The Benefits of Biomedical Research

(Revised 11/4/99)

Our nation's sustained investment in biomedical research has given us longer lives, better health, and lowered cost of illness. Important, too, are the myriad technological spin-offs that have applications to so many different areas of our economy. Ahead of us are a growing number of opportunities for advancement in health and quality of life, and public support for continued investment in research is strong. We can anticipate significant progress in the future if we maintain our commitment to federal funding of research conducted in government facilities, private institutes, and universities.

Investment in biomedical research has propelled a remarkable transformation in our understanding of the life sciences and has given us a bounty of new ways to prevent, treat, and cure disease. Major threats to public health have been reduced, quality of life has improved, and life expectancy has continued to rise. A child born in the United States in 1997 can expect to live 76.5 years, 3.9 years longer than a child born in 1975.1

Examples of improved therapies flowing from biomedical research include better methods for treating AIDS. New therapies made possible by the discovery of protease inhibitors have lowered mortality rates for this disease, and although HIV infection is still the leading cause of death for males between the ages of 25 and 44,² there is new hope for AIDS victims. New drugs and therapies have lowered death rates from heart attacks and stroke: In the past two decades, deaths from stroke have declined by 59% and deaths from heart attacks by 53%.³ For cancer, incidence and mortality rates have also begun to decline.⁴

And there's more good news: Because of opportunities created by federal government support for fundamental science, the pharmaceutical industry invests more than $20 billion every year in research and today has more than 1,000 medicines in development (including 316 anti-cancer medicines and 146 vaccines and drugs for children).⁵ In 1998, U.S. pharmaceutical companies introduced 30 new drugs and nine new vaccines. Further, more than 300 new medicines have become available in this decade.⁶

Research-based knowledge in the biomedical sciences reduces the burden of illness by lowering incidence rates for many diseases and raising the quality of life for those who are still afflicted. Improvements in the prevention and treatment of illness also lead to significant reductions in the cost of illness. While studies frequently differ in their methodologies and approaches to measurement, there is a growing body of evidence identifying research-based cost savings. A 1993 study identified 33 health care advances from NIH-supported research that saved between $8.3 and $12 billion per year.⁷ Additional examples of cost savings from medical research were compiled in a 1995 report by Silverstein et al.⁸ One study has estimated that the federal government's investment in bioscience is $62 per citizen, whereas the benefits returned to each of us are worth $5,600. ⁹

Some of the most expensive of health care costs are those associated with chronic disability. Rates of chronic disability in the U.S. elderly population have been declining at an accelerated pace over the past 12 years.¹⁰ This reduction in long-term disability rates from 1982 to 1994 resulted in a smaller nursing home population in 1994 than would have been the case if the disability rates stayed the same. It also saved $17.3 billion in nursing home expenses. Moreover, if these statistics continue to improve, there could be a substantial decrease in future Medicare and Medicaid costs. Among the factors contributing to this significant reduction in disability rates and projected health care expenditures are recent biomedical research on the fundamental biology of disease mechanisms and the modification of those mechanisms by biomedical interventions.¹¹

The use of pharmaceuticals (especially, new pharmaceuticals) has reduced hospitalization rates. It is estimated that each dollar increase in pharmaceutical expenditure yielded a $3.65 reduction in hospital costs.¹² Improved understanding of molecular biology will result in even more efficient and effective pharmaceutical research and lower the cost of drug development.¹³

The estimated savings in nursing home and hospitalization costs cited above do not adjust for other expenses, such as the costs of home care, that might be incurred as inpatient stays are reduced. Thus, the net savings may be somewhat lower. But regardless of the ultimate level of these countervailing costs, the movement of patients from hospitals and nursing homes has many advantages for patients and health care providers (not the least of which is enhanced patient comfort).

The most important qualification to the efforts to measure cost saving, however, involves the inability to quantify the quality of life improvements associated with more effective treatment and prevention of disease. These benefits are significant, but cannot be converted to a simple dollar estimate. The incalculable value of better health and reduced disability is the most precious outcome of biomedical research.

Public funds promote the climate of openness and sharing that accelerate the process of discovery, verification, and product development. While the private sector is important to research and development in this country, the federal government is the only source able to provide the broad, long-term support necessary for basic research. The returns to investment in fundamental research are difficult to predict. We know that they occur and that they are extremely valuable. What we do not know is when they will happen or how they will be applied. If left totally to market forces, basic research would be underfunded since the gains from basic research are shared and the profits may not be captured by private investors.

