Pharmaceutical R&D spending remains far below industry’s 10% commitment – PMPRB report

Another year of less-than-impressive R&D spending by the pharmaceutical industry has re-ignited the annual sparring match between industry and the organization that compiles the data. The Patented Medicines Prices Review Board (PMPRB) reports that companies belonging to Innovative Medicines Canada (IMC – formerly Rx&D) spent $770 million on R&D in 2016 or 4.9% of its $15.6 billion in sales – a ratio unchanged from 2015.

It’s now been 14 years since IMC members have collectively achieved their 10% R&D-to-sales target, granted in 1987 with a target year of 1996 and actually reached in 1993. The commitment was made in return for concessions by the federal government granting companies extended market exclusivity via more generous patent protection terms.

All patentees spent $918.2 million, up 5.7% over the previous year for an R&D-to-sales ratio of 4.4%. Of the 78 companies reporting for 2016, 89.7% had R&D-to-sales ratios of less than 10%.

The annual PMPRB report was greeted once again with charges from IMC that the PMPRB – a consumer protection and R&D data tracking agency of the federal government – is not counting all of the R&D its members actually do in any given year. It countered PMPRB’s total of $770 million with an estimate of $1.2 billion which includes funding it says is discounted by the agency by insisting on using a 30-year-old definition of R&D that may be technically accurate but is incorrect.

“According to a recent EY Report, Innovative Medicines Canada member companies make significant contributions to the country’s economy: we generate $19 billion in economic activity, invest $1.2 billion annually (9.97% of revenues) into R&D, and support 30,000 high-value jobs,” IMC president Pamela Fralick states in a press release. “That investment in R&D ranges from collaborative initiatives with Canadian universities, hospitals, and centres of excellence, to funding for early stage biopharmaceutical companies, and health charities. It also includes 4,500 clinical trials involving 24,000 Canadians across the country.”

(Note: The EY study attributes "gross patented products revenue" for 2016 of $11.95 billion, compared to $15.6 billion by PMPRB).

The Canadian Generic Pharmaceutical Association (CGPA), arch rivals to the IMC, were quick to jump on the latest PMPRB data, highlighting the shortfall between IMC member performance in 2016 and their 10% commitment and denouncing the IMC’s continued push for even more generous R&D patent provisions.

“Despite nine separate increases to their patent monopolies since 1987, their (IMC’s) investments continue to lag far behind their commitments,” CGPA president Jim Keon said in a press release.

The PMPRB report shows that, at 4.3%, Canada ranked dead last in 2014 among seven comparator nations, many of which have drug prices significantly lower than those charged to Canadians. Switzerland towered above all others with an R&D-to-sales ratio of 126.8%, followed by the UK (25.7%), US (22.8%), Germany (19.9%), Sweden (19.7%), France (16.7%) and Italy (6.3%).

Breaking down the types of R&D conducted by pharmaceutical firms, the PMPRB reports that just $105.9 million was devoted to basic research for 12.6% of current R&D outlays. The largest amount - $500.9 million – was spent on applied research for a 59.5% share, of which 70% was for clinical trials.

Of current R&D expenditures, $394.9 million (46.9%) was intramural, followed by R&D performed by other companies ($213.6 million/25.4%), universities and hospitals ($131.4 million/15.6%) and “other qualifying” ($101.8 million/12.1%).

Ontario and Quebec remain the dominant locales for pharma R&D performance with Ontario accounting for $413.1 million or 49.1% of the total, and Quebec a strong second with $272.6 million in outlays for a 32.4% share. Pharmaceutical firms conducted $140 million worth of R&D in the western provinces and $16 million in the Atlantic provinces.

R$