Report reveals lower R&D intensity and basic research spending by drug industry
July 29, 2002
The R&D-to-sales ratio for the patented pharmaceutical industry in 2001 was the lowest in 10 years despite a healthy 12.6% increase in R&D spending, pushing the industry total to more than $1 billion for the first time. Spending on basic research as a proportion of the total also continued its slow decline, dropping to 16.1% compared to a high of 26.5% in 1991 (see chart).
The increase in R&D spending was offset by an even larger increase in sales revenue of 15.3%, climbing from $9.3 billion in 2000 to $10.7 billion in 2001. Of the 74 firms reporting to the Patented Medicine Prices Review Board (PMPRB), 39 are members of Canada’s Research-Based Pharmaceutical Companies (Rx&D). They account for $935 million or 93.5% of the $1.06 billion R&D total for 2001 and $8.8 billion in sales revenue, for an R&D-to-sales ratio of 10.6%.
Critics contend that the data contained in the latest annual report from the PMPRB don’t provide a complete picture of pharmaceutical and biotech R&D activity. By excluding R&D spending by firms that do not have any sales of patented medicines, many of Canada’s smaller but most research-intensive firms are not captured.
“The PMPRB numbers are consistent with ours, but our own calculation is higher,” says Dr Robert Dugal of Rx&D. “The real figure for Rx&D members using our own survey is $1.13 billion for an R&D ratio of 12.9%, which is a difference of more than $200 million. And the firms that are not included (in the PMPRB data) are far more likely to do basic research.” (The Rx&D report is typically issued at the same time as the PMPRB report, but this year it has yet to be publicly released although it is complete.)
Dugal acknowledges that the firms missed by the PMPRB survey do not completely account for the declining proportion of basic research conducted in Canada. He attributes it to a possible glitch in 2001 but contends that the more likely reason is the Canadian R&D environment. At last year’s RE$EARCH MONEY conference, Dugal pointed to four factors inhibiting greater R&D investment in Canada by big pharma: intellectual property protection, drug approval times, inadequate investment in health care and the PMPRB itself for exceeding its original mandate.
“There was no decline in R&D spending globally. The industry spent $45 billion in 2001,” he says. “I’m hearing word-of-mouth from CEOs that Canada is no longer favourably considered for investment. But we may see changes in our patent regime and regulatory approval times with the innovation agenda.”
PMPRB breaks R&D outlays into three categories — basic, applied and other qualifying. Basic is defined as research that advances scientific knowledge “without a specific application in view”. Applied comprises R&D directed towards the manufacturing process, pre-clinical and clinical trials. Other qualifying research includes drug regulation submissions, bioavailability studies and Phase IV clinical trials. It is this category that has grown over the period that PMPRB has gathered data, increasing from 13.7% in 1988 to 24.0% last year.
It’s generally considered beneficial to have a higher mix of basic research in the pharmaceutical industry, and its continuing decline raises serious questions about the commitment of multinational firms to Canada and the Canadian R&D environment itself.
Although the proportion of basic research continues to decline, it actually posted an increase of 2.5% in 20001, rising from $159.1 million in 2000 to $163.1. The latter amount comprises $84.3 million on chemical research and $78.8 million on biological research.
In the area of applied research, clinical trials accounted for $445.8 million or 73.7% of the $604.8-million total. Manufacturing processes accounted for $79.5 million (7.9%) and pre-clinical trials totalled $79.5 million (7.9%). The report also includes sales and R&D spending data for all 79 firms. FMI: www.pmprb-cepmb.gc.ca
|Total R&D Expenditures & R&D-to-Sales Ratios|
|(1998 – 2001)|
Source: Patented Medicine Prices Review Board Fourteenth Annual Report
|R&D Expenditures – |
Type of Research