For example, the basic research on the enzymology of DNA synthesis and degradation conducted by Nobel laureate Arthur Kornberg provided one of the cornerstones of the current revolution in biotechnology. Public support for Kornberg's research came "without any promise or expectation that this research would lead to marketable products or procedures. No industrial organization had, or ever would have, the resources or disposition to invest in such long-range, apparently impractical programs."¹⁴

Maintaining world leadership in research is vital for our prosperity, prestige, and even our national security. Our reputation, influence, and political power are reinforced by our role as the world's leader in research and education. The relationships forged by individuals working in our laboratories and schools also facilitate valuable links to their counterparts around the globe.

Recent studies have underscored the importance of federal funding for basic research. The House Committee on Science, under the direction of Vernon J. Ehlers (R-MI), reviewed our nation's science policy in 1998 and emphasized the unique role of federal funding. The committee recommended that Congress should make stable and substantial federal funding for scientific research a high priority."¹⁵

The Council on Competitiveness (a nonprofit council of 161 corporate chief executives, university presidents, and labor leaders) recommends that the federal government increase its investment in basic research.¹⁶ The council's report concludes that health research has not been supported at levels required to realize the potential of emerging scientific opportunities and, moreover, changes in the health care system have diminished traditional sources of research support. Although we are currently the world's leader in research and innovation, the Council on Competitiveness cautions that increasing international competition leaves no room for complacency.

For many years, the success and prosperity of the U.S. pharmaceutical industry has relied on publicly funded science for skilled personnel and "enabling discoveries", those fundamental scientific insights that lead to new therapeutics. The revolution in molecular biology increased the importance of this connection.¹⁷ A review of the 21 drugs with the greatest therapeutic effect introduced between 1965 and 1992 found that only five (24%) were not based on a key enabling discovery made in the public sector. Over time, this connection between publicly supported basic research and drug development has become stronger.

Government-funded basic research is an important precursor to innovation by the pharmaceutical industry.¹⁸ In addition to providing highly skilled personnel and new insights into the life sciences, public funding stimulates additional investment by the drug companies and enhances the effectiveness of their R&D expenditures.¹⁹ Direct interactions and exchanges between academic scientists and researchers in the public sector is a critical mechanism by which private sector firms recognize and use new scientific discoveries. Relationships between pharmaceutical firms and publicly funded scientists in academia and government raise the level of private sector research productivity by as much as 30-40%.²⁰

This country's dynamic pharmaceutical industry is prosperous, with estimated sales of $134 billion in 1999.²¹ Domestic employment in research-based pharmaceutical companies also continues to grow, having exceeded 208,000 workers in 1998. Many of these are high paying, high technology jobs that contribute substantially to growth in other technology-intensive sectors of the economy.

Federal support for biomedical research produced the new techniques of molecular biology and the scientist who could use them. The movement of these individuals and methods from academia to industry were vital for the emergence of the U.S. biotechnology industry.²²

As this high technology industry continues to grow, it increases its contribution to society. Employment grew by 9%, with 153,000 people now working in the U.S. biotech industry. Product sales of $13.4 billion, reflect an increase of 17% over the previous year. Soon, over 80 biotech drugs will be on the market. More than 300 other products are in Phase II or Phase III clinical trials, and 2,200 more are in various stages of development.²³

Applications of biotechnology have expanded dramatically. In 1997, total U.S. sales of agricultural biotechnology products reached $875 million, an increase of 54 percent since 1994.²⁴ By 2002, sales are projected to be 2,885 billion for transgenic seeds, animal growth hormones, biopesticides, and other agricultural biotech products. According to some observers, the applications of biotechnology to agriculture will create more economic and social benefits than their applications of biotechnology to health.

We must fund research in a wide range of scientific fields. The contributions of chemistry, physics, mathematics, computer science, and engineering are essential to improving quality of life and raising standards of living. Advances in mathematics, physics, chemistry, and engineering are also vital to progress in medical science,²⁵ any growth in future research funding must reflect their importance. The tremendous potential for progress in biological and medical research will be realized only if there is a steady flow of new insights from the other fields of science. Such discoveries have propelled much of our progress in the past and will undoubtedly guide our success in the future.²⁶ The enzyme, Taq polymerase, for example, was first found in deep sea bacteria. It later proved essential in the development of polymerase chain reaction (PCR), a powerful tool for medicine, biotechnology, and forensic science.²⁷

Our continued progress and leadership in science and technology will also require the preparation of a new generation of scientists who will be able to extend the gains we have made and maintain our world leadership. We currently have the world's greatest system of advanced education, but it faces serious challenges, and we must make certain that we are able to maintain its excellence, expand access, and adapt it to meet the needs of a changing world.

