Should There Be Optimism About US Medical Innovation?

The first COVID-19 vaccines have been administered in the United States, marking the beginning of the end for the pandemic. In clinical trials, Pfizer's vaccine was 95% effective with no serious side effects. Massachusetts-based Moderna said its vaccine proved 94.5% effective. Both companies have been granted emergency use authorizations by the FDA.

The efficacy of the vaccines is, frankly, jaw-dropping. Dr. Anthony Fauci told journalists earlier this year that he'd be happy with 75% efficacy and was prepared for it to be as low as 50%. These first-of-their-kind mRNA vaccines, which scientists developed in under a year -- previously, no vaccine had ever been developed in less than four years -- could effectively end the pandemic by the summer of 2021.

Politicians were quick to claim credit for these achievements. But in reality, we have private capital to thank for these staggering feats of medical ingenuity. Pfizer developed its vaccine with its own money, and Moderna relies on venture funding. Even companies that received boatloads of government cash through Operation Warp Speed wouldn't exist without a biotech ecosystem centered around private innovation.

It's precisely this ecosystem that gave me the confidence to launch Alera Partners, a life-science-focused investment firm. The best days for U.S. researchers are ahead of us.

Not long after graduating from New York University's School of Medicine, it became clear to me that the most exciting breakthroughs in medicine weren't happening in hospitals, but in the research laboratories of private companies. In the years since then, I've used my medical expertise to invest in these healthcare advancements.

What I've witnessed is a wave of bioscience innovation far beyond my wildest expectations. Right now, U.S. biopharmaceutical companies are at work on thousands of new therapies, the vast majority of which are entirely unprecedented.

The gene-editing technology known as CRISPR is a perfect example. Today, biotech startups around the country are using this process in extraordinary ways. One company is modifying the tissue, organs, and cells from pigs so that they can be transplanted safely into humans; another is altering human genes to make patients less susceptible to high cholesterol and heart attacks.

In light of the pandemic, scientists are also hard at work on antibody cocktails like Regeneron's COVID-19 antibody treatment. This particular cocktail consists of two virus-neutralizing antibodies that bind to the spikes on the coronavirus and prevent the virus from spreading to other cells.

Biotech innovation is also helping to make serious illnesses easier to manage. For instance, multiple myeloma patients used to have very few treatment options. Today, physicians can mix and match from three different classes of drugs in ways that extend patients' lives while minimizing harmful side effects. And it's very possible that advances in immunotherapy could cure the disease in the coming years.

Or take spinal muscular atrophy, a disease which, until recently, was considered a death sentence for diagnosed infants. Today, a one-time therapy allows these children to talk, eat, and sit up on their own.

America wasn't always such an engine of medical progress, of course. Back in the 1970s, over half of the world's new drugs came from France, Germany, Switzerland, and the United Kingdom. Today, American companies create two in three new drugs globally.

This extraordinary achievement was the direct result of public policies that reward innovation.

Creating just one new drug costs about $1 billion, a recent JAMA study found. It's because of patents and other intellectual property protections that investors are willing to shoulder these enormous early costs.

IP rights enable inventors to sell their products without rivals stealing their formulas and selling copycat versions. If such protections didn't exist, the risks involved in drug development would be unacceptably high, and investment in new medicines would dry up.

That drug firms are free to sell their products at fair market prices is another reason innovation has flourished in the United States. It's also why countries like Canada, the UK, and France -- which impose strict price controls on drugs -- have fallen behind in the race for medical advancement.

Yet, remarkably, leaders in Washington have proposed linking Medicare drug reimbursements to the artificially low prices in other countries, essentially importing foreign price controls that'd drive investment away from cutting-edge therapies.

With the recent vaccine news, people all over the world breathed a sigh of relief. It's up to policymakers to protect the innovation ecosystem that makes such achievements possible.

Jason Bonadio, M.D., is managing partner and portfolio manager at Alera Partners LP