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HINJ Op-Ed: The Value of Medical Innovation: Saving Lives, Saving Money

New Brunswick, NJ, December 18, 2014 HealthCare Institute of New Jersey (HINJ) President and Chief Executive Officer Dean J. Paranicas has authored the following op-ed on the life sciences and the value of medical innovation.

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Medical innovations produced by American life sciences companies have vastly improved the human condition.  Our pharmaceutical, biotech, medical technology, device and diagnostics companies have helped people live longer, with less pain and greater quality of life.

Over the past century, the life sciences has eradicated some of the world’s most dreaded diseases such as polio and smallpox.  More recently, the industry has made other diseases such as breast cancer, HIV/AIDS, heart disease and lung cancer no longer the death sentences that they once were.

Collectively, new therapies are the greatest contributors to increased life expectancy.  According to the National Bureau of Economic Research (NBER), between 1960 and 1997, new therapies accounted for 45 percent of the increase in life expectancy in 30 developing and high-income countries.  Between 2000 and 2009, new therapies accounted for 73 percent of the increased life expectancy for these countries.

Despite the dramatic life-saving advancements that the life sciences sector has made, our work is far from done.  Diabetes, Alzheimer’s, Ebola, different types of cancers, and other formidable medical conditions demonstrate the compelling need for America’s medical innovation community to build upon its tremendous achievements to continue saving lives around the world.

Toward that goal, every day, teams of scientists from New Jersey companies go to work to research and discover the next generation of medicines, therapies, devices, technologies and diagnostic tools that will alleviate even more of these life-threatening and life-altering diseases.

Medical Innovation’s Overlooked Benefit

With these medical innovations, past and future, comes an often-overlooked benefit:  the incalculable billions of dollars in savings to patients, their families, insurers, employers, governments and hospitals in avoided medical expenses associated with keeping people healthy or curing them of a life-long, chronic condition.

Certainly, these medicines, therapies, medical technologies, devices and diagnostic tools keep people healthier.  They limit the need for frequent visits to the doctor.  They help to avoid costly hospital stays.  They help patients avoid expensive surgeries.

Unfortunately, these tremendous cost savings often go unrecognized.  Instead, we hear frequent reports about the high cost of medicine or about new technologies or diagnostic tools being deemed “too expensive” or “unnecessary.”  We hear that medical innovation is a cost-driver, not a cost-saver.

The reality is quite to the contrary.  Medications, therapies and medical technologies and devices not only save lives — they save money.

By eradicating a disease, people no longer need to seek or spend money on treatment.  By better managing and preventing more serious complications from an existing disease, people avoid more costly medical care.  By discovering a new treatment or cure, the costs that would have been incurred in addressing a patient’s ongoing medical issues can be avoided entirely.

Therefore, developing new treatments, cures and health technologies is one of the most important steps we can take — not only to save lives and improve the quality of life, but also to avoid the expenditure of enormous amounts of health care dollars.

How much savings does medical innovation produce?  There is not one, simple answer to that question.  However, there are numerous academic and government statistics that point to the economic benefits of innovation in the health-care marketplace.

In a paper published by the Journal of Political Economy in 2006, it was estimated that over the preceding 50 years, medical innovation had been the source of nearly half of all economic growth in the United States.

Impressively, for every dollar spent on innovative medicines, total healthcare spending is reduced by $7.20, according to an NBER paper.

As for the price of medicine in America, only 9 cents of every health care dollar spent in America goes to medicines, according to the Centers for Medicare & Medicaid Services (CMS) in 2013.  The other 91 cents goes to hospitals, physicians, clinics, long-term care facilities, and government administration and net cost of health insurance.

Imagine if we could use that 9 cents to reduce the remaining 91 cents or even avoid significant portions of it in the first place.  The result would be saved lives and even greater health-care savings.

Medication Adherence’s Important Role

Medication adherence also plays an important role in health-care savings, as medical innovations can provide no benefit if they are not accessed by patients.

Of the approximately 187 million Americans who take one or more prescription drugs, it is estimated that up to one-half do not take their medications as prescribed.  Poor medication adherence results in 33 to 69 percent of medication-related hospital admissions in the U.S., at a cost of roughly $100 billion per year.  In total, non-adherence to prescribed medicines results in approximately $290 billion in unnecessary spending annually.

Americans with chronic conditions account for 84 percent of health care spending.  In 2011, this totaled more than $2 trillion.  By using medical innovations to prevent or better manage the most common chronic diseases, the U.S. could decrease treatment costs by $218 billion per year and reduce the economic impact of disease by $1.1 trillion annually.

For diabetes, the total costs of this chronic disease rose to $245 billion in 2012 from $174 billion in 2007.  Without a cure, in the next 25 years, annual spending on diabetes is forecast to increase steeply to approximately $336 billion annually.

For Alzheimer’s disease, in the absence of disease-modifying treatments, the cumulative costs of care for people suffering with Alzheimer’s from 2010 to 2050 are expected to exceed $20 trillion.  A treatment breakthrough that only postpones the onset of Alzheimer’s by as few as five years could result in annual Medicare savings of $33 billion in 2020 and climb to $283 billion by mid-century, while annual Medicaid savings could increase from $9 billion in 2020 to $79 billion in 2050.

A 2007 Milken Institute paper reported that cancer treatment results in a tenfold increase in productivity — specifically, $37 billion in cancer treatments resulted in an estimated $373 billion in increased productivity.

While the monetary cost savings of medical innovation are extraordinary, the value to patients is nothing short of priceless.

For example, according to the American Cancer Society, U.S. cancer survivorship alone has more than tripled since 1970, with nearly 14.5 million cancer survivors alive in the country this year.  Also, as of 2014, the U.S. five-year survival rate for all cancers diagnosed between 2003 and 2008 is 68 percent.

With HIV/AIDS, medical innovation has delivered an astounding 3 million life years, which has produced an economic value of $1.3 trillion, according to a 2006 published paper.

Medical Innovation: A Key Part of the Solution

Medical innovation is complex, high-risk, time-consuming and extremely expensive.  But it is clear that medical innovation is a key part of the solution — not only to alleviating human suffering, but also to reducing significantly the incalculable costs associated with treating that suffering.

As a society, we need to recognize the enormous multifaceted return on the investment in medical innovation, and nurture — rather than stifle — the virtuous cycle of better health, longer life and economic benefit resulting from life sciences innovation.

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