1. Health Care Costs: Issues for Business Economic Summit & Outlook 2006 presented by CBIA and MetroHartford Alliance Thursday, January 5, 2006 The Connecticut Convention Center, Hartford, CT Connecticut United for Research Excellence, Inc. (CURE) Paul R. Pescatello, President & CEO

2. CURE, as an educational organization and trade association, seeks to foster connectedness among pharma companies, biotech firms, colleges & universities, and firms that help core members do business, especially R&D. –Represent the biotechnology and pharmaceutical sectors before the state legislature and policy makers –Build a critical mass of biotech and pharmaceutical companies –Foster relationships between academic and industry research that lead to technology transfer –Be the “go to” source for information about bioscience in Connecticut CURE Mission

3. The Mission, distilled Advocate Build critical mass Facilitate tech transfer Resource BioBus Often, the same thing At legislatures and administrative agencies and/or with news media/opinion makers For the public, opinion makers, state economic development efforts Workforce development and public education

4. Bioscience Jobs Multiplier highest of any industry sector (3.3)

5. –Build student interest in science –Relay new scientific techniques to educators –Show how bioscience is relevant –Show students bioscience careers other than M.D. and nursing programs CURE & The BioBus Programs

6. From Compound to Cure

7. What is a biotech? A company that wants to be a pharmaceutical company

8. Changing Face of Biotech Pharmacogenomics – the study of how genes affect the way individuals respond to drugs. Diagnostics, then Therapeutics

9. XDx’s AlloMap From 10+ cardiac tissue biopsies to blood test Genomic knowledge creates cheaper, less invasive diagnostic

10. HistoRx Using biomarkers as companion diagnostics for new pharmaceuticals

11. What we’re really talking about - costs of illness Medications Hospitalizations Doctor visits Physical therapies Surgeries Lost productivity

12. Healthcare costs are rising... –But share of healthcare dollar attributable to medicines has held steady at 10%

13. Health Care Dollar

14. U.S. Annual Health Care Spending $1.6 TRILLION 1.41.21.00.80.60.40.20‘65 ‘70 ‘75 ‘80 ‘85 ‘90 ‘95 ‘00 NOTE: 2001 AND 2002 DATA PROJECTED RESEARCH AND CONSTRUCTION PERSONAL MEDICAL EQUIPMENT AND NON-PRESCRIPTION DRUGS NURSING HOME AND HOME HEALTH CARE PRESCRIPTION DRUGS NET COST OF PRIVATE HEALTH INSURANCE, ADMINISTRATIVE COSTS, AND PUBLIC HEALTH PROGRAMS HOSPITAL CARE DOCTORS, DENTISTS, AND OTHER PROFESSIONAL SERVICES Source: Health And Human Services Department

15. Health Care Dollar

18. Production Costs PEN + INK ≠ TEXTBOOK ACTIVE + INACTIVE INGREDIENTS ≠ MEDICINE

19. Secret Ingredient KNOWLEDGE

20. Drug Discovery Basics 5 Number of compounds investigated that are tested in clinical trials = Number of compounds in clinical trials that are approved for patient use 10,000 1 = 5

21. Cost of researching and developing a drug from idea to pharmacy: $800,000,000 to $1,500,000,000

22. Birth of a Drug

23. Drug Development - A Risky and Expensive Proposition Source: Tufts Center for the Study of Drug Development 5,000–10,000 Screened 250 Enter Preclinical Testing 5 Enter Clinical Testing 1 Approved by the FDA Compound Success Rates by Stage 16 14 12 10 8 6 4 2 0 Phase II 100–300 Patient Volunteers Used to Look for Efficacy and Side Effects Phase III 1,000–5,000 Patient Volunteers Used to Monitor Adverse Reactions to Long-term Use FDA Review Approval Additional Post-marketing Testing Phase I 20–80 Healthy Volunteers Used to Determine Safety and Dosage Preclinical Testing Laboratory and Animal Testing Preclinical Testing Laboratory and Animal Testing Discovery (2–10 Years) Discovery (2–10 Years) Years

24. 1 –2 Products Products Attrition is High in the Knowledge Business Discovery Exploratory Development Idea Drug 11 - 15 Years -----TIME----- Full Development Phase I Phase IIPhase III 015 5 10 Preclinical Pharmacology Preclinical Safety Millions of Compounds Screened Clinical Pharmacology & Safety

25. Healthcare Economics: Prescription Drugs Save Money Stroke – 40,000 fewer strokes per year HIV/AIDS – Death rate cut by 70% High Cholesterol – 1/3 fewer hospitalizations Cancer – Survival rate up to 62.7% from 50% in 1971

26. Impact of Drugs on Spending and Mortality for HIV/AIDS Source: Costs - Bozette et al., New England Journal of Medicine Vol. 344, No. 11, March 15, 2001; Mortality - Centers for Disease Control; data on drug development from PhRMA and the NIH Office of Technology transfer; Pfizer. HIV Mortality Declined Dramatically after Introduction of First “Expensive” Antiretrovirals... First new Drugs Introduced, 1995 Highly Active Antiretroviral Therapy (HAART) introduced, 1996-97 Total: $1804 Total: $1521 Drug Costs Increase by 34% Other Costs Decrease by 41%... While Monthly Costs for AIDS Patients Decreased by 16% after HAART Introduced

27. New Drugs Reduce Visits to Hospital and ER: Asthma Management Program Improves Outcomes for Children with Asthma

28. Concept that Leads to Cures Revenues from successful medicines cover the cost of much, much “unsuccessful” research

29. Only 3 of 10 Marketed Drugs Produce Revenues That Match or Exceed Average R&D Costs

30. If biotechs and pharmaceutical companies don’t do the R&D, who will?

31. Not the NIH 2004 NIH Budget for administration, government research & grants (total): $27.9 billion Biotech/pharmaceutical total R&D spending: $49 billion Biopharma does the clinical trials, translates basic science into practical medicines

32. Why risk investment in a company needing tens of millions of dollars and a decade or more to have a chance of marketing a product? Commensurate reward

33. Reduce the reward Less research Less knowledge creation & discovery Fewer medicines

34. The answer to high drug costs? Importation? No, only shorthand way for politicians to show empathy for high cost of health care But side effect worse than cure: –Importation of price controls –Innovation stagnation

35. What are we really talking about? An international relations/trade issue. –Motivating other developed economies to pay more for the R&D that makes up the price of prescription drugs –Figuring out a way to spread the cost of healthcare across the entire population Hint #1: Greatest cost components of healthcare are the 1 st and last six months of life Hint #2: The annual tab for a daily cup of Starbucks is $1,003.75