Promoting Pharmaceutical Innovation and Patient Confidence

Robert D. Hormats
Under Secretary for Economic, Energy and Agricultural Affairs 
Sino-U.S. Pharmaceutical Industry Summit of 2011
Beijing, China
October 18, 2011

Thank you Rod for those kind words of introduction and your warm welcome.

I was delighted to address this group at last year’s Summit held in Washington, D.C. and I’m delighted to be with you once again.

A year has gone by. Much has changed around the globe but it remains constant that the health of our citizens -- both American and Chinese -- is a critical issue for both of our governments. Health is not only central to the well-being of our peoples, it also influences outcomes in almost all other policy areas, including security, the economy, and trade.

The pharmaceutical industry has been a key driver of improved health outcomes beginning with the discovery and development of antibiotics by Fleming, Florey and Chain to modern, life-changing anti-cancer therapies such as Gleevac and Taxol.

The health challenges we face are global. There is no such thing as a “local crisis.” A flu outbreak in Asia can spread to North America and vice versa. And, populations across the globe share common challenges for major chronic conditions, including cancers, heart disease and respiratory disease.

To protect our citizens, we need new medicines, new vaccines, and new technologies to mass produce them. The world’s largest economy and the world’s fastest growing economy share an opportunity and an obligation to work together to promote and protect pharmaceutical innovation.

Last year I spoke to you about the role of government in creating an environment that fosters innovation, that is, creating an innovation system that allows inventors and innovators to produce and market new products. The key to that system’s success is confidence and collaboration.

Investors and inventors need confidence that they can recoup the large sums of capital, labor, and time they devote to developing new, life-saving medicines. They need confidence to innovate. And, equally important, patients need confidence that the medicines they take, in their time of need, are both safe and effective.

To build confidence, government, industry, and indeed, all stakeholders must work together by embracing innovation-friendly policies, creating regulatory environments that protect patient health, and sharing best practices.

I’ll focus first on the role of government in building industry confidence by promoting pro-innovation policies. By this, I mean, good governance, transparent regulatory policies, markets that are open and competitive, and policies that allow companies to succeed and, sometimes, to fail. If countries do not get these policies right, even massive investments in education and R&D are unlikely to lead to innovation gains.

Strong IPR protection is also vital because it fosters innovation by providing incentives for companies to produce new products or services. Absent effective legal protections for innovators, other businesses can immediately exploit an innovator’s idea, undermining the incentive to invent in the first place. The cornerstone of these intellectual property rights is to catalyze inventive activity. In this sector, to make new medicines, vaccines, and devices.

The U.S. Constitution empowered Congress to create effective intellectual property rights -- helping add “the fuel of interest to the fire of genius,” in President Lincoln’s words. Recognizing the importance of intellectual property rights today, we must commit to their effective enforcement, as the Obama Administration has done in appointing Victoria Espinel as the first Intellectual Property Enforcement Coordinator and redoubling our efforts in this area. I urge the Chinese government to do the same.

China needs to rigorously protect intellectual property rights for its own companies and for foreign companies --  treating the latter fairly, just as China would want its businesses treated abroad. Reciprocity is key.

We will continue to work with the Chinese government to ensure that the rights of all intellectual property holders -- including the pharmaceutical industry -- are well-protected and laws are adequately and consistently enforced. I hope that you -- as companies with IP of your own to protect -- will stress these objectives with government officials so that we can work together to foster an innovative climate.

Beyond enforcement, we must also commit to making the necessary public investments to support high-quality patent examination, lower legal uncertainty. And it is important to clear-up persistent patent application backlogs so that innovative businesses and entrepreneurs are not faced with unnecessary risk or left waiting for years before a patent decision is made.

Reduced uncertainty is vital to build confidence in the pharmaceutical industry for both investors and inventors. The policies I mentioned will help create an environment in which American and Chinese companies are able to develop new, innovative medicines.

At the same time, however, we need to strengthen patient confidence in the pharmaceutical industry.

For most of the 19th century, drugs were neither safe nor effective. One of the leading physicians of the time and Dean of the Harvard Medical School, Oliver Wendell Holmes, Sr., famously commented that: “if all medicines in the world were thrown into the sea, it would be all the better for mankind and all the worse for the fishes.”

We cannot afford to return to this era. We must ensure that our citizens -- in their most desperate moments -- have confidence that the medicines they are taking -- or that their loved ones are taking -- are safe and effective.

I’m delighted that the Chinese government has been working with the U.S. Food and Drug Administration to raise its mandatory Good Manufacturing Practices requirements to meet international standards, to both protect public safety and aid domestic industries move up the value chain.

We’re making progress. But there remains one area in which I believe we need to re-double our efforts, that is, the growing menace of counterfeit medicines. This is issue that has sparked at lot of debate in a lot of different venues.

