increase in biotechnology venturecapital owing into China is mirrored by

the dramatically increased oreign direct

investment by Western biotechnology

and pharmaceutical rms in China. Such

examples include:

In2009,Novartisannounceditwould

invest $1 billion in R&D in China

over the next ve years, including a

signicant expansion o the Novartis

Institute o BioMedical Research inShanghai, China. Novartis also invested

$250 million to build a new global

technical center in Changshu, China

to develop and manuacture active

pharmaceutical ingredients.45

AstraZenecacommittedover$300

million to the development o an

innovationcenterintheZhangjiang

Hi-ech Park in the Pudong area o

Shanghai, which will be an equal with the

companys R&D centers in Wilmington,

Delaware, and Manchester, U.K.46

Merckrecentlyannouncedastatement

o intent with BGI to develop a rela-

tionship in R&D to create value rom

the massive output o genomic inor-

mation made available through DNA

sequencing and analysis.47

InApril2011,AscletisInc.,aUS-China

specialty lie sciences venture ocused on

cancer and inectious-disease therapeu-

tics, launched operations in Hangzhou,

China, having raised $100 million in

private equity unding in China and the

United States.48

Tese companies are attracted to Chinas

large market, its large pool o skilled talent,

and its science inrastructure, the last twosupported directly by government lie

sciences unding. With regard to the rst

o these, Chinas prescription drug market

is the worlds second-largest, next to that

o the United States, and is growing at

more than 20 percent annually.49 But

its not just large domestic markets and

massive government investments unding

science parks, academic researchers, and

the development o a national health

inrastructure that is ueling Chinas rapid

increase in lie sciences-competitiveness.

alent is a key part o the equation

as well, and the number o Chinese

undergraduates studying in the lie

sciences surpassed U.S. levels ve years

ago. Chinas universities produce more

graduates and post-graduates in lie

science than any other country in the

world. Among all oreign nations, China

boasts the highest number o recipients

o U.S. doctoral degrees awarded in the

biological sciences. Some 4,500 Chinese

students received Ph.D.s in lie sciences

rom Western universities in 2007

alone.50 Nor has China been content with

educating uture talent; it has aggressively

courted world-class lie sciences talent,

with the result that at least 80,000

Western-trained Ph.D.s in lie sciences

have returned to China to work inindustry or academic institutes.51

Te message is clear: China is emerging

as a ormidable competitor to the United

States in the eld o lie sciences. Te

country has already achieved several

notable biotechnology successes,

including being the rst to sequence the

genome o the virus that causes severe



11/24

acute respiratory syndrome (SARS)and to create a diagnostic tool or

SARS detection, as well as developing

oodstus genetically modied to coner

immunity against hepatitis B and other

viruses. More innovations will come.

A PricewaterhouseCoopers report,

Medical echnology Innovation Scorecard:

Te Race or Global Leadership, predicts

that China will have the strongest gains

(amongst nine leading biotech countries)

in developing next-generation liesaving

products in the coming decade.52 As

GeorgeBaederandMichaelZielenziger

o the consulting rm Monitor conclude,

Chinas lie sciences industry is today

gathering a critical mass o highly skilled

talent, savvy and ocused venture investors,

and growing government support as its

market or drugs and medical devices takes

o, thus positioning it with the potential

to create a more vigorous pipeline or new

drugs, than the Western model.53

While Chinas emergence as a lie sci-

ences power holds the promise to unlock

new discoveries that will benet all the

worlds citizens, it also threatens U.S. lie

sciences leadership. Its clear that Chinas

government views biotechnology as a key

strategic industry, positioned to employ

millions o Chinese, which is why China isinvesting aggressively to capture the great-

est possible share o scientic, employ-

ment, and economic growth benets rom

lie sciences advances.54 Make no mistake:

Chinas commitment to making consistent

and sustained investments in biotechnol-

ogy is ultimately capable o dislodging

the United States rom its position as the

worlds lie science leaderunless the

United States matches Chinas com-

mitment to investing in its lie sciences

industry and providing an institutional and

regulatory ramework supporting it.

United kingdomWhen David Camerons coalition govern-

ment took ofce in May 2010, amidst

the continuing global economic recession

and a deep U.K. budget decit, the new

government announced an austerity pack-

age that cut unding or many government

agencies by 25 percent. Although the new

British government understood that not

every expenditure should be equally tar-

getedevidenced by the act that it held

national investment in scientic research

at existing levels through a at-cash

agreementeven that arrangement still

corresponded to an eective 10 percent

cut in scientic investment, ater allowingor ination.55 In other words, the Brit-

ish response was to at-und scientic

research, much as the United States is now

at-unding NIH.

While U.K. investment in scientic

research had been spared deep budget

cuts, markets nevertheless gained the

impression that the new coalition gov-

ernment was not strongly committed to

the scientic research enterprise. Tough

many actors were at play, the govern-

ments decision to reeze science unding

and slash capital spending was ollowed by

massive layos in the countrys pharma-

ceutical industry.56 Tis included Pzers

closure o its R&D operation in Sandwich,

Kent (where Viagra was discovered), which

had employed about 2,400 people.57 At

the same time, the number o U.K. biotechrms decreased by 3 percent between 2009

and 2011,58 in part because more than a

third o the countrys listed biotech sector

companies ailed between 2008 and 2010.59

But as John Bell, President o the British

Academy o Medical Sciences, explains,

it was really Pzers departure rom

Sandwich [that] caught people unaware.

It sent shockwaves up and down White-

hall. It was a wake-up call or action.60

As a result, in December 2011, the British

government reversed course, reafrming its

commitment to the British lie sciences in-

dustry by launching a comprehensive new

Strategy or UK Lie Sciencesdesigned to

bolster the competitiveness o the United

Kingdoms lie sciences sector.61 Te Strategy

eatures substantial new investment in


chinasseqUencingpowerhasthepotentiaLtotiptheBaLanceininnovation: theinventionsandideasthatcUrrentLyUnderLiethesUccessof U.s. BiotechnoLogy.


