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Remarks at PhRMA Annual Meeting, Arlington, Virginia

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Thursday, March 18, 2010

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Secretary of Commerce Gary Locke
Remarks at PhRMA Annual Meeting
Arlington, Virginia

Thank you for inviting me here today.

As we meet here in Arlington, it's hard not to have our attention focused on what's going on just a few miles from here.

Congress is on the cusp of passing comprehensive health care legislation that will finally expand access, bring down costs and give Americans the security that if they lose or change jobs, they can count on affordable coverage, regardless of their health status.

If this bill passes, it will be a quantum leap forward for the American people and for the American economy.

And I want to thank PhRMA for the constructive role you have played since this whole process began over a year ago.

I know this issue has been contentious, even within your own membership. But I have the utmost confidence that comprehensive health care legislation will have been worth fighting for.

It's going to provide security and affordability for consumers. It's going to bring down costs for individuals, families, businesses and the government.

And it's going to help fuel the innovation America needs to get its economy growing again.

That connection, between health care reform and innovation might not be immediately apparent. But it is no less true.

America, more than any other country, celebrates the idea of entrepreneurial innovators and companies bringing new products and new ways of doing business to market. We glorify those willing to shake up the status quo. And the Obama administration seeks to empower them.

Well, unfortunately our health care system as it exists today, preserves the status quo.

In this 21st century economy, people should decide whether they want to start a new business or switch jobs based solely on where their skills fit best and where they can grow.

But that's not the way it works. We all know people who would like to switch jobs, but won’t because they can't afford to lose health care for their child or risk shopping for a plan in the individual market.

Who knows how many new businesses haven’t been started or new products haven’t been developed because smart people were locked in jobs just to keep their health care?

In these difficult economic times, nothing is more important to American prosperity than jumpstarting our engine of innovation.

I know that is something that people in the pharmaceutical and biomedical industries have a deep appreciation for—and I’d like to spend my time today talking about how the Obama administration is jumpstarting our national engine of innovation.

America’s economy has always depended, above all, on a continuous flow of new technologies and new ideas entering the marketplace.

But that engine has recently broken down.

For years, our economy had been on a path of illusory growth—one driven by speculation and debt-fueled consumption.

America may still be a world leader in key metrics of economic success like levels of entrepreneurship, R&D investment and IT infrastructure—but a widely-cited report that came out last year concluded that no advanced economy has done less than the United States to improve its competitive position over the last decade.

The United States simply must get back to cultivating industries and lines of scientific discovery that provide long-term benefits to society and spur sustainable innovation.

That's the type of work that America's pharmaceutical and biomedical companies do every day.

Your industry is high-risk and high-reward—it’s characterized by big investments, only some of which will reap substantial pay-offs.

Your industry is a source of breakthroughs in treatments to improve public health, a source of high-paying jobs, and a constant font of innovation that spins off new businesses with significant growth prospects.

Above all, we owe this uniquely American success story to the vision and intellect of your scientists, engineers and business managers.

But over the years, this country has also made a lot of smart decisions to create the physical and regulatory environment that allow your innovations to germinate.

U.S. leadership in pharmaceuticals and biotechnology flows from the nation’s multi-decade support for basic research led by the National Institutes of Health; a strong pool of world-class scientific talent; and an entrepreneurial climate that fosters the start-up of new businesses.

These are competitive strengths that the Obama administration seeks to build on. Let me tell you how.

To begin with, this administration has made a variety of policy decisions that have a direct impact on the ability of America's pharmaceutical and biotechnology companies to deliver affordable life-saving medicines to consumers.

The administration is providing additional funding for research and development through the NIH and other agencies—reversing the decades-long decline in federal funding of basic research.

You will all also remember that one of President Obama's first acts upon entering office was lifting barriers to federally-funded stem cell research.

The administration and the Commerce Department are also pursuing a variety of innovation-boosting strategies that will help spur growth throughout our economy.

One key area that I know is of great interest to PhRMA members is the administration’s efforts to reform the U.S. patent office at home and crack down on counterfeiting and piracy of U.S. goods abroad.

When I joined the Commerce Department early last year, it became apparent almost immediately that we had major issues at the U.S. Patent and Trademark Office.

We had a backlog of almost 800,000 applications, and an often cumbersome process that created immense uncertainty in the marketplace.

