Healthcare innovation — a vital social function

FORTY years ago no one could have foreseen the staggering development Shanghai was about to witness when it started to reform its economy and open up to international trade.

In record time, the city not only bridged the gap with the West. It became a leader in its own right in areas as diverse as industrial production, finance and information technology- — to name but a few sectors.

Today, the city is charting new territory. Its leaders are intent on accelerating innovation, boosting education and strengthening infrastructure to create a global city of excellence and further strengthen Shanghai’s attractiveness as an international investment hub.

As these efforts gain traction, I am convinced they will serve as a blueprint for other cities in an increasingly urbanized and globalized world.

In my view, driving innovation in healthcare will be crucial if Shanghai is to achieve this goal, because the quality of a healthcare system is intrinsically linked to a society’s ability to be productive.

This is especially important today, as Shanghai and China — like the rest of the world — are faced with structural challenges linked to demographic change.

The expected increase in age-related and chronic diseases due to rising life expectancy — China’s life expectancy at birth is predicted to rise from around 76 today to 79 by 2030 — is set to increase costs and will require new medical and social care solutions.

Shifting the focus toward the management of care-intensive chronic conditions such as lung disease, diabetes, cancer and cardiovascular diseases, is challenging — in terms of both developing new drugs and providing assistance to patients with chronic diseases.

Drug development costs have been rising rapidly in the past 20 years, reaching an average of US$1.5 billion to get just one medicine onto the market. This is a threefold increase from the US$500 million in the 1990s.

Overall healthcare costs are also increasing rapidly, especially in industrialized countries, where they generally top 10 percent of GDP. In China, healthcare expenditure is rising, too, having grown from 3.5 percent of GDP in 1995 to 5.5 percent in 2014, according to the World Health Organization.

A strong base

Given its strong innovation-oriented leadership, its track record in other industries and proven ability to adapt to fast-changing market needs, I am convinced Shanghai is very well positioned to tackle today’s healthcare challenge.

My optimism is based on the fact that Shanghai has one of the world’s greatest talent pools in the fields of medicine, biology and chemistry.

According to the World Economic Forum, China had 4.7 million graduates in science, technology, engineering and mathematics in 2016. In the US, by comparison, the figure was 568,000.

And this competitive advantage is set to accelerate, as some experts believe that the number of Chinese graduates will grow by 300 percent from today to 2030, versus 30 percent in Western industrialized countries.

The city has also considerably improved its healthcare system over the past few years. It has introduced transparent regulations and has been allocating substantial funds to research and development to drive innovation.

These advances have also helped Novartis. In Shanghai, where we opened a campus last year, our Chinese colleagues have already researched a new cancer compound that is now being developed globally.

Harnessing private research

To support Shanghai’s goal to become a global innovation hub, we at Novartis believe that the Shanghai government could explore three areas related to life sciences innovation.

One important aspect is to encourage investment in life sciences. Today, private funding is often risk-averse and focuses on short-term financial gains.

To make full use of Shanghai’s exceptional human capital, policymakers could envisage strengthening framework conditions that allow investors to take a longer-term view.

This could include the coordination of existing government funding efforts through a funding review committee, the use of intellectual property rights as security for loans or the introduction of “loyalty shares,” which increase investors’ voting rights over a certain period of time.

Another important element for accelerating healthcare innovation is to find novel ways to translate basic research findings into medicines.

The transition from the research lab to the clinic needs to be managed with great diligence given its complexity and the large numbers of players involved. Just consider the fact that out of 10,000 potential molecules only one is likely to make it through development to become a marketable drug.

Although Shanghai has strong scientific talent and an increasing willingness to participate in healthcare innovation, capabilities for translational research are still limited.

Translation of research outcomes into commercial products could be encouraged by the establishment of full-time clinical trial departments. These should be given sufficient time to engage in clinical trials and be equipped with appropriate funds to pay researchers. These departments should also have the opportunity to share their ideas and experience with international experts and to be rewarded for achievements in R&D.

Last but not least, we believe that increasing early market access for innovative medicines could create a win-win situation for patients and investors.

Investors in innovative healthcare products are eager to see their products reach patients and make a difference in the real world. Market access is also essential to achieving a financial return on innovation.

Shanghai has benefited from a recent expansion of the National Reimbursement Drug List, which has added some new drugs and expanded the number of drugs overall.

However, provinces have only limited options for deviating from this list.

Shanghai could test a more flexible approach by including selected registered drugs in the provincial list on an ongoing basis, instead awaiting updates of the national list.

Thousands of patients could benefit from this access to novel treatments.

Harbinger of change

I am confident that Shanghai will succeed in further expanding its pharmaceutical industry, developing new drugs and finding solutions that prepare the city for existing and coming healthcare challenges.

As Shanghai strives to boost its position as a global biotech center and work on establishing new models of excellence, Novartis stands ready to support the Shanghai government in these efforts.

This in my view will also help the city create a strong investment and research environment that will allow Shanghai to invigorate its strong leadership position and become a harbinger of change in our urbanized world.