Drug makers are “getting away with murder” said President Trump in his first press-conference as president-elect, unsettling prospects of a favorable industry partnership with a condemnation of high drug prices that laid blame on pharmaceutical companies, prompting representatives across the value chain, from manufacturers to wholesalers to payers and pharmacy benefit managers (PBMs), to shift blame to such an extent that they have run out of fingers to point. The Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s largest trade group and lobbyist, is simultaneously seeking to address negative public and institutional perception by increasing exposure of the industry’s advances through its recently-launched GOBOLDLY campaign. By showcasing recent innovation and the vast progress towards addressing unmet needs, the campaign seemingly hopes to offset the notion of “getting away with murder” by illustrating the opposite as the industry advances towards more effective and specialized treatments, and from treatments to cures.

Beyond the immediate effect on companies’ profits, lowering drug prices would greatly reduce incentives to innovate in an industry where the average drug costs upwards of $2 billion to develop and bring to market. The pharmaceutical industry is indeed one of the most R&D intensive in the United States, with annual investment of over $50 billion, and companies allocating between 15% to 20% of revenue to this area. As the backbone of the pharmaceutical and biotechnology industry, innovation needs to be supported and encouraged to drive these industries forward. Concerns had already been raised following a drop in drug approval rates in 2016 as the bar is pushed increasingly higher for approval and evidence of safety and efficacy. Following a shifting trend from mass-market drugs to those targeting smaller patient populations, whilst hurdles are rising, addressable market sizes are shrinking, and reimbursement once in the market is therefore more difficult even before considering the impacts of lowering drug prices.

“The industry needs to do something about pricing, plain and simple,” asserted James Sapirstein, CEO at Contravir and chairman at BioNJ. “If the industry does not figure out a way to be more transparent, the government will. The system in the United States allows us to innovate, and reference pricing as seen in Europe and around the world would hinder our progress to helping people with hard-to-treat diseases. Patients might be in favor of reference pricing to lower drug costs, but removing the incentive for profit will kill invention. In countries such as Russia, prices might be low, but there is no innovation, and what is invented is not tested adequately enough to be safe.”

Whilst larger companies continue to drive R&D programs and bring drugs to market, academic institutions and their off-shoots are playing an increasing role in innovation. Cross-collaboration between industry and academia is on the rise, and larger pharma companies are increasingly outsourcing early-stage R&D, with many products of companies such as Johnson & Johnson, Merck and Bristol-Myers Squibb initially developed by biotech companies. Financing is a key challenge for companies lacking already-commercialized products in their portfolios, and whilst the United States’ appealing IP laws might offset potential deterrents such as high corporate tax rates, financial incentives and support are needed for these trends to continue. This has been better recognized at a state level, although there are some grants and initiatives nationwide. The 21st Century Cures Act, which became law in December 2016, also provides a large supplemental appropriation to the National Institutes of Health to enable more of its core research.

Several individual states are placing greater emphasis on the role of life sciences within their economic development and recognizing the importance of fostering an innovation ecosystem, reflected in the many incentives and various financial supports on offer of which companies can take advantage. The most committed and successful states have been able to create dynamic hubs to which companies both large and small are gravitating. The Boston/Cambridge area ranked first in Genetic Engineering & Biotechnology News’ (GEN) top U.S. biopharma clusters list in 2016, followed by the San Francisco Bay area, having seen greatest progress in R&D through commercialization of academic research projects. Ranking third, the New Jersey/New York hub nevertheless maintains its reputation as the “medicine chest of the world”.

New Jersey’s economic development strategy is particularly focused on the life sciences industry, with an overall drive to increase the attractiveness of the region. Particularly notable is New Jersey’s Net Operating Loss (NOL) program, which is unique to the state. Officially called the Technology Business Tech Certificate Transfer program, the program allows companies not yet seeing financial return to sell their losses to for-profit companies. The for-profit companies use that credit to offset some of their profits, and in turn offer a certain percentage on each dollar bought. In addition, there is the Grow New Jersey program, centered around job creation in the state, and the state’s angel investor programs also carry huge appeal. “251 applications were approved through New Jersey’s Angel Investor Tax Credit Program in 2016, representing the injection of more than $96 million in private capital into technology and life sciences companies in the state,” commented Melissa Orsen, CEO of the New Jersey Economic Development Authority. “Interestingly, a little under 40% of investors within the angel investor program were actually from New Jersey, showing a larger percentage investing into the state from the rest of the United States and from abroad.”

