I am very grateful to the Manhattan Institute for this opportunity,
and to all of you, for taking this time out of your day
to hear my thoughts.
I understand that many of you are supporters of the Manhattan
Institute's work, and for that I also thank you, as a citizen.
I wish I could say that the importance of free markets and
individual responsibility was widely understood, and that
the Manhattan Institute was therefore a pleasant luxury.
But that is not the case.
Markets and the free choices of individuals are not always
perfect. The current mortgage crisis makes that clear once
again, along with the need for prudent regulation. However,
if I may recast Winston Churchill's comment about democracy,
the free market is the worst possible system except for
all of the others! This argument must be made constantly
and applied to all manner of policy, no matter how unfashionable
the argument might be. Far from a luxury, therefore, the
Manhattan Institute is a foundational necessity, and I hope
that you will continue to keep it strong.
* * *
This is a milestone event for me. I will retire as chairman
of Eli Lilly and Company in less than three weeks, so these
will be my last public remarks as the leader of a large
Do not fear the worst! I promise that I will not use this
time either to talk about the "good old days"
or to unburden myself of a growling complaint about how
the industry has been mistreated. As tempting as these approaches
might be, neither would leave us with much more than indigestion.
Instead, I want to look forwardto speak about the
promise of the life sciences and about what we can do to
realize that promise.
I firmly believe that we stand on the cusp of an unprecedented
period of discovery and invention in the life sciences,
in which our understanding of individual human differences
replaces our pursuit of generalized well-being as the main
driver of medical progress.
That is a mouthful. So let me try to explain by bringing
to mind, 10 blocks from the MOMA in this city of art and
culture, the image of a painter at work. The masterpiece
in this caseand it is worthy of that name todayis
the improvement of human health.
Prior to the 20th Century, this canvas had been barely
touched. There was a pencil outline perhaps, the contours
of an image that would have seemed fanciful throughout most
of historythe image of more and more children surviving
infancy, of infections and plagues that could be stopped
rather than simply endured, of chronic diseases that could
be held at bay or even cured, and of lives that were not
only long but also robust and productive.
During the last century, we began to paint rather than
merely to sketch this masterpiece. We began with broad brush
strokesincluding major public health improvements
through the build-out of a sanitation infrastructure, immunization
programs, health education on a mass scale, and the training
of medical practitioners on the basis of science rather
At the same time, innovative pharmaceuticalsalong
with medical devices and new surgical techniquesadded
more and more layers of color and texture to this masterpiece.
No one describes these shadings more effectively than Frank
Lichtenberg, a Columbia University economist whose work
the Manhattan Institute has encouraged.
For example, Professor Lichtenberg published an analysis
of disease data and death rates from 52 countriesrich
and poorand correlated this information with data
on the availability of new medicines. He controlled for
income, education, and other factors. And he found that
new drug launches accounted for 40 percent of the increase
in life expectancy during the two decades that he studiedthe
1980s and 90s.
In other words: for every year that life expectancy increased,
five months can be attributed to the availability of new
And so, as the 20th Century came to a close, improvement
in human health already qualified as a striking masterpiece.
Today, the average life expectancy at birth in the U.S.
is 78. A century earlier, it was 47. This increase of 66
percent is unprecedented in human history. And the rates
of increase have been equally dramatic throughout most of
Not bad for a work in progress, and I am proud to have
been part of an industry that contributed mightily to the
brush work. But we are not done.
Wagers are being placed these days, at some scientific
conferences, about whether the first person to live to 150
already has been born. (I must say, I have no idea how these
scientists propose to collect on their bets, unless they
are the ones who will live to 150 and beyond!)
As for me, I will not place a bet on a specific number.
Sadly, some of the lifestyle factors that plague us todaysuch
as poor diets and lack of exerciseconspire to actually
reduce life expectancy. What I do feel confident in sharing
with you is this: Whether lifespans increase by 10 percent
or another 66 percent in the century ahead, it will not
be as a result of using the same broad brush strokes that
filled the canvas during the last one hundred years. Further
improvements will require a fine-pointed brushdetail
work at the level of the individual patient.
