It’s hard to open a magazine or newspaper these days without reading an article bemoaning the high price of new medicines, particularly for cancer. While high prices (and high copays) produce enormous challenges for some patients, it would be wrong to assume that pricing itself is the problem – it’s simply the result of an extraordinarily inefficient and expensive process for bringing new medicines to market.

Using the government’s enormous purchasing power to clamp down on drug prices, as called for by some advocate, would merely reduce incentives for innovation. Reforming the drug development and approval system, however, would accelerate patient access to better treatments and sharply lower the cost of developing new technologies – from stem cells to immune therapies - that can radically alter the lifetime cost of treatment for desperately ill patients – and pave the way for even more effective generics after patent protection eventually expires.

ADVERTISEMENT

It’s a little known fact that the U.S. already benefits from a robust market for inexpensive generics. Indeed, IMS Institute for Health Care Informatics projects that generic substitution for branded drugs saved U.S. payers nearly $1 trillion from 2001 to 2010. Today, generics account for the vast majority of prescribed medicines, 84 percent, compared to just 40 percent in the late 1990s.

But the competition between generics and branded drugs isn’t a zero sum game. Patients and taxpayers benefit both from a robust process for bringing lower cost products to market and a rich pipeline of innovative medicines that treat unmet medical needs, improve health care outcomes, and offset other health care costs. Ultimately, today’s innovative medicines are tomorrow’s more affordable generics.

Still, policymakers have pushed regulators to rapidly approve lower cost generics. Now we need strategies for driving lower cost innovation by reducing the cost and time required to bring new medicines to market, as well as sustaining the tax and reimbursement incentives that encourage companies to take the enormous financial risks required to develop those treatments.

While many patients undoubtedly do well on generics, many more don’t respond, or only respond partly, to the best generic or branded drugs available today. Millions of patients with diabetes, severe depression, Parkinson’s, cancer, and Alzheimer’s are praying for new medicines that can help them. Innovation is literally their only hope.

This is the reality that Washington policymakers ignore in their zero-sum clashes over federal healthcare spending. No tweak to Medicare spending formulas or price controls on Medicare Part D will produce a single new treatment for Alzheimer’s, which is projected to cost Medicare and Medicaid a staggering $142 billion in 2013, according to the Alzheimer’s Association. By 2050, AD will cost the federal government over $850 billion annually.

On the other hand, if we could develop a treatment that simply delayed the onset of Alzheimer’s by a mere 5 years, Medicare would accrue $100 billion in annual savings by 2030.

The market shift towards generics hasn’t occurred because industry has stopped trying to innovate. On the contrary – companies are working to develop breakthrough technologies like nanotechnology, immune-system boosting cancer therapies, and regenerative treatments that have the potential to revolutionize the treatment of life-threatening ailments.

But when the risks are higher, the costs and time required to develop and validate new products is higher too. Regulators are often more skeptical as well, and ask for more evidence to prove that medicines with novel mechanisms of action are safe and effective. As a result, on average, it can take well over $1 billion and about a decade to develop a single new medicine.

That trend is simply unsustainable given the rising disease burden of our aging society, and the reality that we don’t have enough money – through program cuts or higher taxes - to pay for existing health care programs like Medicare without wrecking the rest of the economy.

Innovation is not optional. It is a national imperative.

To generate the innovation we need at a cost we can afford we need to re-tool our entire ecosystem for medical innovation to deliver new treatments and cures to patients faster and less expensively than ever before. This will require unprecedented cooperation and collaboration between industry, academia, and regulators – and recognition by the federal government that a vibrant life-sciences industry will generate higher national productivity, lower total health care costs, and technological “spillovers” that will benefit almost every other industrial sector, from agriculture to defense.

This year, the president should reach across the aisle and launch a bipartisan effort with Congress, building on last year’s report from his own Council of Advisors on Science and Technology, to streamline and accelerate medical innovation and double the number of new medicines reaching patients within the next decade.

Generics have an important role to play in our health care system. But we also need a focused strategy for accelerating the pace of innovative breakthroughs. At an appropriate time and place (given complexity of the innovator product and patent expiration) those breakthroughs will evolve into lower cost generic products or biosimilars.

In other words, we can have our cake and eat it too – if we adopt wise and balanced public policies to deliver the cures that we need, now and in the future.

Von Eschenbach is a former Fodd and Drug Administration commissioner. Howard is with the Manhattan Institute’s Center for Medical Progress.