Successful Business Leadership

By Alan K Rudi

Health care costs grew at an 8.8% rate in 2005, still substantially faster than inflation, but down from a 13.7% increase in 2002. General inflation accounted for 27% of this increase in health costs, increased demand for health services accounted for 43% of the increase. Price increases in excess of inflation for healthcare services accounted for the remaining 30% of the increase in health care costs (i.e., movement by purchasers to broader-access health plans, provider consolidation, increased costs of labor, and higher priced technologies). 86% of the insurance premiums paid went directly to pay for medical services. The history of medical cost increases shows that during the 1990s, healthcare costs rose at a slower rate than they had throughout the 1980s. (Source: PriceWaterhouseCoopers).

The following is a brief review of medical technology:

• On June 26, 2000, it was announced in the White House that two independent projects had mapped the Human Genome, enabling an understanding of human beings’ genetic make-up. Human DNA has approximately 25,000 genes consisting of 3 billion sequenced chemical base pairs. Analyses of the data and genome maps, however, will continue for many years. It was stated that “The genome sequence represents a new starting point for science and medicine, with potential impact on every disease. The development of new therapeutics will require continued public investment in basic science, and the translations of discoveries into new medicine by the biotech and pharmaceutical industry” (Source: J. Craig Venter).

• According to Merck & Co., “It costs about $800 million over 12 years to bring one medicine from discovery in a laboratory to the patient. For every one medicine that reaches the marketable stage between 4,000 to 10,000 compounds must be screened. The research-based pharmaceutical industry assumes the high risk of drug development failure and is responsible for the development of more than 90 percent of new medicines produced worldwide.”

• “Since 1990, the pharmaceutical industry has discovered and brought to market over 300 new biopharmaceutical medicines that treat over 150 conditions. Our growing knowledge of human genetics has given us a new understanding of how diseases work and new ways to try to cure them. Today, there are more than 2,000 medicines in development: 646 for cancer, 146 for heart disease and strokes, 77 for AIDS, and 56 for diabetes.” (Source: Pharmaceutical Industry).

• The biotech industry conducts biomedical research, beginning in the 1970’s, and to-date has brought 366 new medicines to market. In 2005, the Food and Drug Administration (FDA) approved 38 new biotech products. There are more than 400 biotech drug products and vaccines currently in clinical trials targeting more than 200 diseases, including cancer, Alzheimer’s, heart disease, diabetes, multiple sclerosis, AIDS and arthritis. As of 2005, there were 1,415 biotechnology companies in the United States, of which 329 were publicly held and had $50.7 billion in revenues. The industry spent $19.8 billion on research and development (39%). Corporate partnering is crucial to the biotech industry as a means to increase investments and lower the risk. In 2005, biotech companies signed 564 new agreements with pharmaceutical firms and 354 between biotech firms. Most biotechnology companies are young firms who depend heavily on investor capital for startup. Biotechnology attracted more than $20 billion in financing in 2005 and has raised more than $100 billion since 2000. (Source: Biotechnology Industry Organization).

• Increasingly drug companies are working to create personalized medicines. “The sequencing of the human genome is yielding exciting new tools to help physicians tailor treatments to individuals and their disease. This powerful new capability, called personalized medicine, holds great potential to improve patient health. Physicians today often cannot predict how an individual patient will respond to a treatment; personalized medicine could help physicians tailor the use of medicines for an individual patient. Today, we are seeing the first examples of personalized medicine reaching patients. Advances in knowledge of molecular and genetic levels hold great potential for personalization. But significant hurdles must still be overcome for its full potential to be realized.” (Source: Age of Personalized Medicine).

• On November 20, 2007, a breakthrough in stem cell research was announced indicating that stem cells could be created from skin tissue. As a result, medical advances could be further researched and developed, eliminating the ethical questions. Here is a video with a good explanation of the situation. If true, this development could be significant to advance medical technology as researchers believe that treatments derived from stem cells can be used for cancer, Parkinson’s disease, spinal cord injuries, and many other conditions.