This is the vision that some have called "personalized
medicine," and I can assure you, from the front lines
of pharmaceutical innovation, that it is no illusion.
The Human Genome Project was necessary to this vision,
though not sufficient. It has allowed scientists to pin
down the location and chemical composition of every gene
that defines a human being, but this effort did not reveal
the "master code" of disease that some had hoped
for. Genes interact with many other biological systems to
determine whether a particular disease develops in a particular
human beingor not.
So the massive task for our scientists, now, is to combine
insights from the human genome with the growing field of
systems biology, use informatics to organize complex data,
and apply new research tools to develop highly targeted
molecules that prevent or stifle disease.
All of this will permit the biopharmaceutical industry
to make essential contributions to personalized medicine.
At Lilly, we call our goal "tailored therapies"or
"tailoring" for short.
Already, it is possible to design and engineer molecules
that target patients, based on their genetic makeup, who
have not been helped by existing therapies. At Lilly, we're
doing this right nowfor example, with a molecule for
the significant percent of patients with non-Hodgkin's lymphoma
who do not respond well to Rituxan, which is today's standard
of care for that disease.
And we are coming away from clinical trials with better
and better information about the benefitrisk profile
for new molecules in different groups of patients. That
has been our experience, for example, with prasugrel, a
molecule Lilly developed alongside Daiichi Sankyo for acute
coronary syndromes. It is currently being reviewed by the
Even after a product is on the market, it is increasingly
possible to determine why it does not work in certain patients
and to spread that knowledge to doctors, perhaps in conjunction
with a diagnostic tool that identifies the right patients.
We are close to delivering on that vision with Xigris, Lilly's
product for severe sepsis.
Today, there is hardly a molecule or an approved product
anywhere in Lilly's pipeline or portfolio that is not the
subject of tailoring. Our goal is to give doctors the ability
to prescribe for individual patientswith a much higher
level of confidencethe right dose of the right medicine
at the right time.
The therapeutic value of tailoring is fairly obvious, even
from the few examples I've given. But there is potentially
large economic value as wellwhich is quite important
in a world of aging populations and struggling payers. The
economic argument for personalized medicine has at least
First, the more predictive that medicine becomesusing
genomic information and other tools to identify the patients
likely to be at risk for certain diseasesthe more
that can be done to prevent the onset of expensive chronic
conditions or medical crises.
Second, the more tailored the therapies that doctors prescribe,
the less money that will be wasted in trial-and-error medicinenot
to mention precious timeand the fewer side effects
that will arise, which carry their own costs to remedy.
Third, even as personalized medicine can reduce the immediate
expenditures on health care, it also promises to improve
the long-term return on investment, if you will.
The wide brush strokes of the last century added years
of productivity and personal fulfillment to the average
lifespan. In the same way, the detail work of 21st Century
medicine should increase the value that each of us adds
to the economy and to the lives of those around us.
* * *
I hope that my report on the early progress at Lilly makes
clear that, as I said, personalized medicine is no illusion.
However, personalized medicine is also not guaranteed. There
is nothing automatic about the innovation that will be required
to improve human health even further and to realize the
economic value of human potential. This is why I have come
to an elite institution of policy research to press my case.
Far from guaranteed, innovation in the life sciences depends
on a set of basic requirements that seems perpetually under
threat in political debates and policy deliberations.
In understanding the basic requirements of innovation,
it helps to envision a three-legged stoolthe kind
which a painter might sit on, to keep our metaphor intact!
The first leg is intellectual property protection, without
which the incentives to take financial risks on health-care
R&D simply would not exist.
The second leg is pricing freedom: the ability to price
our products in a manner that reflects their true value
compared with other alternatives in an open, competitive
And the third leg is market access: the ability to make
our products available to prescriberswho, in turn,
can inform their patients about the attributes and the benefits
of what we have developed.