12/24

lie sciences research, as well as reorms to

U.K. tax, regulatory, and talent policy and

sets a goal that, Te UK will become the

global hub or lie sciences in the uture.62

Out o the United Kingdoms 4.6 billion

($7.5 billion) annual science budget, 1

billion ($1.6 billion) will be invested

in 2012 by two lie sciences ocused

sectoral research councils, the MedicalResearch Council (MRC) and the

Biotechnology and Biological Sciences

Research Council (BBSRC).63 Te

United Kingdom will also invest 800

million ($1.3 billion) to boost research

ostering the development o ground-

breaking medicines, treatments, and care

or patients.64 Moreover, the Strategywill

allocate 310 million ($500 million) in

new unding to support the discovery,development, and commercialization o

research.65 Tis includes 130 million

($211 million) or Stratied Medicines

(that is, to support treatments targeted

at specic populations) and 180 million

($292 million) or a novel Biomedical

Catalyst Fund, which will assist small to

medium-sized enterprises (SMEs) and

academic entrepreneurs in avoiding the

Valley o Death to turn promising ideas

into innovative technologies and protable

businesses.66 Other unding in the Strategy

includes investing 75 million ($122

million) in the European Bioinormatics

Institute at Cambridge, 15 million ($24

million) in a Cell herapy echnology

and Innovation Center (IC), and 60

million ($98 million) to improve health-

data-links between the National Health

System and clinical researchers.

But the United Kingdom hasnt stopped

there. It is expanding incentives or

private-sector lie sciences investment,

including the introduction o a patent

box, a measure that will reduce corporate

taxes on prots rom patents to 10 percent

starting on April 1, 2013.67 (Te United

Kingdom is one o eight nations that taxescorporate income rom the sale o pat-

ented products at a lower rate than other

income.)68 Te United Kingdoms intro-

duction o the patent box was clearly an

eort to make the country a more attrac-

tive location or lie sciences research, and

it is already having the intended eect. For

example, Sir Andrew Witty, GlaxoSmith-

Klines CEO, noted that the introduction

o the patent box has transormed the wayin which we view the United Kingdom as

a location or new investments, ensuring

that the medicines o the uture will not

only be discovered, but can also continue

to be made here in Britain.69

Te United Kingdom will also introduce

an above the line R&D tax credit to

improve the visibility and certainty o

the credit. It will expand use o National

Health System NHS InnovationChallenge Prizes in both lie sciences

research and health care delivery. Trough

an Early Access Scheme, the United

Kingdom will revamp its regulatory drug

approval system to increase the speed

and efciency o bringing innovative

therapies to market. Finally, the United

Kingdom has also ocused on reorming

its institutions to improve its lie sciences

competitiveness. Te United Kingdom isthe only nation to have a dedicated cross-

government Ofce or Lie Sciences, led

jointly by Health and Business Ministers.

And it recently launched a model Industry

Collaborative Research Agreement and

a ranslational Research Partnerships

program, both designed to boost

collaboration among academics, clinicians,

and industry to help deliver the medicines

o the uture aster.70

o be sure, lie sciences have long been

one o the United Kingdoms most

important industries. In act, the UKs

lie science industry is the third largest

contributor to the British economy, with

more than 4,000 companies contribut-

ing 50 billion to GDP (about 5 percent

o total UK output), investing over 50

billion in research, and employing over


theStrategyfeatUressUBstantiaLnewinvestmentinLifesciencesresearch, asweLLasreformsto U.k.tax, regULatory, andtaLentpoLicyandsetsagoaLthat, the Uk wiLLBecomethegLoBaLhUBforLife

sciencesinthefUtUre.


13/24


165,000 people.71

Te sector generated atrade surplus o approximately $80 billion

over the past decade. Eight percent o

global biopharmaceuticals are being devel-

oped in the United Kingdom.72 However,

the British government understood that

it could not rest on its laurels and take its

lie sciences sector or granted. Tats why

it penned what amounts to a lie sciences

competitiveness strategy or the country

and substantially increased its investment

in the sector. Te British case exemplies

the intensiying global competition in the

lie sciences industry and demonstrates

that, even a nation with an illustrious lie

sciences historyrom discovering the

structure o DNA to developing medical

resonance imaging (MRI) technology

must demonstrate continued commitment

to invest or the uture.

singaporeSingapore has aggressively pursued

global prominence in innovative lie

sciences research over the past decade,

seeking to establish twenty-rst-century

pharmaceutical and biotechnology industries

as pillars o its economy. Substantial material

resources have been dedicated to the

task, and some success has been achieved,

although the country still has some distance

to go.73 Established in 2003, Singapores

Biopolis provides dedicated research

and residential acilities, and co-locates

public research institutes with corporate

laboratories in order to oster collaboration.74

On top o this inrastructure, Singapores

government has provided direct unding or

pharmaceutical industry R&D, investing

nearly ve times as much in the industry as

did the United States in 2009, on a share

o GDP basis.75 Tis material support,

along with Singapores business-riendly

regulatory environmentor example, it

takes teen minutes to register a business

online, three weeks to receive approval or

clinical trials, and only twenty-our to thirty-

six months or a manuacturing acility to

be operationalhas attracted several large

players in the pharmaceutical industry.

