Health Reform Includes Research and Prevention

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Pharmaceutical CommercePharmaceutical Commerce - July/August 2010

Among major advances of civilization, the greatest may be doubling of life expectancy in the 20th century. As recently as 1900, on average worldwide, people lived 31 years. Life expectancy in America now approaches 80 and could reach 100 this century. But further gains are threatened by budget limits for research, and by destructive lifestyles. So preventing and curing disease are at least as important as health reform focused on insurance.

Along with prevention, the best way to reduce health costs is to reduce the burden of illness by devoting more resources to research. Much of the progress in medical science is borne by the private pharmaceutical sector, which often invests more than $1 billion to produce an approved new medicine. The business risk is underscored by comparing price/earnings ratios of consumer and biopharmaceutical companies. Pfizer for instance has an enterprise value of roughly $162 billion. Its forward P/E ratio is 7.6. Coca-Cola, valued at roughly $138 billion, has a P/E ratio of 15.6. This disparity represents a consistent pattern between pharma-research and consumer-product companies that reflects how the market recognizes risk inherent in medical research.

FasterCures, a Milken Institute center, has helped expand grant programs for laboratory investigators, establish human tissue “biobanks,” increase enrollment in clinical trials and disseminate best-practices information to disease-specific organizations. This builds on work begun by the Milken Family Foundation three decades ago. The importance of these programs will grow as our population ages.

Life is priceless, and benefits of reduced suffering are immeasurable. Yet in purely economic terms, a total cancer cure would be worth at least $50 trillion to the United States in per-capita income gains, long-term productivity growth and reduced treatment costs. A more-modest goal—reducing cancer mortality by 1%—has an economic value of $500 billion. If we spent $25 billion by doubling the National Cancer Institute’s annual $5 billion budget for each of the next five years, it could produce a $500-billion return—20 times the increased investment.

These projections are conservative. Productivity from longer life has been shown to add 50% of average annual gross national product to national wealth. Policymakers debate government stimulus programs, but medical research is the greatest stimulus of all, which becomes even clearer if we compare it to other expenditures. National political campaigns in 2008 cost $5.3 billion. Interestingly, Americans also spend $5.3 billion a year on potato chips. Potato chips! Nearly double the federal budget for heart-disease research. More than the National Cancer Institute budget.

Because preventing a disease is better than curing it, we must also focus on preventing the 70% of healthcare spending related to lifestyle. According to the Milken Institute report, “An Unhealthy America,” if overweight Americans collectively made minor behavior adjustments and returned to their 1991 weight, they would save the country more than $1 trillion a year. Meanwhile, doctors increasingly find “adult” diabetes and other obesity-related lifestyle diseases in our children. That’s why any program to reverse the obesity trend should start in our schools.

Congress can’t mandate we lose weight (although in Japan, the government does). And laws limiting or disclosing restaurant food ingredients seem ineffective. But several forward-thinking businesses have had success with employee wellness programs that typically offer reduced major-medical insurance premiums as a reward for losing weight, lowering cholesterol, optimizing blood pressure or quitting smoking. These are effective ways to limit rising healthcare costs. We have a choice: We can pay now through wellness programs. Or we can pay later—pay much more—treating chronic diseases.

We’ve responded well to other behavioral challenges by reducing smoking, increasing recycling and using seat belts. We can do it with diet and exercise. Recent legislation that addresses health-insurance coverage and payments is much in the news. But it will be largely irrelevant if we don’t increase prevention and research. PC

About the Author

Michael Milken is Chairman of the Milken Institute (Santa Monica, CA). He has been called “The Man Who Changed Medicine” by Fortune for three decades of accelerating life-saving solutions, founded the Milken Family Foundation in 1982 and is widely known for financial innovations that created millions of jobs in 3,200 companies he financed. Details are at www.mikemilken.com. These remarks are derived from a keynote address Mr. Milken gave at the AmerisourceBergen Specialty Group Commercialization Summit (Sept. 15-16, National Harbor, MD).

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