"Stationary economies are capital repellents, which means it's essential that the U.S. retain its... [+]
The United States is the undisputed leader in global medical innovation. Each year, we test more potential new medicines than the rest of the world combined, and we lead the world in biotechnology patents. But continued U.S. leadership in innovation is by no means guaranteed.
I’ve spoken so many times about the risks to American innovation, particularly in biopharmaceuticals, that I may sound like a broken record – if I may use a reference to obsolete technology. But the risk is real. Reports from multiple sources reinforce this assertion.
Just this month, we learned that the U.S. dropped to 10th place in the 2012 Global Innovation Index, down from 7th place the year before. The index, published by the international business school INSEAD and the World Intellectual Property Organization, ranks 141 nations on nearly 100 factors related to innovation; the top two countries, for two years running, are Switzerland and Sweden.
The report said the biggest area of concern for the U.S. was a drop in “human capital and research” – which includes K-12 and college education, as well as R&D. In these areas so critical to future innovation, the U.S. ranking fell from 13th in 2011 to 22nd this year.
One might question the methodology of any particular measure of innovation. But this is only the latest in a steady stream of international reports that warn – over and over, like a broken record – of a growing global threat to American leadership in innovation.
Last year, the Information Technology and Innovation Foundation updated a comprehensive study that ranked the top 44 industrialized nations in what they call innovative competitiveness. In the 2011 list, the U.S. ranked fourth – behind Singapore, Finland and Sweden. Not number 1 – which is where the U.S. ranked in 2000 – but, you might say, not a disaster.
However, the same study also measured what ITIF calls “the rate of change in innovation capacity” over the past decade. These are things countries are doing to make themselves more conducive to innovation in the future. ITIF looked at 16 different metrics – things like higher education, public and private investment in R&D, corporate tax rates, and the like. On this list, the U.S. ranked second-last – ahead of only Italy. (This was actually an improvement over 2009, when we ranked dead last!)
Another ITIF study, focused on biomedical innovation, recently found that China, Singapore, Korea, and the United Kingdom are all investing more in biomedical R&D than the U.S. as a share of their economies. Over the next five years, China will invest more than $300 billion into its biotech sector and provide an array of economic incentives to innovators. Meanwhile here in the U.S. – despite a strong tradition of public support for biomedical research – federal investment in research through our National Institutes of Health has been declining since 2003.
Yet another study by Battelle, a global R&D organization, shines a light on the potential loss of a key U.S. advantage in biomedical R&D: venture capital. As of 2011, the U.S. maintained over 80 percent of global biopharmaceutical-related VC funding. But emerging nations like China and Brazil have been laying the groundwork to compete for this cash. Since 2000, venture capital investment for biopharma in China has shot up from $7 million to nearly $500 million. In Brazil, it stood at $189 million in 2012, a 57,000 percent increase over the preceding decade!
This is about a whole lot more than bragging rights. The $900 billion U.S. biopharmaceutical industry is a critical force in the U.S. economy. It supports some four million American jobs, including more than 650,000 jobs in the industry itself. The average biopharma wage is nearly twice the U.S. private sector average, $119,000 versus $64,000 – reflecting the value created by pharmaceutical innovation.
Europe provides a cautionary case study. During the 1970s, four large European countries – France, Germany, Switzerland and the UK – accounted for 55 percent of new medicines produced by major nations, while the U.S. share was 31 percent. Indeed, only a few decades ago, Germany was known as “the world’s medicine cabinet.” Since then, Europe has adopted policies that undermine innovation, including burdensome assessment processes that make it difficult to obtain market access and adequate reimbursement for new medicines. In the most recent decade, 2001 to 2010, there was a complete reversal of fortune, with the U.S. producing 57 percent of newer medicines while the four European countries’ share fell to 33 percent.
The studies of international competitiveness in innovation are not dire – yet. The United States is still the leader in biomedicine, and we still hold strong advantages in innovation. But each new study repeats the warning – trends that we must reverse if we are to maintain an unbroken record of U.S. leadership in biopharmaceutical innovation to meet the growing health care needs of people around the world.