Eight o the top ten global pharmaceutical

rms now have their regional headquarters

in Singapore, including Johnson &

Johnson, Pzer, GlaxoSmithKline,

Merck, Sharpe & Dohme, Bayer, Roche,

Sanof,andAstraZeneca.76 Singapore

has also put in place a number o policies

aimed at supporting and attracting

international talent to complement

local expertise.77 Te Novartis Institute

or ropical Diseases, or example,houses more than a hundred researchers

representing eighteen nationalities.78

Despite these successes, there are

several areas in which Singapores

strategy could be rened. Te quality o

intellectual property protection available

or innovations in Singapore is rated

as markedly lower than that o most

other major players.79 A number o

commentaries have noted a ailure to ocus

on specic elds o expertise, and argued

that even the generous support provided

is inadequate without the kind o ocus

and specialization most oten associated

with world-class excellence. Moreover,

Singapores eorts to apply such ocus

have not enjoyed a uniormly congenial

reception among some o the expatriates

attracted to Biopolis, leading to some

turmoil and turnover.80

Nevertheless, Singapores commitment

and ocus have borne ruit. Te countrys

share o global pharmaceutical output has

more than tripled since 1995 (although

it is down somewhat since its 2006

peak).81 And the countrys surplus in

pharmaceutical-goods trade has boomed,rising rom a decit o 0.01 percent o

GDP in 2003 to an impressive surplus

o 2.07 percent o GDP in 2010.82 I

Singapore is able to successully address

the challenges it is now acing and

then maintain a sound strategy over

the long term, its status as a ormidable

competitor in biopharmaceuticals will

only strengthen urther.

eightofthetoptengLoBaLpharmaceUticaLfirmsnowhavetheirregionaLheadqUartersin singapore,incLUding Johnson & Johnson, pfizer,gLaxosmithkLine, merck, sharpe &dohme, Bayer, roche, sanofi, and

astrazeneca.76


14/24

a cLearpictUreemergesfromtheseindicators:thecompetitivepositionoftheU.s. Lifesciences

indUstryhasBeenerodingoverthepastdecade.

sciences industry has been eroding overthe past decade.

Although there is a dearth o internation-

ally comparable data on biomedical research,

some data show the United States underper-

orming. While international data on govern-

ment support or biological-science R&D are

unavailable, data are available on government

support or medical-science R&D. In other

words, it is possible to analyze one o the

two components o biomedical R&Dthemedical componentto iner the trends in

biomedical R&D as a whole. Figure 4 shows

that the United States trails the developed

world in government investment in medical-

science R&D as a share o GDP. 83

qUantitativeassessmentofcoUntries Life sciencescompetitiveness

A set o countries is analyzed with ve

indicators: government support or

medical-science R&D, biopharmaceutical

patents, pharmaceutical-industry output,

trade balance in pharmaceuticals, and

pharmaceutical-industry employment.Although a consistent set o countries

is preerable, a exible set was necessary

due to a lack o comparable data or

the rst and th indicators. A clear

picture emerges rom these indicators:

the competitive position o the U.S. lie

0.00

0.05%

0.10%

0.15%

0.20%

0.25%

JapanUnited StatBelgiumFinlandAustraliaAustria

DenmarkNorwaySweden

200920082007200620052004200320022001200019991998199719961995

growthin U.s. governmentfUndingformedicaLsciencehasBeenfLatwhiLeothercoUntriesareincreasingtheirsUpport83** incLUdesaLLperformingsectors

| Figure 4 | Government-unded R&D or Medical Science Perormed by the Academic and Non-Proft Sectors

(share o GDP), 1995-2009



15/24

O those or which data are available, onlyone country (Japan) invests a smaller share

o its GDP in medical science than does

the United States. Despite some uctua-

tions (likely due to dierences in classi-

cation over the 2000 to 2003 period), in

2009 the U.S. governments investment in

medical-science R&D (as a share o GDP)

was unchanged rom 1995. Meanwhile,

Australia, Belgium, Denmark, Japan,

Norway, and Sweden all show signicant

increases in their government support

or medical-science R&D. Assuming

that support or medical-science R&D

and support or biological science R&D

are roughly correlated over time, thesetrends do not bode well or U.S. com-

petitiveness in lie sciences.

Figure 5 displays trends in biopharma-

ceutical patents granted by nine countries

rom 2000 to 2009. Clearly, the United

States remains the worlds leading grantor

o biopharmaceutical patents, but during

the past decade its share o all

biopharmaceutical patents awarded ell by

5 percent, rom 38 percent to 33 per-cent. In contrast, Chinas share o world

biopharmaceutical patents experienced

a dramatic rise, increasing 12 percentage

the U.s. shareofgLoBaLBiopharmaceUticaLpatentsisfaLLing; chinasisexpanding84


|Figure 5 | Global Share o Biopharmaceutical Patents Granted by All Patent Ofces, 2000-2009

Sweden U.K. France Korea Switzerland Germany Japan China Other U.S.

2009200820072006200520042003200220012000

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

points rom 4 percent in 2000 to 16percent by 2009.84 Japans share held

mostly constant, slipping by just 2

percent, while Switzerlands grew by 2

percent. Figure 5 conrms that China is

becoming an increasingly serious lie

sciences competitor, and that its invest-

ments in biomedical research are begin-

ning to produce results. o be sure,

U.S. inventors were awarded 31,541

biopharmaceutical patents to Chinas

15,468 in 2009, but Figure 5 graphically

illustrates the intensiying competition

or global lie sciences leadership.


16/24

Figure 6 amplies a key trend evident ingure 5: Chinas increasing competitive-

ness in the lie sciences. Tis gure shows

countries shares o global pharmaceuti-

cal industry output rom 1995 to 2010.85

Chinas share o pharmaceutical industry

output increased nearly seven-old, rom

2.5 percent in 1995 to 18.3 percent in 2010

Much o Chinas rise on this indicator

came at Japans expense, as Japans share ell

rom 23.3 percent to 8.7 percent.86 Te U.S

share held steady over this period, starting

at 25.8 percent in 1995 and ending at 26.6

percent in 2010. However, the U.S. share

had risen as high as 36 percent in the early

2000s, beore declining in the latter hal

o the decade. Europe as a whole ended

the decade with approximately the same

share o pharmaceutical industry output as

the United States. Like Figure 5, Figure 6

vividly illustrates Chinas rapidly increasing

lie sciences-industry competitiveness over

the past decade.