Investment in basic science has fueled the development of new industries and increased the productivity of existing ones. Edwin Mansfield estimated that the total (i.e., social) rate of return on investment in academic research was 28% and that academic research was crucial to industrial innovation in high-tech industries such as pharmaceuticals and information processing.²⁸ It is difficult to overstate the economic importance of technology to the national economy: By one estimate, technology accounts for more than 50% of the economic growth in this country.²⁹

The benefits of research flow through a range of mechanisms including personnel exchanges and direct applications of the scientific research literature.³⁰ A recent examination of U.S. patents revealed that 73% of the research papers cited by U.S. industry patents were written by scientists working in universities, government, or other nonprofit institutions.³¹ A study conducted by the Massachusetts Institute of Technology (MIT) found that approximately a billion dollars has been invested by private industry in the development and early commercialization of inventions licensed from currently active patents held by that institution.³² A subsequent study of exclusive patent licenses granted by the University of Pennsylvania found similar patterns of induced investment, and the authors estimated that in 1995 licenses from all universities led to investments of $4.6 billion and created 27,000 private sector jobs in research and development nationwide.³³ Much of the research that generated these university-held patents was performed by scientists working with federal research funds.

Government scientists also make significant contributions to technology transfer. In FY 1998, research performed by scientists on the NIH campus resulted in 124 patent awards, 215 executed licenses, and $36.7 million dollars in royalty payments.³⁴ Each of these technology transfer indicators reflect an increase over FY 1997 levels. From 1996 through 1998, NIH earned more than $102 million on royalties from its 607 active invention licenses.³⁵

Recent progress in medical research has been phenomenal, but millions of Americans are still suffering from Alzheimer's disease, arthritis, cancer, chronic obstruction and pulmonary diseases, diabetes, heart disease, mental disorders, and stroke. We cannot measure the pain or hardship these illnesses impose on the victims and their families. The financial burden on our society, however, is substantial. Each year, the total economic cost (health care cost plus indirect costs such as lost wages) for each one of these diseases exceeds the budget for the NIH. In 1998, for example, the total economic cost of heart disease was estimated to be $175.3 billion, more than 10 times the size of the 1998 NIH budget.³⁶

We must also prepare for new challenges and future threats to human health. The President's National Science and Technology Council reports that more than 30 new pathogenic microbes have been identified since 1973 and lists 21 other re-emerging infectious diseases.³⁷

We have seen a significant increase in federal funding for NIH, but our investment in health research is modest compared to the health and economic benefits it generates. Relative to our total national expenditure for health care, we spend only a small fraction on health research. In 1996, the total U.S. expenditure on health care was $1,035 billion dollars³⁸ or 13.7% of the Gross Domestic Product (GDP).³⁹ Of that total, only $30.6 billion (3.0%, or three cents out of every health care dollar) was spent on research.⁴⁰ That same year, 14.8% of the federal outlays for defense went for research and development.⁴¹

Our nation's leaders recognize the importance of research for the U.S. and its value to our citizens. The electorate is clearly in support of increased federal funding, with nine Americans in ten believing we should invest more in medical research.⁴² Polls conducted by Research!America demonstrate that support for increased funding is found across the nation. Surveys conducted in states as different as Mississippi, New York, Tennessee, Wisconsin, and North Carolina all indicate strong support for increased federal investment in medical research. In each of these states, at least 60% of those polled favored doubling the level of government-sponsored medical research over the next five years.⁴³

Skeptics, questioning whether we can afford to use tax dollars to support biomedical research, say there are too many scientists, that high-tech innovations increase the cost of medical care, or that the government should leave it to private industry. But as we've shown here, the investment must and should be made by the government because the benefits are broadly shared and long term. The savings in health care, especially from reduced disability and improved productivity, are far greater than the investment. With our DNA genetic blueprints in hand, we are on the shores of a new intellectual continent that will transform our lives, our health, our medicines and our treatments. Recent discoveries have yielded significant breakthroughs in the prevention and treatment of disease, pointing the way to other improvements that may soon be within reach.⁴⁴ We need a new generation of biomedical scientists and a continued commitment to research to realize these benefits, and we cannot afford to miss the opportunity.

^1. Donna L. Hoyert, Kenneth D. Kochanek, and Sherry L. Murphy. (1999) "Deaths: Final data for 1997." National Statistics Reports 47 (June 30). http://www.cdc.gov/nchswww/releases/99facts/99sheets.htm

^2. National Center for Health Statistics. (1997) "Report of Final Mortality Statistics, 1995." Monthly Vital Statistics Report 45 (June 12). http://www.cdc.gov/nchswww/data/mvsr45_6.pdf.