New Jersey is also home to the largest incubator, the Commercialization Center for Innovation Technologies (CCIT). Established in 2002, CCIT’s tenants have so far generated more than $130 million in revenue, and graduates include successful ventures into a variety of areas. Genewiz, a global leader in research and development genomics services, grew from a two-person operation at CCIT into a 700-person, internationally-recognized operation headquartered in South Plainfield with 12 facilities at major biotech hubs around the world. Advaxis, Chromocell, Amicus Therapeutics, Agile Therapeutics and ContraVir are just some of the other notable companies that originated at this facility.

Industry associations such as BioNJ, the New Jersey arm of BIO, and the Healthcare Institute of New Jersey (HINJ) act both in support of individual companies and as industry advocates. BioNJ was recently involved in signing two initiatives into law: the establishment of the Biotechnology Task Force, and the establishment of a governmental entity to facilitate business and academic partnerships across the state. BioNJ will have a seat on both. “Working closely with policy makers in Washington and New Jersey, we will advocate for a policy environment that supports medical innovation and ensures faster treatments and cures for patients,” stated Debbie Hart, president and CEO at BioNJ. “BioNJ is committed to the growth and prosperity of our industry and that patients have access to innovative medicines to improve and save their lives.”

The presence of key players, including 13 of the top 20 pharmaceutical companies, is testament to the state’s support infrastructure and framework.

Universities such as Rutgers and Princeton are taking advantage of trends to outsource early-stage development, and are positioning themselves as strong partners for industry. Princeton plans to increase research expenditure from industry, already increasing this figure to 12% in 2016, where it had previously been between 5% and 6%. Despite being relatively small in size, Princeton saw 191 patents filed, 31 issued and 29 technologies licensed in 2016. Rutgers is leading the way in areas such as continuous manufacturing (CM), partnering with companies such as Johnson & Johnson, which recently used CM processes developed and optimized at Rutgers to produce HIV treatment drug Prezista.

Moving down the East Coast, Pennsylvania is also home to prominent academic institutions, alongside a growing community of contract research organizations (CROs), with two of the top five institutions funded by the National Institute of Health (NIH)–the University of Pennsylvania is number four and the University of Pittsburgh is number five. The Pennsylvania Biotechnology Center seeks to advance biotechnology in the region, part-funded by a grant from the Commonwealth of Pennsylvania, and home to the Hepatitis B Foundation and its research institute, the Baruch S. Blumberg Institute, as well as other research organizations. Pennsylvania’s most prominent association, representing a broad range of life sciences companies, is Life Sciences PA, previously Pennsylvania Bio, with 726 members across pharmaceuticals, medical devices, diagnostics, academic research institutions.

Whilst the state has faced a budget deficit for the last few years, resulting in fewer policy changes, there are nevertheless a number of initiatives in place, such as Innovate in PA, which received $80 million of funding in 2015. In addition, there is the Research and Development Tax Credit with a pool of $55 million for companies to access, which can also be sold for credit or cash. However, Pennsylvania’s high corporate net income tax (CNI) rate could make the state less attractive, and nationwide is second only to Iowa’s. Nevertheless, companies continue to set up shop in the state, demonstrating its attractiveness. Nabriva, a clinical-stage biopharmaceutical company focused on novel antibiotics to treat serious infections, headquartered in Austria, recently set up the head of its U.S. operations in the area, for example. The company is concentrated on the pleuromutilin class of antibiotics, and its lead product candidate, lefamulin, is geared to be the first pleuromutilin antibiotic available for systemic administration in humans.

A certain degree of support is required for companies to enable continued development and research into new areas, and whilst this is recognized at a state level, the industry would benefit from wider nationwide support. First and foremost, companies need adequate incentives and minimal barriers for projects to make commercial sense and to support the various stages of drug discovery and development. The drive to make drugs more affordable is commendable, but should not come at the expense of the innovation that enables these treatments and cures in the first place.