Figure 7 shows ten countries trade bal-

ances in pharmaceutical products (as a

share o GDP) rom 2000 to 2010. As

it has with many products, the United

States has run a negative trade balance in

pharmaceutical products every year since

1997, and it has accumulated a $136.7

billion trade decit in pharmaceuti-cal products over the last decade.87 Tis

stands in stark contrast to countries such

as Singapore, Germany, France, and the

United Kingdom (not to mention the

broader European Union), which accrued

healthy pharmaceutical trade surpluses

in the 2000s. It is noteworthy that these

countries pharmaceutical trade balances

have shown steadily increasing trends,

the U.s. tradeBaLanceinpharmaceUticaLprodUctshasBeenworseningwhiLethatofmostothercoUntrieshasBeenimproving

chinaisgainingonthe United statesand eUropeas JapandecLines

|Figure 6 | Country Share o Global Pharmaceutical Industry Output, 1995-2010

-0.5%

+0.0%

+0.5%

+1.0%

+1.5%

+2.0%2010

2000

KoreaJapanUnitedStates

ChinaEuropeanUnion

IndiaUnitedKingdom

FranceGermanySingapore

|Figure 7 | Percentage Point Change in Trade Balance in

Pharmaceutical Products (share o GDP), 2000-2010


0

5%

10%

15%

20%

25%

30%

35%

40%IndiaJapan ChinaU.S.Europe

2010200920082007200620052004200320022001200019991998199719961995


17/24


whereas the U.S. trade balance has beensteadily declining. For example, rom 2003

to 2010, Germanys pharmaceuticals trade

surplus increased in every year but one,

while the pharmaceuticals trade balance o

the United States decreased in every year

but two. From 2000 to 2010, Singapore

increased its pharmaceuticals trade bal-

ance as a share o GDP by a actor o ten,

rom 0.25 to 2.63 percent, while the rate

doubled in both Germany (0.36 to 0.75

percent) and France (0.26 to 0.53 percent),

and increased in the United Kingdom

rom 0.29 to 0.46 percent. Singapores

sharply rising pharmaceuticals trade bal-

ance can be traced in part to the nations

concerted policy ocus on improving its

biotechnology-industrys competitive-

ness, which has included increased R&D

investments and building an institutional

research ramework through its Biopolis.Germany, France, and the United King-

doms rising competitiveness accord-

ing to this indicator, in the ace o U.S.

decline, implies that the competitiveness

o the U.S. pharmaceutical industry is not

increasing at the same rate as that o its

peers. It also shows that the concerted

policies that several countries have put

in place to bolster the competitiveness o

their lie sciences industries, such as Ger-

manys Te High ech Strategy o Germany88

and the United Kingdoms Strategy or UK

Lie Sciencesare having positive eects.89

Figure 8 shows trends in pharmaceutical

industry employment rom 1995 to 2007.

As a share o the working age population,

U.S. pharmaceutical industry employ-

ment has been at over this period: the

share was 0.13 percent in 1996 and thesame in 2007, with only slight uctuations

in the interval. Similarly at trends over

this period are also seen in France, Japan,

Korea, and Sweden. By contrast, pharma-

ceutical industry employment as a share

o working-age population has increased

substantially in several countries, includ-

ing in Denmark, Belgium, and Germany,

demonstrating the growing competitive

strength o the pharmaceutical industries

in these countries. While these gures

conrm that the U.S. pharmaceutical

industry is a key component o the U.S.

economy and an important source o high-

skill, high-paying jobs, employment trends

in other countries point to erosion in the

United States relative position. 90

0.00

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

Korea

France

Japan

United States

United Kingdom*

Germany

Sweden

Belgium

Denmark

2007200620052004200320022001200019991998199719961995

thepharmaceUticaLindUstryisakeycomponentofthe U.s. economy, aLthoUghempLoymentisfLatwhiLeothercoUntriesgain90 *empLoyees (nottotaLengaged)

|Figure 8 | Pharmaceutical Industry Employment (total engaged, share o working-age population), 1995-2007


18/24

Tis report makes the case that ederal

investment in biomedical research

catalyzed the initial development o and

sustains the ongoing competitiveness

o the U.S. lie sciences industry, while

generating tremendous rates o both

public and private return in the process.

Indeed, biomedical research unding has

a private rate o return o 30 percent

per year and an even higher social

return o at least 37 percent. While U.S.

lie sciences-companies have already

produced scores o breakthrough,

lie-improving drugs and biologicals,

innovation in the lie sciences is only

getting started, as new tools, such

as genome sequencing, proteomics,and recombinant DNA techniques,

create vast new possibilities or uture

innovations in the lie sciences.

For at least the past hal century, the

United States has stood at the oreront

o the global lie sciences revolution. But

amidst intensiying global competition,

continued U.S. lie sciences leadership

is not assured, and is under clear threat

rom several directions. Te United States

is not sustaining the historically strong

investments in biomedical research that

once propelled it to global lie sciences

leadership. Baseline ederal investment

in biomedical research through the NIH

has decreased in both ination-adjusted

dollars and as a share o GDP nearly every

year since 2003.

At the same time, competing nations are

signicantly increasing their investments

in biomedical research, in many cases

investing a larger share o their economies

than the United States.

For example, as a share o GDP,Singapores unding o pharmaceutical

industry R&D was nearly ve times

greater than that o the United States in

2009. And i current investment trends in

the United States and China continue, the

U.S. governments investment in lie sciences

research over the next hal-decade will be

barely hal o Chinas in actual dollars and

roughly one-quarter Chinas level on a per-

GDP basis. Te impact o other countriesincreased lie sciences competitiveness

is beginning to show up in a number o

indicators, including the United States

negative trade balances in pharmaceuticals

and its lack o growth in pharmaceutical-

industry employment compared with that

in competing companies, such as Germany.