The average investment today in the pharmaceutical industry,
to bring a single new product to market, is around $1.5
billion. We are not happy with that number and we are working
on a number of fronts to improve our productivity. However,
the complexities of tailored therapies and the growing demands
of regulators make it unlikely that 21st Century drug-development
will come cheaply.
The necessary investments simply cannot and will not be
sustained in the absence of the three-legged stool. The
image is appropriate because, like other three-legged stools,
this one will collapse if any of the legs are sawed down
And right now, saws are being wielded against all of these
legs in the U.S., with potentially serious consequences
for the development of tailored therapiesand I won't
even speak about markets outside the U.S., where it is more
like chainsaws that we are facing!
With regard to intellectual property protection, the U.S.
Congress is considering various pathways for the approval
of generic biotechnology productsso-called "follow-on
biologics." Biomolecules, I should note, lend themselves
particularly well to the kind of targeted engineering that
I mentioned earlier.
On the innovation side of the industry, we have no complaint
at all with the role of generics. We will not be able to
develop anything worth copying, however, if the new laws
do not guarantee a significant period of what is called"
data package exclusivity" for our inventions.
This kind of exclusivity would assure that, for a fixed
period of time after FDA approval, no one other than the
owner of a patent could use data about the resulting product
and its manufacturing process in a regulatory application.
Some key Members of Congress, unfortunately, envision follow-on
biologics legislation with no data package exclusivity whatsoever.
Other saws are being sharpened around pricing in the U.S.
For example, some in Washington appear poised to repeal
the so-called "non-interference clause" in the
Medicare drug benefit, which today relies on private competition
among health plans. Companies such as Lilly would face de-facto
government price controls if the non-interference clause
were to be eliminated.
A second pricing issue concerns the rebates that pharmaceutical
companies are required to pay as a condition of doing business
with the government through the Medicaid program. There
is growing support for increasing both the percentage and
the scope of the rebates, possibly requiring them in Medicare
The common fallacy of these proposals, in my view, is the
notion that the government can somehow generate real savings
by reducing near-term outlays for prescription medicines.
The actual impact is likely to be the opposite.
Since our current revenues pay for future innovation in
the pharmaceutical industry, price controls and expanded
rebates will mean less progress in tailored therapieswhich,
in turn, will make it harder for society to realize the
economic benefits of personalized medicine that I described
earlier. Short-term savings will be swamped by long-term
The case study leading to this conclusion is the story
of pharmaceutical innovation in Europe. In the course of
my own careerabout 40 yearsEurope went from
being the primary location of R&D on new medicines to
a distant Number Two. To explain this, I can do no better
than to quote Ken Kaitin, director of the Tufts Center for
the Study of Drug Development.
Kaitin said: "Investors tend to invest in places where
there is less control over prices." For the sake of
innovation in personalized medicine, let us hope that the
remaining island of opportunity in the U.S. is not swamped
The third leg of the stoolmarket accessalso
is threatened in a variety of ways. Indeed, the U.S. Food
and Drug Administration's growing risk aversion has contributed
to a serious decline in the number of drug approvals in
recent yearsonly 19 new molecules in 2007, for example,
the lowest number in a quarter century. The FDA has also
been slow to embrace some of the implications of personalized
medicine, such as adaptive clinical trial designsresearch
that evolves in mid-stream based on what is learned about
individual patient responses.
Meanwhile, policymakers appear to be considering yet another
hurdle to market access based on something called "comparative
effectiveness" research. It compares the clinical effectiveness,
risks, and benefits of different options for treating a
Used wiselyas one element in medical decision making-data
on comparative effectiveness can help to improve patient
outcomes. However, I believe that we should be very skeptical
about calls for a centralized or government-run center for
such research, and we should resist policies that would
turn favorable comparative effectiveness reports into yet
another requirement of market access.
Such approaches simply fly in the face of personalized
medicinereducing the range of options available to
doctors and patients on the basis of research that almost
by definition favors the broad brush over the fine point.
* * *
To conclude, I would like to offer a few thoughts on how
we can use policy to favor the fine point, thereby helping
to make the masterpiece of human health improvement even
more spectacular in the 21st Century.