Without clear and ironclad ownership of a patent, it makes it harder for businesses and entrepreneurs to attract investors and more likely that patent-holders will be on the receiving end of long term and possibly frivolous litigation.

It’s analogous to trying to build a house on a piece of land that you don't have clear title to. That's just not good for anybody.

And all of you should know that we are on a mission to fix these problems at the patent office.

We’ve got a very capable hand leading the PTO in Dave Kappos, who is focused on granting patent applications at higher quality and with greater timing flexibility.

We are going to continue working with Congress in the months ahead as they try to pass comprehensive patent reform this year. As you know, it's vital to the PTO, to innovation, to job creation and to our economy

Of course, I know that receiving clear and quality patent rights is only half the battle when it comes to intellectual property.

As American companies move ever deeper into world markets, it’s getting increasingly difficult to protect our innovations.

Every year, American companies in fields as diverse as energy, technology, entertainment and pharmaceuticals lose between $200-$250 billion to counterfeiting and piracy.

That hurts American businesses. It costs American jobs. And it is flatly unacceptable.

The life-saving medicines that you produce are among the strongest competitive advantages we have in the global economy.

And it is a fundamental priority of the Obama administration and the Department of Commerce to protect it.

The Department of Commerce has a long history of active international engagement on this issue.

Commerce has been an active participant with the U.S. Trade Representative and other agencies in the negotiation with key trading partners of an Anti-Counterfeiting Trade Agreement (ACTA), which takes aim at preventing counterfeiting and piracy on a global scale.

At last year’s U.S.-China JCCT meeting, we agreed on a range of issues, including furthering cooperation on intellectual property rights and strengthening China’s oversight and enforcement of active pharmaceutical ingredients that are used in the production of counterfeit medicines.

The PTO also has a very strong ongoing enforcement effort that provides training for government and private sector officials from all over the world.

More broadly, IP protection has been, and will continue to be, a focus of my tenure at Commerce.

I have already been to China multiple times to express the Obama administration’s commitment on this issue. My message there, and throughout the rest of the world, is a simple one:

America will not allow its knowledge and its intellectual property to be stolen with impunity.

Patents are obviously an integral part of America's innovation ecosystem.

But the Commerce Department is also engaged in a variety of other areas that impact the ability of businesses to develop ideas and deliver them to new markets.

For example, we are looking at ways to accelerate the movement of ideas from federally-funded labs into the hands of entrepreneurs. Many university-based research centers do a terrific job managing commercializing technologies. The challenge before us is to make that high-level of performance the standard nationwide.

A few weeks ago, the Commerce Department's Office of Innovation and Entrepreneurship brought together academic and business leaders from across the country to begin the process of developing a more efficient and standardized approach to moving basic and applied research into the marketplace.

Commerce is also working with the rest of the Administration to address problems with business visas—to allow foreign scientists and business leaders to travel more easily to the United States.

In addition, we will soon be awarding grants to local communities to help them improve upon their unique strengths and create regional economic clusters.

You’re all familiar with the Route 128 biotechnology corridor in Boston. There are also thriving biotech clusters in San Francisco, San Diego, and Research Triangle Park in North Carolina.

There's no reason we can't create more of these clusters of innovation around the country, centered on medical research or whatever other strength a local community chooses to build on.

As we take these important steps to spur American innovation at home, Commerce is also ramping up our efforts to help our companies sell more of their products abroad.

With traditional drivers of American economic growth like consumer and business spending facing headwinds, our companies must increasingly turn their focus to selling goods and services to the 95 percent of the world’s consumers who live outside the United States.

The Commerce Department is playing a lead role in implementing President Obama’s recently announced National Export Initiative (NEI), which aims to double American exports over the next five years and support two million jobs here at home.

There is no question that PhRMA members will have to be an integral part of us reaching this goal. Despite the recent recession, millions of people around the world are emerging from poverty and they will look to your medicines to ensure a healthier, wealthier future for their families.

As we move forward on this export initiative, and the other agenda items I've discussed today, I will look forward to hearing your input on how we can continue to make America more conducive to innovation.

The Obama administration has policies in place that I am confident will help get the American economy back on its feet.

But ultimately, it is innovators like all of you that are going to show us how to get there.

As always, it will be a scientist with a new medicine, an engineer with a new energy technology that I suspect will get this economy moving faster than the naysayers expect.

We want to help facilitate that however we can, and if you have ideas, my door is always open.

Thank you.