Te dangers o the United States losing lie

sciences competitiveness include diminished

employment, lost economic growth, and loss

to U.S. citizens o the benets o innovative

new drugs and therapies.

Some will say that, in times o deepening

budget decits, the United States cannot

aord to maintainlet alone increase

its ederal investment in biomedical

research. But the reality is that, i the

United States wishes to reduce its

budget decit (while also reducing its

investment and trade decits) the only

way to do so is by increasing targeted

investments that spur innovation,

productivity, and competitiveness, while

cutting budget decits elsewhere. In

doing so, policymakers should distinguish

between productive investmentsthose

that expand the productive capacity o

the country, drive economic growth, and

increase uture incomesand consumptive

spendingexpenditures that nance

present consumption o goods and

services, but do not position the country to

create uture wealth.

Increasing productive public investments

will reduce the investment decit, boostU.S. competitiveness and exports, and

generate higher economic growth, which

is the single best way to close the budget

decit. In act, the Congressional Budget

Ofce (CBO) estimates that an increase

o just 0.1 percent in the GDP growth

rate could reduce the budget decit by as

much as $310 billion cumulatively over the

next decade. Tis approachinvesting in

boosting the rates o innovation produced

by key sectors such as the lie sciences

is the most eective way to reduce the

budget decit.

Other countries, like the United

Kingdom, recognize these realities;

thats why they are making the difcult

choices to expand their investments in

biomedical research, even in the ace o

daunting decits. Put simply, the notion

concluSion



19/24

that America cannot aord to increase

its investment in biomedical research is

alse; the reality is that America cannot

aord not to increase its investment in

lie sciences research. We have seen thisplay beore. Te United States has lost

leadership in numerous technologies and

industries it created and in which it elt it

once had unassailable leadstelevisions

and advanced displays, consumer

electronics, and clean-energy technologies

such as solar panels and rechargeable

batteries or examplewhich it then let

slip away or lack o strategic investment.

I we repeat those short-sighted mistakesin the lie sciences, the United States can

expect similar results.

Te United States must thereore

re-establish as a national priority

and strategic urgency the strong and

continuing support or the National

Institutes o Health and similar agencies.

Specically: Congress should maintain

the stability o unding levels with

minimal uctuations rom year to year;

and Congress should maintain NIH

unding at a level commensurate with at

least one quarter o one percent (0.25%)o national GDP or higher. Our nations

baseline policy going orward should

be to grow NIH unding at a rate that

accounts or ination, embraces emerging

avenues o research that can propel U.S.

innovative leadership, and reects the

catalytic eect biomedical research has on

our nations economy.

Implementing these recommendations

committing to this level o sustained

investmentwill continue the long

tradition o policies that have delivered

such a robust record o economic

growth and made the United States the

preeminent global leader in lie sciences

or the past three-quarters o a century.

foratlEaStthEpaSthalfcEntury, thEunitEd StatEShaSStoodatthEforEfrontofthEgloballifESciEncESrEvolution. butamidStintEnSifyingglobalcompEtition,continuEd u.S. lifESciEncESlEadErShipiSnotaSSurEd, andiSundErclEarthrEatfromSEvEralforcES.


about thE informationtEchnologyand innovation foundation

Te Inormation echnology and Innovation

Foundation (IIF) is a Washington, D.C.-

based think tank at the cutting edge o

designing innovation strategies and technology

policies to create economic opportunities and

improve quality o lie in the United States and

around the world. Founded in 2006, IIF is a

501(c)(3) nonprot, non-partisan organization

that documents the benecial role technology

plays in our lives and provides act-based

analysis and pragmatic ideas or improving

technology-driven productivity, boosting

competitiveness, and meeting todays global

challenges through innovation.

about unitEdformEdical rESEarch

United or Medical Research represents leading

research institutions, patient and health advocates

and private industry, joined together to seek steady

increases in ederal unding or the National

Institutes o Health. Te coalition groups consisto the American Cancer Society Cancer Action

Network, American Diabetes Association,

American Heart Association, Association o

American Universities, Association o Public and

Land Grant Universities, BD, Biotechnology

Industry Organization, Harvard University,

Johns Hopkins University, Lie echnologies,

Massachusetts Institute o echnology, Melanoma

Research Alliance, PhRMA, Research!America,

Roche Diagnostics, Stanord University, Te

Endocrine Society, Termo Fisher Scientic,

University o Pennsylvania, University o Southern

Caliornia, Vanderbilt University, and Washington

University in St. Louis.


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1 Biotechnology Industry Association, 2010, State Legislative Best Practices in Support o Bioscience Industry Development, May 25, http://www.bio.org/articles/state-legislative-best-practices-support-bioscience-industry-development; Everett Ehrlich, 2011,An Economic Engine: NIH Research, Employment, and the Future o the

Medical Innovation Sector, Washington, DC: United or Medical Research, 5, http://www.eyeresearch.org/pd/UMR_Economic%20Engine_042711a.pd.

2 OECD, OECD Science, echnology and R&D Statistics (business enterprise R-D expenditure by industry and by source o unds, http://dx.doi.org/10.1787/strd-data-en, accessed March 12, 2012a; OECD, OECD National Accounts Statistics, Aggregate National Accounts (gross domestic product, national currency, currentprices, http://dx.doi.org/10.1787/na-ana-data-en, accessed March 12, 2012a; National Science Foundation, Business and Industrial R&D (ederal unds by industryand company size, 2003-2009, http://www.ns.gov/statistics/industry/, accessed March 24, 2012.

3 $10.4 billion over a two-year period.