I'll group these ideas into three areas, calling the first
one "choice for patients and doctors"; the second
one "tapping health information"; and the third
one "working together."
Let's start with choice. To enable personalized medicine,
we must increase both the options available to patients
and their freedom to choose among these options.
Single-payer health care systems accomplish neither goal,
which is yet another reason to avoid them.
Instead, I believe that we should be looking at insurance
and payment-system reformssuch as the Health Savings
Account modelthat elevate the role of individual patients,
working with their doctors, in weighing one set of interventions
against others based on their particular needs.
Universal access to health care is completely consistent
with choice and with improved outcomes for individuals,
since larger markets are better markets. But the emphasis
must be on giving new entrants meaningful power. Too often,
existing universal systems simply entitle patients to receive
care, passively, from a fixed and limited inventory. We
must do bettercreating more savvy consumers, equipped
with the knowledge and the choices to realize the promise
of personalized medicine.
This leads us into the second area of policy innovation
that I foreshadowed: tapping health information-with the
aim of converting such information into real knowledge.
In the disaggregated, paper files of tens of thousands
of doctors' offices, we are squandering one of the greatest
untapped resources in health care: namely, the knowledge
of what works and what does not work in the treatment of
patients based on their particular characteristics and medical
Tapping this resourcein conjunction with the rise
of genetic testing for individual patientscould yield
a true wealth of insight on personalized medicine, making
treatments safer, more predictable, and more effective across
Getting to that point requires things that policymakers
can enable, including: an infrastructure for building and
sharing health records electronically, a rigorous privacy
code that prevents disclosure and discrimination, and a
far more pervasive system for detecting "signals"both
positive and negativein the real-world use of prescription
To that end, I am proud of something called the Observational
Medical Outcomes Partnership (OMOP), which our industry
association, PhRMA, launched with almost no fanfare together
with the FDA and the Foundation for the National Institutes
of Health. OMOP, to use the acronym, will develop and test
new tools to mine vast databases of information on the outcomes
Finally, there are the policy innovations that I have labeled,
simply, "working together." The insight here is
straightforward. No single company, industry, agency, or
even nation will add very much to the canvas of human health
by working on its own. The fine point, ironically, depends
much more than the broad brush on collaboration, flexibility,
Much more will be asked of companies such as Lilly. Tailored
therapies will not arise in isolation from our own labs
and sales forces using the R&D and delivery models of
the past. That is why we are quietly transforming ourselves
from a company that once did everything by itself into something
more like conductors of a global orchestra.
Using virtual collaboration tools, risk-sharing arrangements,
new financing models, and many more innovations, our goal
is to tap expertise at its source, accelerating the development
of new medicines. The same openness and spirit of partnership
will be required in our relationships with patients and
As an industry, we are beginning to share non-proprietary
assets, including libraries of molecules and imaging data,
in an effort to avoid unnecessary duplication of work. And
we have launched a very promising consortium, working with
the FDA and the National Institutes of Health to validate
so-called "biomarkers"biological "tell-tales"
that have been a key to progress in tailored therapeutics.
And we are learningfinallythat transparency
with regard to our clinical trials, research grants, and
payments to doctors is the best way to build trust with
patients, which in turn will be crucial to their engagement
in personalized medicine.
* * *
Ladies and gentlemen, almost 40 years in the business of
health care leaves me an optimist.
The canvas of human health looks vastly better today than
it did when I began my career in the early 1970s. And I
remain convinced that it will look much better still-from
the vantage point of another generationwith many more
of the details filled in, by the artists of personalized
If I am right in this assessment, then it will be because
innovation triumphed. We do not need to be doctors or scientists
ourselves to help that cause. But we do need to insist on
a reasonably free market, on the possibility of reward for
innovation that works, on collaboration and openness towards
the outside world, and on the importance of individual aspirationsin
health care and otherwise.
So it has been my privilege today to conclude the public
portion of my Lilly career right here in the company of
the Manhattan Institute, where all of these things are understood
and embraced. Thank you!