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Lilly CEO Blames Slower Innovation on Immigration, Tax Laws

Eli Lilly & Co Chief Executive Officer John Lechleiter
Eli Lilly & Co chief executive officer John Lechleiter. Photographer: Koichi Kamoshida/Bloomberg

The U.S. government needs to open its borders to attract and retain talented scientists for drugmakers to employ, Eli Lilly & Co. Chief Executive Officer John Lechleiter told a technology conference today.

The pharmaceutical industry faces $1.3 billion in development costs for a single drug and had 95 Food and Drug Administration clearances in the past five years, the lowest in such a span since the late 1970s. The industry is in a six-year window when products that make up 40 percent of pharmaceutical sales lose patent protection, equivalent to a $100 billion loss in annual revenue, he said.

Lechleiter called for U.S. immigration officials to issue more green cards, formally called permanent resident cards, for highly skilled immigrants along with adopting a shorter, simpler process to obtain the proof to live and work in the U.S. His remarks were part of a five-point proposal to reinvigorate U.S. innovation at a Washington conference.

“To those that argue that these immigrants are taking jobs from Americans, I say baloney,” according to a draft of prepared remarks provided to Bloomberg. “And it surely beats the alternative: talented people trained in the U.S. returning to their native country or going elsewhere to start or help a foreign firm to compete against us.”

He added: “You want a job killer? That’s a job killer.”

Waiting Years

Employees of Indianapolis-based Lilly sponsored by the company wait an average of five years to obtain a green card. The uncertainty and frustration drives away promising potential candidates for employment, Lechleiter said in his remarks.

Lilly fell 49 cents, or 1.3 percent, to $37.19 at 4:09 p.m. in New York Stock Exchange composite trading; the stock has climbed 6.1 percent this year.

Lechleiter also called for bigger tax breaks and an FDA approval process that more evenly weighs safety and benefits. The corporate tax rate needs to be dropped as low as 20 percent and the U.S. shouldn’t tax the overseas earnings of U.S. companies, he said.

The U.S. corporate tax rate was 40 percent in 2009, according to KPMG LLP, a tax firm based in New York. The U.K.’s rate was 28 percent and China’s was 25 percent in the same year.

The Biotechnology Industry Organization, a Washington lobbying group that represents manufacturers of biologic drugs made from living organisms, plans during its annual conference next week to introduce legislative proposals aimed at spurring innovation as well.

BIO President and Chief Executive Officer Jim Greenwood said in a telephone interview the proposals won’t address immigration even as he acknowledged green-card access is an industry concern.

Drafting Proposal

“Congress should be running to us asking, ‘What do you need?’” he said. BIO will be ready with a proposal, once it is adopted by its board June 27 at the Washington conference, that will include legislative recommendations for Congress, much like Lechleiter’s suggestions, on tax incentives and regulatory changes at the FDA, Greenwood said.

He didn’t specify the tax stimulants the trade group would seek or the regulatory changes except to say that “the risk-benefit ratio or consideration isn’t there” at the FDA.

Greenwood said he came up with the idea for the proposal last year following passage of the health law and the 10th anniversary of the sequencing of the human genome. He sought help from former National Institutes of Health Director Elias Zerhouni, who now is president of research and development at Sanofi.

The FDA drug review process must be more systemic, Lechleiter said.

“There is much greater pressure on regulators to identify and avoid risks of new medicines than to balance those risks against the potential benefits to patients,” he said in his remarks.

Lechleiter wants the FDA to document the basis of putting off decisions or erring on the side of avoiding risk.

The FDA and industry held talks on enhancing communication as part of negotiations over user fees that drugmakers pay to speed product approvals that must be reauthorized in 2012. The agency said on its website it proposed to create liaisons to meet more often with industry about drug applications.

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