4 UK Department or Business, Innovation, & Skills (BIS), Department o Health, 2010,Lie Sciences in the UK Economic analysis and evidence or Lie Sciences 2010:Delivering the Blueprint, London: BIS, 102, http://www.bis.gov.uk/assets/biscore/economics-and-statistics/docs/10-541-bis-economics-paper-02.

5 Iain M. Cockburn and Rebecca M. Henderson, 2001, Publicly Funded Science and the Productivity o the Pharmaceutical Industry (working paper, National Bureauo Economic Research, January), http://www.nber.org/chapters/c10775.pd; Health Economics Research Group, Ofce o Health Economics, RAND Europe, 2008,

Medical Research: Whats It Worth? Estimating the Economic Benefts rom Medical Research in the UK, London: UK Evaluation Forum, http://www.wellcome.ac.uk/stel-lent/groups/corporatesite/@sitestudioobjects/documents/web_document/wtx052110.pd. Mushkin nds even higher rates o return, estimating that the rate o returnor biomedical research is as high as 150 percent.

6 Ehrlich, 2011, 5.

7 Ibid., 7.

8 Cockburn and Henderson, 2001.

9 Bastian Rake, 2012, Determinants o Pharmaceutical Innovation: Te Role o echnological Opportunities Revisited, Jena Economic Research Papers, 2012 018,http://pubdb.wiwi.uni-jena.de/pd/wp_2012_018.pd.

10 Steano Bosi and Tierry Laurent, 2011, Health, Growth and Welare: A Teoretical Appraisal o the Long Run Impact o Medical R&D (working paper, Center oEconomic Policy Studies, University o Paris, August 6), http://mpra.ub.uni-muenchen.de/33789/1/MPRA_paper_33789.pd.

11 Paul A. David, Bronwyn H. Hall, and Andrew A. oole, 200, Is Public R&D a Complement or Substitute or Private R&D? A Review o the Econometric Evi-dence, Research Policy (29) 45: 497529.

12 David M. Levy and Nestor E. erleckyj, 1983, Eects o Government R&D on Private R&D Investment and Productivity: A Macroeconomic Analysis, Bell Journao Economics (14) 2: 551561.

13 Ehrlich, 2011.

14 Cockburn and Henderson, 2001.

15 Michaela Platzer, 2007, Patient Capital: How Venture Capital Investment Drives Revolutionary Medical Innovation, Arlington, VA: National Venture Capital Association.

16 Ibid.

17 A case study o India was omitted due to data availability issues and because, in the main, the country appears to be a competitor more in generic pharmaceuticalsproduction than in the most cutting-edge elds o biotechnology.

18

Indiana Business Research Center, 2009,Indianas Lie Science Industries. Indianapolis: Indiana Economic Development Corporation, http://www.ibrc.indiana.edu/studies/lie-science-industries_2009.pd.

19 Biotechnology Industry Association, 2010.

20 United or Medical Research,2009,Investing in Recovery and Discovery: How NIH Recovery and Reinvestment Act Grants are Improving Healthand the Economy,Washington, DC: UMR, 10, http://www.investingindiscovery.com/documents/UMR%20-%20Investing%20in%20Recovery%20and%20Discovery.pd.

21 Ehrlich, 2011.

22 National Institutes o Health, Te Mary Lasker Papers: Mary Lasker and the Growth o the National Institutes o Health, , http://proles.nlm.nih.gov/ps/retrieve/Narrative/L/p-nid/200, accessed April 24, 2012.

23 National Cancer Institute, Te National Cancer Act o 1971, http://legislative.cancer.gov/history/phsa/1971, accessed April 24, 2012.

24 Julius H. Comroe and Robert Dunning Dripps, 1978,Te op en Clinical Advances in Cardiovasular-Pulmonary Medicine and Surgery between 1945 and 1975: HowTey Came About: Final Report, Bethesda, MD: National Institutes o Health.

notES



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25 Howard H. Garrison and Kim Ngo, (no date) NIH Research Funding rends: FY1995-2012 (presentation, Ofce o Public Aairs, Federation o AmericanSocieties or Experimental Biology), http://www.aseb.org/Policy-and-Government-Aairs/Data-Compilations/NIH-Research-Funding-rends.aspx. FY 2013 isan estimate.

26 National Institutes o Health, Report Catalog, (actual o NIH R01 equivalent success rates FY 19702008 and estimates o NIH R01 success rates FY 1962-1969rom CGAF; R01-equivalent grants: applications, awards, and success rates FY 1998 2011), http://report.nih.gov/catalog.aspx, ; accessed April 18, 2012.

27 Ashley Mooney, 2012, Research Projects Face Scary Outlook Amid NIH Cuts, Te Chronicle, January 12, http://www.dukechronicle.com/article/research-projects-ace-scary-outlook-amid-nih-cuts.

28 National Institutes o Health, Report Catalog (rst-time R01-equivalent investigators: average age by degree, 1970-2004, http://report.nih.gov/catalog.aspx, accessedApril 26, 2012.

29 Robert D. Atkinson and Merrilea Mayo, 2010,Reueling the U.S. Innovation Economy: Fresh Approaches to SEM Education, Washington, DC: Inormation echnology

and Innovation Foundation, http://www.iti.org/les/2010-reueling-innovation-economy.pd.

30 Authors analysis based on data rom National Science Board, Science and Engineering Indicators: 2010, Arlington, VA: National Science Foundation, http://www.ns.gov/statistics/seind10/pd/seind10.pd.

31 National Economic Council, Council o Economic Advisers, and Ofce o Science and echnology Policy, 2010,A Strategy or American Innovation: Securing OurEconomic Growth and Prosperity, Washington, DC: Executive Ofce o the President, 3, http://www.whitehouse.gov/sites/deault/les/uploads/InnovationStrategy.pd

32 Te White House,2012,National Bioeconomy Blueprint, April, http://www.whitehouse.gov/sites/deault/les/microsites/ostp/national_bioeconomy_blueprint_exec_sum_april_2012.pd.