^3. Harriet P. Dustan, Edward J. Roccella, and Howard H. Garrison. (1996) "Controlling hypertension: A research success story," Archives of Internal Medicine 156: 1926-1935. http://www.ama-assn.org/sci-pubs/journals/archive/inte/vol_156/no_17/60622.htm

^4. P. Wingo, L. Ries, H. Rosenberg, D. Miller, and B. Edward. (1998) "Cancer incidence and mortality, 1973-1995: A report card for the U.S." Cancer 82: 1197-1207.

^5. Pharmaceutical Research and Manufacturers Association (1998). "Drug companies to invest $20 billion on R&D as they continue to work on 1,000 new medicines." Facts and Figures (March). Washington, DC: PhRMA. http://www.phrma.org/facts/phfacts/3_98a.html

^6. Alan F. Holmer. (1999) New Drug Approvals in 1998. Washington, DC: PhRMA. http://www.phrma.org

^7. National Institutes of Health. (1993, revised 1996) Cost Savings Resulting from NIH Research Support, second edition. NIH Publication no. 93-3109. Bethesda, MD: NIH.

^8. Samuel C. Silverstein, Howard H. Garrison, and Stephen J. Heinig. (1995) "A few basic economic facts about research in the medical and related life sciences." The FASEB Journal 9 (July, 1995): 833-840.

^9. Wisconsin Association for Biomedical Research and Education. (1996) Bioscience Research, Development & Industry: Impact on Health & Economic Growth in Wisconsin. Milwaukee, WI. .http://www.wabre.org/

^10. Kenneth G. Manton, Larry Corder, and Eric Stallard. (1997) "Chronic disability trends in elderly United States populations: 1982-1994." Proceedings of the National Academy of Sciences 94: 2593-2598. http://www.pnas.org/cgi/content/full/94/6/2593.

^11. Kenneth G. Manton, Larry S. Corder, and Eric Stallard. (1997) "Monitoring changes in the health of the U.S. elderly population: Correlates with biomedical research and clinical innovations." The FASEB Journal 11: 923-930.

^12. Frank R. Lichtenberg. (1996) "Do (more and better) drugs keep people out of hospitals?" American Economic Review 86: 384-388.

^13. Herbert Pardes, Kenneth G. Manton, Eric S. Lander, H. Dennis Tolley, Arthur D. Ulian, and Hans Palmer. (1999) "Effects of medical research on health care and the economy." Science 283 (January 1, 1999): 36-37. http://www.sciencemag.org/cgi/content/full/283/5398/36.

^14. Arthur Kornberg. (1997) "Support for basic biomedical research: How scientific breakthroughs occur." The Future of Biomedical Research, Claude E. Barfield and Bruce L. R. Smith, eds. Washington, DC: American Enterprise Institute and The Brookings Institution, p 38.

^15. U.S. House of Representatives Committee on Science. (1998) Unlocking Our Future: Toward a New National Science Policy. Washington, DC: U.S. Government Printing Office, September, 1998. http://www.house.gov/science/science_policy_report.htm.

^16. Council on Competitiveness. (1998) Going Global: The New Shape of American Innovation. Washington, DC: Council on Competitiveness. http://www.compete.org/bookstore/book_default.htm.

^17. Iain Cockburn, Rebecca Henderson, Luigi Orsenigo, and Gary P. Pisano. (1999) "Pharmaceuticals and biotechnology." Pp. 363-398 in David C. Mowery (ed.), U.S. Industry in 2000: Studies in Competitive Performance. Washington, DC: National Academy Press. http://books.nap.edu/books/0309061792/html/363.html#363

^18. Andrew A. Toole. (1997) "The impact of federally funded basic research on industrial innovation: Evidence from the pharmaceutical industry." Madison, WI: Lauritis R. Christensen Associates.

^19. Andrew A. Toole. (1997) "Public research, public regulation, and expected profitability: The determinants of pharmaceutical research and development investment." Madison, WI: Lauritis R. Christensen Associates.

^20. Iain Cockburn and Rebecca Henderson. (1997) "Public-private interaction and the productivity of pharmaceutical research." National Bureau of Economic Research. http://papers.nber.org/papers/w6018.

^21. Pharmaceutical Research and Manufacturers Association. (1999) PhRMA Annual Survey, 1999. Washington, DC: PhRMA. http://www.phrma.org/publications/industry/profile99/default.htm

^22. Lynne G. Zucker and Michael R. Darby. (1997) "The economists' case for biomedical research: Academic scientist-entrepreneurs and commercial success in biotechnology." The Future of Biomedical Research (Claude E. Barfield and Bruce L. R. Smith, eds.). Washington, DC: American Enterprise Institute and The Brookings Institution.