Counterfeiters do not care about a patient’s health when selling fake, tainted, poisonous, or sub-standard forms of life-sustaining medicines. Moreover, they are not interested in whether the patient is taking other medications or if the combination of medications will result in an adverse reaction.

Experts report that there has been a 700 percent increase in drug counterfeiting from 2002 to 2009. It’s not just life-style drugs that are being counterfeited. In 2009, we identified counterfeited versions of over 800 unique medicines, ranging from antibiotics to cardiovascular drugs to anti-cancer therapies.

Let me be clear -- counterfeit medicines hurt people and endanger lives. At best, counterfeit medicines have unpredictable therapeutic benefit; at worst, they can cause severe illness or death due to chemical toxicity.

Counterfeit, falsified, and substandard medicines are not a hypothetical problem. The results can be tragic. In the United States 81 patients died from contaminated Heparin in 2010. And there have been reported deaths in China due to counterfeit and sub-standard medicines as well.

Our citizens -- in China and America -- deserve better.

The United States has stringent statutory, regulatory, and enforcement regimes to protect consumers against dangerous counterfeit, unapproved, or illegally prescribed pharmaceuticals.

The Internet and the growth of online pharmacies has complicated matters, but rest assured, our government will not wait for a full-blown crisis before taking appropriate action. Through the leadership of my colleague in the Obama Administration, Victoria Espinel, the private sector has voluntarily agreed to address rogue online pharmacies responsible for distributing illegal pharmaceuticals in the United States. And several internet and credit card companies have stepped forward to support efforts to educate the public and start taking voluntary enforcement action against illegal Internet pharmacies.

Globally, the State Department is funding a number of government-to-government anti-counterfeit medicines programs. The goal here is to help law enforcement, customs officials, and prosecutors and judges catch and convict criminals involved in counterfeiting medicines.

We also increasing global awareness of the problem through outreach program. And we’re bringing drug regulators to the United States to receive training on drug quality control, monitoring, and counterfeit and substandard drug detection. This is raising public awareness and improving the prosecution of counterfeiters.

In addition to these bilateral programs, this year, as the APEC host country, the United States led three dialogues focused on counterfeit and substandard medicines. One of which was a seminar on detection technologies for counterfeit medicines that was held in Beijing in September.

The United States will continue to fight against the spread of counterfeit and sub-standard medicines. At the same time, there is an opportunity for Chinese companies to show leadership. It’s essential that we work toward a corporate culture in which problems are not swept under the rug but rather, are openly discussed.

The same goes for governments, which leads me to my final point on collaboration.

We must encourage a cooperative relationship between Chinese drug regulators, companies, and their U.S. counterparts. Sharing information and expertise will help to protect both the Chinese people and the American public.

Not only will we improve drug safety through some of the examples of U.S.-China collaboration I highlighted earlier, we’ll also spur greater innovation. The production of scientific knowledge is shifting from individuals to groups, from single to multiple institutions, and from a national to an international scope.

The OECD reported that from 1985 to 2007, the number of scientific articles published by a single author decreased by 45%. During that 12 year period, the number of scientific articles published with domestic co-authorship increased 136% and those with international co-authorship increased 409%.

The same applied to patents. In 1990 less than a tenth of international patent applications had a foreign co-inventor; 25% did in 2008. In the United States nearly 40% of patent filings have a foreign co-inventor.

This type of collaboration is exciting because it takes advantage of expertise that exists around the country and around the world. For example, the U.S. National Eye Institute (part of our National Institutes of Health) is collaborating with Zhongshan Ophthalmic Center to perform genetic association studies of myopia in a genetically isolated population. What we learn from these studies will benefit US and China, as well as the global community.

And, approximately 500 Chinese visiting scientists are working in our National Institutes of Health intramural laboratories. In fact, China is consistently one of the top two countries that sends scientists to the NIH. Collaborations begun in these laboratories often continue long into the future, again, building the fabric of strong international scientific partnerships which benefit everyone.

Whether it be bilaterally or through multilateral institutions, the United States will continue to take advantage of opportunities to work together to improve the health and safety of our citizens.

I want to encourage you -- American and Chinese pharmaceutical business leaders -- to work with one another and the U.S. and Chinese government to develop new therapies, improve drug safety, and stop the spread of counterfeit medicines. The fact that this group meets regularly is evidence that the United States and China pharmaceutical industries are indeed building a global partnership.

There are a number of areas where we must form stronger collaborations and come to agreement. Stopping the spread of counterfeit and substandard medicines is a central one.

I am confident that, over time, U.S. and Chinese companies will continue to expand their collaborative efforts, resulting in groundbreaking innovations that will help to cure disease -- as well as to prevent disease -- and meet the mounting health care needs of our citizens. Thank you.