33 Bosi and Laurent, 2011.

34 Federation o American Societies or Experimental Biology, 2012, Federal Funding or Biomedical and Related Lie Sciences Research: FY 2013, Bethesda, MD: FASEB,http://www.aseb.org/LinkClick.aspx?leticket=10Qs6teI4kY%3D&tabid=64.

35 Howard J. Federo and Elaine R. Rubin, 2010, A New Research and Development Policy Framework or the Biomedical Research Enterprise,Journal o the Ameri-

can Medical Association (304) 9: 10031004.36 Te six others areas are: (1) energy saving and environmental protection; (2) a new generation o inormation technology; (3) high-end equipment manuacturing;

(4) new materials; (5) new energy ; and (6) new energy vehicles. See China State Council, 2010,Decision on Accelerating the Fostering and Development o New StrategicIndustries, Beijing: State Council.

37 China Brieng, 2011, China May Scale Back Investment in Strategic Industries, July 13, http://www.china-brieng.com/news/2011/07/13/china-may-scale-back-investment-in-strategic-industries.html.

38 Robert D. Atkinson, 2012, Enough is Enough: Conronting Chinese Innovation Mercantilism, Washington, DC: Inormation echnology and Innovation Foundation,http://www2.iti.org/2012-enough-enough-chinese-mercantilism.pd.

39 Wang Yu and Li Xiang, 2011, China P lacing Priority on Biotechnology, China Daily, June 28, www.chinadaily.com.cn/bizchina/2011-06/28/con-tent_12790544.htm.

40 Ehrlich, 2011, 8.

41GeorgeBaederandMichaelZielenziger,2010,China: Te Lie Sciences Leader o 2020, Boston: Monitor, 40,http://www.monitor.com/ch/Portals/0/MonitorContent/

imported/MonitorUnitedStates/Articles/PDFs/Monitor_China_Te_Lie_Sciences_Leader_o_2020_17_Nov.pd.42 Robert D. Atkinson et a l., 2009,Rising igers, Sleeping Giant: Asian Nations Set to Dominate the Clean Energy Race by Out-investing the United States, Washington, DC:

Inormation echnology and Innovation Foundation, http://www.iti.org/les/2009-rising-tigers.pd.

43 ed Agres, 2011, Brighter Days Ahead, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

44 Ibid.

45 thePharmaLetter, 2009, Novartis to Invest 1 billion to Build Largest Pharma R&D Institute in China in Shanghai, November 3, http://www.thepharmaletter.com/le/24518/novartis-to-invest-1-billion-to-build-largest-pharma-rd-institute-in-china-in-shanghia.html.

46 Robert Lee Kilpatrick, 2011, Global Partnering, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

47 Kevin Ali et al., 2011, Building Bonds in the BRICs, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.


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48 Ascletis, 2011, US-China Based Ascletis, Inc. Raises $100 Million rom Private Chinese Investors or Specialty Terapeutics Venture, news release, April 6, http://www.ascletis.com/n04062011.html.

49BaederandZielenziger,2010,14.

50 Ibid., 17.

51 Te Editors, 2011Worldview Roundtable: Te BRICs, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

52 Peter Gwynne, 2011, Biotech in the BRICyard, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

53BaederandZielenziger,2010,2.

54 Gwynne, 2011.

55 Ian Sample, 2010, Science Community Relieved as It Escapes Spending Axe, Guardian, October 20, http://www.guardian.co.uk/science/2010/oct/20/spending-review-science.

56 Ewen Callaway, 2011, Lukewarm Reception or UK Lie sciences Investment,Nature, December 12, http://www.nature.com/news/lukewarm-reception-or-uk-liesciences-investment-1.9612.

57 revor Sturgess, 2011, Drug Giant Pzer to Pull Out o Kent, Kent Online, February 1, http://www.kentonline.co.uk/kentonline/news/special_reports/pzer_-_end_o_an_era/drug_giant_to_pull_out_o_kent.aspx.

58 Paul Anthony, 2012, Government Boost to Lie SciencesIs It Enough?, BDO, January 30, http://www.bdo.uk.com/talk-shop/government-boost-uk-lie sciences-it-enough.

59 Julia Kollewe, 2011, Britains Biotech Stars Fade Away, Guardian, August 29, http://www.guardian.co.uk/business/2011/aug/29/britains-biotech-stars-ade-away.

60 om Feilden, 2011, Breathing Lie into Lie Science, BBC News, December 5, http://www.bbc.co.uk/news/science-environment-16031166.

61 Christine Bloor et al., 2011,Strategy or UK Lie Sciences, London: Department or Business, Innovation and Skills, http://www.bis.gov.uk/assets/biscore/innovation/docs/s/11-1429-strategy-or-uk-lie sciences.

62 Ibid., 6.

63 UK Department or Business, Innovation, and Skills, 2011, Investing in UK Health and Lie Sciences, London: Department o Business, Innovation and Skills, http://www.number10.gov.uk/wp-content/uploads/2011/12/8971-BIS-Lie sciences-Prospectus-BMK_Spreads.pd.

64 UK Department o Health, 2011, Record 800 Million or Groundbreaking Research to Benet Patients, news release, August 18, http://mediacentre.dh.gov.uk/2011/08/18/record-800-million-or-groundbreaking-research-to-benet-patients/.

65 Bloor et al., 2011, 31.

66 InPharm, 2012, UK launches biomedical catalyst und, April 11, http://www.inpharm.com/news/172166/uk-launches-biomedical-catalyst-und.

67 Bloor et al., 2011, 24.

68 Robert D. Atkinson and Scott Andes, 2011, Patent Boxes: Innovation in ax Policy and ax Policy or Innovation Inormation echnology and Innovation Founda-tion, October, http://www.iti.org/les/2011-patent-box-nal.pd.