^23. Scott W. Morrison and Glen T. Giovanetti. (1998) Biotech 99: Bridging the Gap: Ernst & Young's 13^th Biotechnology Industry Annual Report. Palo Alto, CA: Ernst & Young. http://www.ey.com/publicate/life/default.asp.

^24. Chemical and Engineering News. (1999) "Ag biotech sales continue strong." Chemical and Engineering News (April 19, 1999): page 28. http://pubs.acs.org/

^25. Dill, Ken A. (1999) "Strengthening biomedical roots." Nature 400 (July): 309-310. http://www.nature.com/.

^26. William R. Brinkley. (1998) American Physical Society News 7 (December): 4. http://www.aps.org/.

^27. Tabitha Powledge. (1996) "The Polymerase Chain Reaction." Bethesda, MD: FASEB. http://www.faseb.org/opa/bloodsupply/pcr.html.

^28. Edwin Mansfield. (1991) "Academic research and industrial innovation." Research Policy 20: 1-12.

^29. Michael J. Boskin and Lawrence J. Lau. (1992) "Capital, technology, and economic growth," Technology and the Wealth of Nations. Nathan Rosenberg, Ralph Landau, and David C. Mowery, ed. Stanford, CA: Stanford University Press.

^30. National Science Board, Task Force on Industry Reliance on Publicly Funding Science. (1998) Industry Trends in Research Support and Links to Public Research. NSB 98-99. Arlington, VA: National Science Foundation. http://www.nsf.gov/cgi-bin/getpub?nsb9899

^31. Francis Narin, Kimberly S. Hamilton, and Dominic Olivastro. (1997) "The increasing linkage between U.S. technology and public science," Research Policy 26: 317-330.

^32. Lori Pressman, Sonia K. Guterman, Irene Abrams, David E. Geist, and Lita L. Nelson. (1995) "Pre-production investment and jobs induced by MIT exclusive patent licenses: A preliminary model to measure the economic impact of university licensing." Journal of the Association of University Technology Managers VII: 49-82.

^33. Peter B. Kramer, Sandy L. Scheibe, Donyale Y. Reavis, and Louis P. Berneman. (1997) "Induced investments and jobs produced by exclusive patent licences: a confirmatory study." Journal of the Association of University Technology Managers IX: 79-100.

^34. National Institutes of Health. (1998) Technology Transfer Activities. Bethesda, MD: NIH. http://www.nih.gov:80/od/ott/nih93-98.htm.

^35. U.S. General Accounting Office. (1999). Technology Transfer: Number and Characteristics of Inventions Licensed by Six Federal Agencies. RCED-99-173. Washington, DC: U.S. GAO. http://www.gao.gov/

^36. National Institutes of Health. (1998) Disease-Specific Estimates of Direct and Indirect Costs of Illness and NIH Support: 1998 Update. Bethesda, MD: NIH.

^37. National Science and Technology Council, Committee on International Science, Engineering, and Technology, Working Group on Emerging and Re-emerging Infectious Diseases. (1995) Infectious Disease -- A Global Health Threat. Washington, DC: Executive Office of the President.

38^. U.S. Bureau of the Census. (1998) Statistical Abstract of the United States: 1998 (118th edition.) Washington, DC: U.S. Government Printing Office. http://www.census.gov/prod/3/98pubs/98statab/cc98stab.htm.

^39. National Science Board. (1998) Science and Engineering Indicators - 1998. Washington, DC: U.S. Government Printing Office. Appendix Table 4-1. http://www.nsf.gov/sbe/srs/seind98/start.htm

^40. This is based on the $17.0 billion for medical research reported in the Statistical Abstract of the United States (op. cit.) plus the $13.6 billion in company-financed domestic U.S. R&D reported by the pharmaceutical industry in its 1999 Industry Profile (op. cit.)

^41. Office of Management and Budget. (1999). Historical Tables, Budget of the United States Government, Fiscal Year 2000. Washington, DC: U.S. Government Printing Office. Tables 8-7 and 9-8. http://www.access.gpo.gov/usbudget/fy2000/pdf/hist.pdf.

^42. Research!America and Louis Harris and Associates. (1995 and 1995) Public Attitudes About Medical Research. Alexandria, VA: Research!America. http://www.researchamerica.org.

^43. See postings on Research!America home page at http://www.researchamerica.org.

44. National Institutes of Health. (1999). "Today's Advances: The Result of Yesterday's Investments." FY 2000 Congressional Justification. http://www4.od.nih.gov/ofm/cj/todaysadvances.stm.