President Biden’s push to rejuvenate the country’s technology-based sectors, which commenced with semiconductors and electric vehicles, should also encompass the life sciences domain. Biotechnology, pharmaceuticals, medical devices, digital therapeutics, diagnostics, genomics, and AI-driven clinical decision support operate in a competitive global arena where other countries are amplifying their backing for local frontrunners. The advantages of investing in life sciences extend beyond enhanced health outcomes to encompass well-paying jobs, exports, tax revenues, pandemic and military readiness, and cross-sectoral spillover effects.
Advocating for a more proactive industrial policy in the life sciences is not exclusive to a single party but should be a bipartisan initiative, particularly given the escalating concerns regarding China’s aspirations. Conservative factions in Congress call for heightened sanctions on unjust subsidies and intellectual property theft. Former President Donald Trump proposes broad tariffs and reductions in U.S. drug prices to align with international rates. President Biden strongly endorses reshoring the complete technology innovation continuum, spanning research, product development, manufacturing, and distribution.
Regrettably, while bipartisan viewpoints on policy exist, they do not necessarily translate into bipartisan political backing for these policies. The primary hurdle facing the U.S. life sciences sector lies in the nation’s ongoing struggle to formulate a clear vision and execute a strategy to realize it. Nonetheless, the similarities between the Trump administration’s Operation Warp Speed (OWS) and the Biden administration’s Advanced Research Projects Agency for Health (ARPA-H) indicate a potential common trajectory.
The perceived threat posed by China is prompting a reevaluation of the traditional U.S. innovation policy framework, which historically emphasized government-funded scientific research and industry-funded product development. The current landscape necessitates a shift towards a more cohesive industrial policy for the life sciences to prevent falling behind, as seen in other critical industries.
A Fresh Approach to Industrial Policy
Simultaneously pursuing two objectives is imperative. Firstly, public investments should target areas of significant societal need with innovation potential. Secondly, policies must ensure that the benefits derived from these investments predominantly enrich the U.S. rather than other nations.
The U.S. must veer away from the familiar path of funding basic research only to witness subsequent stages of manufacturing and development relocate overseas. Losing ground in industries like semiconductors, computers, batteries, electric vehicles, and wind power to Asian counterparts highlights the urgency for a strategic industrial policy in the life sciences to avert a similar fate.
Innovative Funding Models
The revamped life sciences industrial policy should involve a renewed focus on funding from the National Institutes of Health, given the sector’s reliance on scientific breakthroughs. Moreover, tax policies should be realigned to match those of competitor nations, while expanding public grants from research to product development is crucial.
Unlike venture capital firms, the public sector possesses the financial capacity and long-term vision required to support the scaling up of startups, particularly outside the software realm. Successful models in Asian nations underscore the efficacy of public sector intervention in this regard.
Operation Warp Speed’s success in vaccine innovation underscores the impact of public grants in product development, manufacturing expansion, and distribution system enhancement. ARPA-H aims to emulate this success by offering grants for technology ventures with transformative potential in diagnostics and therapeutics.
By adopting push grants, the U.S. can cultivate policies favoring domestic firms over foreign entities, akin to strategies employed by global leaders in innovation policy like Israel.
Novel Incentive Mechanisms
Traditionally, successful innovation in the life sciences has been rewarded with the ability to command high prices in the U.S. market. However, the U.S. pays significantly higher drug prices compared to other affluent nations, contributing substantially to the pharmaceutical sector’s revenues globally. To counter this trend, alternative pull mechanisms such as advance purchase commitments can de-risk the market demand side and ensure a more balanced pricing strategy.
Embracing the Future
As the U.S. charts its course forward, drawing lessons from past successes is instrumental. The nation’s adept handling of the Covid-19 crisis through innovative incentive structures, robust public-private collaboration, and decisive public sector leadership underscores its potential for driving transformative change across the entire life sciences spectrum.