69 Elysia Robinson, 2012, 1,000 New Jobs as GSK Invests 500m in UK, Clinical Proessionals, March 22, http://news.clinicalproessionals.co.uk/?p=1774.

70 Nigel Gaymond, 2011, letter to the editor, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

71 UK Prime Ministers Ofce, 2011, UK Lie Sciences Get Government Cash Boost, news release, December 5, http://www.number10.gov.uk/news/uk-lie sciences-get-government-cash-boost/.

72 Gaymond, 2011.

73 Singapore Agency or Science, echnology, and Research, 2009, Biopolis, October 14, http://www.a-star.edu.sg/tabid/861/deault.aspx.

74 Pharmaceuticals and Biotechnology, 2012a, Industry Background,EDB Singapore, April 3, http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/pharmaceu-ticals__/industry_background.html.

75 OECD, 2012a; OECD, 2102b. Authors analysis. Te Singapore government invested 0. 38% o GDP into pharmaceutical industry R&D; the U.S. governmentinvested 0. 08% o GDP.



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76 Pharmaceuticals and Biotechnology, 2012b, Facts and Figures,EDB Singapore, January 30, http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/pharmaceu-ticals__/acts_and_gures.html.

77 Catherine Waldby, 2009, Singapore Biopolis: Bare Lie in the City-State,East Asian Science, echnology and Society(3) 23: 367383.

78 Pharmaceuticals and Biotechnology, 2012b

79 Te Editors, 2011, Worldview Scorecard: Global Biotechnology Innovation, Worldview, June, http://www.saworldview.com/les/dmle/SAWorldView2011june10.pd.

80 Dennis Normile, 2011, Winds o Change Leave Bioscientists Scrambling, Science (332) 6026: 165.

81 National Science Foundation, Science and Engineering Indicators 2012, Appendix ables (appendix table 6-16: Value added o pharmaceuticals, by region/country/economy: 1990-2010) accessed March 12, 2012a, http://www.ns.gov/statistics/seind12/appendix.htm.

82 National Science Foundation, Science and Engineering Indicators 2012, Appendix ables (appendix table 6-30: exports and imports o pharmaceutical goods, by

region/country/economy: selected years, 1995-2010) accessed March 12, 2012b, http://www.ns.gov/statistics/seind12/appendix.htm.

83 OECD, 2012a; OECD, 2012b; National Science Foundation, Federal Funds or R&D (research obligations by detailed eld o science and engineering, scal years19802009, http://www.ns.gov/statistics/edunds/, ; accessed April 19, 2012. Estimates: Australia (1997, 1999, 2001, 2003, 2005, 20072009); Austria (19951997,19992001, 2003, 2005, 20082009); Belgium (19952001); Denmark (19952001, 20072009); Finland (19951996, 2009); Japan (19952002); Norway (1996,1998, 2000, 2002, 2004, 2006, 2008); Spain (1996); Sweden (1996, 1998, 2000, 2002, 2004, 2006, 2008).

84 World Intellectual Property Organization, Statistics Database (patent applications published by eld o technology: leading countries; patent applications by eld otechnology: aggregate, http://www.wipo.int/ipstats/en/statistics/patents/, accessed March 9, 2012. It must be recognized that dierent patent ofces apply dierentviews o the degree o novelty required to enable an innovation to be patented; a patentable novelty in one country may be an obvious and trivial incremental changeunworthy o protection in another. Tis complicates any eort to evaluate the signicance o patents issued by one country against those rom another. But largechanges within a country, such as the surge in Chinese patents, clearly indicate, i not an increase in innovation, at least an increase in attention paid by policymakersand investors in the country to the area under scrutiny.

85 Output dened as value added.

86 National Science Foundation, 2012a.

87 National Science Foundation, 2012a. Estimates or 1996, 1998, 2000, and 2002.

88 Germany Federal Ministry o Education and Research, 2006, Te High-ech Strategy o Germany, Ber lin: BMBF, http://www.ona.de/pd/publikationen/bmb_the_high_tech_strategy_or_germany.pd. Between 2011 and 2014, the German Federal Ministry o Education and Research (BMBF), will support health research inGermany with unds totaling 5.5 billion ($7 billion). Correspondence with Michael Vorlnder, LL.M, Counselor (Science and echnology), Embassy o the FederalRepublic o Germany.

89 UK echnology Strategy Board, 2009, Biosciences: echnology Strategy 2009-2012, Swindon, UK: echnology Strategy Board, http://www.innovateuk.org/_assets/pd/Corporate-Publications/BioSciencesechnologyStrategyFinal.pd.

90 OECD, OECD SAN Industry 2008 (number o persons engaged, pharmaceuticals; number o employees, pharmaceuticals), http://dx.doi.org/10.1787/stan-data-enaccessed March 27, 2012; World Bank, World Development Indicators (population ages 1564, percent o total; population, total), http://databank.worldbank.org/data/home.aspx, accessed March 25, 2012. Estimates: Korea (2007).

91 Robert D. Atkinson et a l., 2011,aking on the Tree Defcits: An Investment Guide to American Renewal, Washington, DC: Inormation echnology and InnovationFoundation, http://www.iti.org/les/2011-taking-three-decits.pd.

92 David Leonhardt, 2010, One Way to rim Decit: Cultivate Growth,New York imes, November 16, http://www.nytimes.com/2010/11/17/business/economy/17leonhardt.html.

93 Congressional Budget Ofce, 2011, Te Budget and Economic Outlook: Fiscal Years 2011-2021, January 26, http://www.cbo.gov/doc.cm?index=12039.

94 Gary P. Pisano and Willy C. Shih, 2009, Restoring American Competitiveness, Harvard Business Review, July, htt

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