Biopharmaceutical research companies produce the highest-value jobs, the types of jobs Americans want in the 21st century economy, the kinds of jobs that can drive future economic growth. No other sector has the ability to drive innovation, create high-quality jobs and provide new life-saving medicines for patients.
According to a recent report from the Battelle Technology Partnership Practice (TPP), “nationwide, the biopharmaceutical sector supported a total of 4 million jobs in 2009, including nearly 675,000 direct jobs. Battelle is the world’s largest non‐profit independent research and development organization, providing innovative solutions to the world’s most pressing needs through its four global businesses.
TPP has an established reputation in state‐by‐state assessment of the biopharmaceutical sector, and has recently undertaken major impact assessment projects for the Human Genome Project, the nation’s biotechnology sector, and major bioscience organizations such as Mayo Clinic. TPP has also been active in provision of analysis to industry organizations, including the Council for American Medical Innovation, PhRMA and BIO‐the Biotechnology Industry Organization.
Each job in a biopharmaceutical research company supported almost 6 additional jobs in other sectors, ranging from manufacturing jobs to construction and other building service jobs to contract researchers and child care providers. Together, this biopharmaceutical sector‐related workforce received $258 billion in wages and benefits in 2009.
“Battelle also found that across all occupations involved in the biopharmaceutical sector, the average wage is higher than across all other private sector industries, due to the sector’s role as a ‘high value-added sector.” Specifically, the annual average personal income of a biopharmaceutical worker was $118,690 in 2009 as compared to $64,278 in the overall economy.
Additionally, the biopharmaceutical sector’s total economic output (including direct, indirect and induced impacts) was $918 billion in 2009. The sector generated an estimated $85 billion tax revenues in 2009—$33 billion in state and local and more than $52 billion in federal. This impact comprises $382 billion in direct impact of biopharmaceutical businesses and $535 billion in indirect and induced impacts (an output multiplier of 2.4—meaning that every $1 dollar in output generated by the biopharmaceutical sector generates another $1.4 in output in other sectors of the economy).
To put this export volume into perspective, 2010’s total biopharmaceutical exports of $46.7 billion compares favorably to other major U.S. exports including: automobiles ($38.4 billion in 2010 exports); plastics and rubber products ($25.9 billion); communications equipment ($27 billion) and computers ($12.5 billion).
In addition, the U.S. Congressional Budget Office noted that, “the pharmaceutical industry is one of the most research‐intensive industries in the United States and that pharmaceutical firms invest as much as five times more in research and development, relative to their sales, than the average U.S. manufacturing firm.”
At over $105,000 in biopharmaceutical R&D per employee, the sector is way ahead
of the average across all U.S. manufacturing which stands at about $10,000 per employee—and is far ahead of the second and third ranked sectors of “communications equipment” and “semiconductors, which respectively spend $63,000 and $40,000 per employee in R&D annually.
PhRMA Statement on Battelle Report
Consequently, Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO John J. Castellani issued a statement discussing the results from this report and the biopharmaceutical research sector’s impact on jobs and the American economy.
Castellani asserted that, “at a time when the U.S. is facing a jobs crisis, evidenced by the terrible employment numbers from last Friday, it is critical that our policymakers embrace dynamic and innovative business sectors such as the biopharmaceutical research sector and refrain from stifling job growth through shortsighted proposals such as government-mandated price controls in Medicare Part D.”
Specifically, the PhRMA CEO pointed to a new paper from the Battelle Technology Partnership Practice, which underscored the pharmaceutical sector’s tremendous contribution to America’s economy. Castellani recognized that, “startling potential job losses would result from undermining the business foundations of biopharmaceutical companies.”
He noted that the Battelle report estimated “that a $20 billion per year reduction in biopharmaceutical sector revenue would result in 260,000 job losses across the U.S. economy” and a $59 billion reduction in U.S. economic activity. As a result, Castellani recognized that, “as the President and Congressional leaders negotiate an important agreement on the debt ceiling and the future of the nation’s economy, it is critical that the jobs crisis is not exacerbated.”
For example, Castellani noted how “the President and some in Congress have proposed including government-mandated rebates in Medicare Part D as part of a debt ceiling agreement.” However, he recognized that “such a provision would have a dramatic negative effect on the economy and patients, and could undermine the success of the Part D program, which has very high beneficiary satisfaction and has cost far less than original government projections.”
He pointed to the “Battelle numbers, which clearly demonstrated that reducing the biopharmaceutical sector’s annual revenue by $20 billion would be a serious blow to employment.” Castellani added that, “while the research is not specific to any one policy or event, proposals being considered, such as government-mandated Part D rebates, would be expected to have revenue impact of this magnitude.”
Moreover, he noted that, “Part D is an unparalleled success, providing unprecedented access to life-saving medicines for seniors.” Accordingly, Castellani asserted that PhRMA does not “believe policies that discourage R&D and cutting-edge science and that will inevitably slow the development of needed new medicines are fair for seniors waiting for new treatments against our most challenging and costly diseases.”
Battelle Report
The Battelle Report quantifies the economic impact of the biopharmaceutical sector on the U.S. economy and jobs using input/output analysis, measures the direct and indirect impacts of the biopharmaceutical sector, and quantifies the economic impacts that would occur if biopharmaceutical revenues increase or decrease from significant changes in the business operating environment.
The report also highlights some of the functional impacts of the sector—the wide‐ranging benefits provided through the biopharmaceutical sector’s contributions to enhancing human health, improving life spans and sustaining the high quality‐of‐life that Americans enjoy—and assesses the contributions of the biopharmaceutical sector to key areas of importance to our economy— innovation, product exports and quality of jobs produced.
