Secretary's Speech

Secretary of Commerce Carlos M. Gutierrez
PhRMA Discoverers Awards
Washington, D.C.

Let me begin by congratulating your guests of honor this evening: the winners of PhRMA’s prestigious Discoverers Award. I understand the official presentations will be made after dinner.

There is probably no endeavor more essential to our nation’s security, safety, health and prosperity than innovative research that leads to new discoveries and products.

America’s forefathers thought it important enough to give Congress the right to protect inventions in the U.S. Constitution. President George Washington signed the bill laying the foundation of our patent system in April, 1790.

The understanding was that providing limited exclusive rights to an invention or discovery would, over the long term, be of greater benefit to society than to the individual inventor.

While still evolving to meet new 21stcentury demands, the patent system has served us well.

The end result is clear: Because of the imagination and hard work of people like those being honored tonight, we’re living longer, healthier, more comfortably.

We have a standard of living that is the envy of most of the world--and a strong and vibrant economy with low inflation, low unemployment and the fastest growth of any other major industrialized nation.

Since August 2003, over seven-and-a-half million new jobs have been created. That’s more than all of the new jobs created in the European Union and Japan combined.

Discoverers, inventors, creators and risk takers play a big part in this good economic news. The so-called “Eureka” industries represent 40 percent of U.S. economic growth and employ 18 million Americans in good, high-paying jobs.

Intellectual property accounts for over one-third of the value of all publicly traded U.S. corporations. This is an amount equal to almost half of the U.S. GDP.

We in government are not generating growth and creating jobs and allocating capital and launching new products. That’s being done by you, by the private sector.

Our role is to create the environment for you to succeed. So the question is how do we keep the momentum going?

We believe that in very simple terms, our future relies on our ability to compete. The challenge that confronts a CEO is the same challenge our nation faces: every day, every year, to become more and more competitive.While the United States has led the global marketplace in fostering new ideas, we can’t be complacent.Look at what’s happening:

• Throughout the 1960s, the U.S. share of total worldwide research and development was about 60 percent.
• Today, not because we’ve pulled back, but because everyone else is doing R&D, our share is 30 percent.
• Since 2000, there have been more foreign graduate students than U.S. citizens studying engineering and the physical, computer and mathematical sciences in U.S. graduate schools. This isn’t just about numbers, but the reality that we’re confronting a lot of high-skilled workforces around the world.
• And, think about this: we spend more money on tort litigation in our country than we do on research and development. We spend more money suing each other than we do investing in developing next-generation cures and technologies and products.

President Bush has an aggressive pro-growth agenda to keep our economy strong and our nation innovative and competitive.

First, we have to continue opening global markets. Exports have grown at about a 6 percent annual rate since the President took office. In 2006, the United States was the largest exporter of good and services in the world with $1.4 trillion in exports.

There’s a lot of talk these days about withdrawing a bit from the global economy. We hear a lot of protectionist sentiment being expressed throughout the country and in Congress. I would suggest to you that is a big trap. The worst thing we could do today is believe we could grow without being part of the global economy.

Notably, at the same time, we’re moving to open markets, we’re negotiating free trade agreements with cutting edge intellectual property protections, including patent protection. We’re putting on a full court press to protect U.S. products from piracy and counterfeiting.

We believe respect for intellectual property rights is critical to an innovative economy--ours as well as our trading partners.

As you know, the military government in Thailand for example, has recently made unilateral decisions to break patents, disregard innovation and pre-empt the type of transparent negotiation that has worked in many other developing countries. We believe, and we have seen in many contexts, that respect for intellectual property and effective approaches to deliver quality care are not mutually exclusive goals. Your industry has proven this through its leadership and action around the world.

As you know all too well, a lack of respect for intellectual property is much more than an economic issue. The World Health Organization estimates global sales of counterfeit medicines at $35-to-$40 billion a year. This translates to roughly 10 percent of all medicines in the world.

Counterfeit drugs impact the health and safety of those who think they’re getting the real deal. And sometimes, sadly, they kill.We’ve made this a significant law enforcement priority. From the FDA to Customs to the Justice Department, we’re going after the criminal organizations producing and trafficking in counterfeit drugs. And we’re working closely with leaders within your industry.

Second, e need tort reform to reduce frivolous lawsuits, and we need to keep taxes low. In fact, we’d like to have taxes lower. What we don’t need is a tax increase.

I would hope that there is no way that anyone can convince the American people that somehow the government needs a tax increase. I know families don’t want higher taxes.

I know businesses don’t want higher taxes.And we also don’t need to fix a prescription drug benefit program that isn’t broken. Government shouldn’t be negotiating Medicare Part D prescription prices.

The success of the Medicare prescription drug benefit indicates that competition among private drug plans is helping to provide wider choices and lower costs. The average monthly premium has dropped by 42 percent--from an estimated $38 to $22--and there’s a plan available for less than $20 a month in every state.

Third, we need to implement the President’s American Competitiveness Initiative. ACI commits $136 billion dollars over 10 years to increase investment in R&D, strengthen education and encourage innovation.

It doubles funding for basic research. The federal government does about a third of all R&D in the country. This tends to be very basic research. We’d like to double funding for these projects. More basic research will result in more private innovation.

It also calls for making the R&D tax credit permanent. As you know, today the tax credit for R&D has to be renewed every 18 or 24 months. Businesses want predictability. They want visibility into the future.

Another key component is strengthening K-12 science and math education to prepare the innovators of tomorrow and enlisting more professionals to mentor students.

Lastly, it calls for increasing our ability to compete for and retain the best and brightest highly-skilled workers from around the world.

We have a great track record on growth. We have a great track record on innovation.

And, as the pharmaceutical industry is well aware, sometimes that’s not an easy track to run. The development of a new drug can take from an average of 10-to-15 years and cost in excess of $800 million--much of that in regulatory costs.

What we can do in Washington to ensure we keep growth and innovation going is to keep taxes low, federal regulation to a minimum, spending restrained, and markets open, and then let free enterprise work its magic.

I’ll close with this: Everyday when I arrive at the Commerce Department, I see the Abraham Lincoln quote engraved over the entrance. It reads “The patent system added the fuel of interest to the fire of genius.”

As a father, like many of you here this evening, I’ve made a late night trip to the drug store to get a prescription filled for a sick child.

I have great admiration and appreciation for the world-class medical care, medicines and products you help make available to protect health and extend lives. The challenge we face together is this: to maintain an environment that will keep the fire of genius burning throughout our society and ensure that ours continues to be the most innovative, greatest and healthiest country in the world in which to work, to live and to raise a family.

Thank you.