Drug innovation offers economy hope

Nowhere is there a better opportunity to drive growth than our medical innovation sector. We need to facilitate the innovation of new medical technologies, and further scientific research.
Improving medical innovation is the way out of our economic crisis. Doing so creates long-term job opportunities, and generates new drugs that help fight debilitating and fatal diseases.

Facing skyrocketing deficits and anemic economic recovery, cash-strapped European governments have recently passed austerity packages to reduce spending and rein in budget deficits.

As part of these efforts, European governments have seriously curtailed expenditures on drug development.

Indeed, IHS Global Insight estimates that pharmaceutical sales in Europe will grow at just two percent annually from now until 2015. Biotech companies are increasingly apprehensive about expanding facilities in Europe. And they’re strictly limiting their investment in locally-based lines of research.

Put simply – drug innovation is on the decline in Europe.

To avoid a similar fate, the United States needs to scale back hurdles for drug makers and reduce the cost of undertaking innovative activities.

An aggressive medical innovation agenda will revive the economy, facilitate the work of scientists, and bring to market products that will address some of our world’s most pressing medical challenges.

The Obama administration needs to provide new incentives to entrepreneurs and small businesses in the pharmaceutical sector. The combination of private investment, federal funding and strong public-private partnerships will create jobs, bring down our deficit, reduce healthcare costs and positively impact other industries.

By making tax policies friendlier to innovation and entrepreneurship, we can substantially reduce the cost of undertaking innovative activities, provide incentives for private investment in R&D, and make our economy globally competitive.

Entrepreneurship is crucial for economic growth. Research by the Kauffman Foundation shows that in virtually every recession, it is the small business sector that creates the jobs that bring the economy out of recession. It is unlikely that this recession will be any different.

The administration must put forth a set of focused initiatives that promote economic growth, with an emphasis on job creation through tax cuts and tax incentives. In addition, it has to create a set of policies that reduce spending, and ultimately reduce the debt and deficit.

Part of this effort must include making the research and development tax credit permanent. This credit creates the long-term incentive for investors to put more money into pharmaceutical development and other innovative sectors of the economy.

Making the tax credit permanent would induce a flood of new R&D spending. Research shows that the R&D tax credit has been a cost-effective policy.

Academic studies have found that every tax dollar deducted fuels between one and three dollars in R&D investment. Other studies have found even greater benefits, with the economic-benefit-to-tax-cost ratio as high as two.

Moreover, a study prepared for Congress’ Office of Technology Assessment found a tight relationship between money put toward new research and the level of certainty that the R&D tax credits would stick around.

Policymakers should also extend the Small Business Innovation Research program, and expand lending through the Small Business Administration. These moves would encourage more start-ups and enable small businesses to hire and train more workers.

On a broader scale, government should declare a payroll tax holiday for new businesses so they can invest in new jobs. This would encourage private-sector employers in the biotech community to make new hires and retain current employees.

And lawmakers should remove existing legal roadblocks to the formation and growth of new companies. They could do so by reforming patent laws to permit challenges to patents within twelve months of their award. Patent courts must recognize that the balance of costs and incentives for patents varies significantly by industry.

Government needs to reform immigration laws to let high-growth entrepreneurs into this country. And, finally, we need to foster the next generation of scientific researchers by improving math and science education in our nation’s schools.

Now is the time for a practical, achievable and pro-growth agenda to create jobs and spur the creation of life-saving treatments. Pharmaceutical innovation represents our nation’s best hope of emerging from this prolonged period of economic weakness as a stronger, healthier and more competitive economy.

Douglas Schoen is a political strategist and author of the just-released book, “Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System” (Harper 2010), co-authored with Scott Rasmussen.