The Battelle Report starts by recognizing that the biopharmaceutical sector has all of the characteristics for an ideal industry for economic growth and sustainability in the U.S. Specifically, the biopharmaceutical sector:
- Grows in output and employment even in tough economic times
- Provides high wage, good quality jobs
- Is innovative and deploys high‐technology to generate comparative advantage for U.S. companies
- Generates significant exports that boost the U.S. economy
- Has a strong supply chain that drives further economic growth across the economy through “multiplier effects”
- Builds on America’s long‐standing strengths and investment in fundamental and applied research
- Encourages capital flows to sustain growth, and is profitable to provide funds for reinvestment into the research and development (R&D) cycle;
- Generates federal, state and local taxes and other economic contributions that support public services
- Is sustainable and not a major drain on global resources
- Is geographically dispersed, providing opportunities for job creation and economic growth across many areas of the nation, not just a few selected places
- Produces a product of value to society, something that improves the quality of life for humankind, including
- Improved life spans (personal longevity)
- Improved productivity resulting from prevention and effective management of disease and chronic conditions; and
- Reductions in unnecessary hospitalizations resulting in potential cost‐offsets elsewhere in the health care system.
Fundamental to major progress in human longevity, reducing the marginalization of individuals from disease and disability, and generally improving our quality‐of‐life, biopharmaceuticals are a unique contributor to societal and individual well‐being.
Moreover, the output of the biopharmaceutical sector is highly valued by society because the sector develops and manufactures a broad‐range of unique products to treat disorders and diseases that, were they to go untreated, can ruin individual quality of life, personal abilities and productivity. In many instances, biopharmaceuticals are central to helping to prevent and treat a range of public health issues, address pandemic risk and thereby support national economic security.
For example, innovation in the biopharmaceutical sector, combined with the diagnostic and treatment skills of U.S. healthcare professionals, has contributed to a lengthening of the average life span of Americans. In 1900, the expected life span of an American at birth was just 47.3 years. With the advent of more modern medicines and advanced medical knowledge, life expectancy at birth has seen a steady increase rising to 69.7 years in 1960, and 77.9 years in 2007.
In fact, the National Bureau of Economic Research reports that “there is a highly statistically significant relationship between the number of new molecular entities [drugs] approved by the FDA and increased longevity.”Furthermore, Lichtenberg found in a study of FDA data that “approval of priority‐review drugs—those considered by the FDA to offer significant improvements in the treatment, diagnosis, or prevention of a disease—has a significant positive impact on longevity.”
Additionally, the American Hospital Association (AHA) notes that “advances in medicine contribute to national economic growth by helping Americans recover more quickly from injury and illness, avoid lost or ineffective work time due to flare‐ups of chronic conditions, and live longer with higher quality of life.” Without effective medicines and treatments for illnesses, injuries, pain and chronic conditions, the productivity of the U.S. economy would clearly be greatly impaired. Biopharmaceuticals are a key contributor to a more productive and healthy America and U.S. economy.
Beyond direct employment in biopharmaceutical companies, the biopharmaceutical sector is the foundation upon which one of the United States’ most dynamic innovation and business ecosystems is built. A large part of the modern biomedical economy is built upon a robust foundation of biopharmaceutical companies that perform and support advanced biomedical and technological R&D, and act as the funnel and distribution engine for getting life‐saving and quality‐of‐life‐sustaining therapeutics to the marketplace.
Providing R&D impetus and funding, capital resources, technology licensing opportunities, and a sophisticated market access and distribution system, the biopharmaceutical sector is of central importance to the much broader biomedical and life sciences economy.
Fueled by private investment capital, venture capital investments, and public/private collaborations, and enabled by the U.S. open market system, the nation has been able to advance biomedical innovation, which in turn has led to new start‐up companies, business growth and exports across the world.
Conclusion
Despite the tremendous success in the biopharmaceutical industry, emerging infectious diseases continue to present new challenges and a substantial volume of long‐standing diseases such as cancer, diabetes, neurodegenerative diseases, psychiatric diseases, immunological diseases, etc. continue to demand novel treatments and improved therapeutics. There are millions of people suffering from diseases and disorders for which a therapy has yet to be found. The need for ongoing biopharmaceutical research and development is simply enormous.
The only way the U.S. economy can stay ahead of international competition is by using advanced R&D and innovation to drive the growth of high value‐added industries. By leveraging investment in federal lab, university and industry R&D, our nation is able to produce high‐value, typically technologically advanced products that the rest of the world values highly. In recent decades, life sciences have come to the fore as a leading driver of U.S. technological innovation and competitive advantage, and the biopharmaceutical sector is a key foundation of the life sciences innovation ecosystem.
The Unites States’ biopharmaceutical industry produces products that save, sustain and improve lives, and the sector has a large and significant economic impact, affecting many other key areas of the U.S. economy. Gains or losses in biopharmaceutical sector revenues will be reflected in gains and losses across a broad range of additionally important U.S. economic sectors that have robust supply chain relationships with the biopharmaceutical sector.
As PhRMA CEO John Castellani noted, “the bottom line is we are at a critical time for our economy. We have to create jobs, not lose more. We have to support innovation, not interfere with the most innovative sectors of our economy. We must continue to improve the health of America’s seniors, not increase costs and erect barriers to promising scientific breakthroughs.”
For the U.S. to continue to benefit from a robust biopharmaceutical industry, companies must have a business and innovation environment that fosters and sustains continued R&D investment.
Brilliant article!