PhRMA Releases Annual Survey, Shows Highest R&D Spending Ever
By Mark Terry
The industry group PhRMA released its 2018 PhRMA member annual survey along with the 2018 Biopharmaceutical Research Industry Profile. Among the findings was that overall research-and-development spending was at an all-time high in 2017, hitting $71.4 billion, up from $65.5 billion in 2016 and from $29.8 billion in 2001.
In fact, the U.S. biopharma sector makes up about one-sixth of total domestic R&D spending by U.S. businesses, the single largest R&D business expense. This has led to the U.S. Food and Drug Administration (FDA) approving 56 novel drugs in 2017, including the first gene therapies. It also approved therapies for primary progressive multiple sclerosis and the first treatment for sickle cell disease in 20 years. In addition, the report cites that there are more than 1,100 new medicines and vaccines in development for cancer alone.
The report defines R&D expenditures as including “basic and applied research, as well as developmental activities carried on or supported in the pharmaceutical, biological, chemical, medical, and related sciences (e.g., psychology and psychiatry), if the purpose of such activities is ultimately concerned with the utilization of scientific principles in understanding diseases or in improving health. It includes the total cost incurred for apharmll pharmaceutical R&D activities (e.g., salaries, materials, supplies used, and a fair share of overhead), as well as the cost of developing quality control.”
It doesn’t include the cost of routine quality control expenses, or drug or medical R&D performed under a grant or contract for other companies or organizations.
Of the PhRMA members companies, in 2017, domestic R&D expenses were $55.755 billion, with another $15.6444 spent abroad. That makes for an annual percentage change of 6.4 percent for domestic R&D and 19.2 percent for R&D abroad. R&D abroad includes expenditures outside the U.S. by U.S.-owned PhRMA member companies and R&D performed abroad by the U.S. divisions of foreign-owned PhRMA member companies.
It also marks the highest domestic R&D as a percentage of domestic sales. In 2017, it represented 24.8 percent of domestic sales and 21.4 percent of total sales, compared to 24 percent and 20.4 percent, respectively, in 2016. Although this figure varies more over the years, it’s dramatically higher than it was in 1980, when it was 13.1 percent and 8.9 percent, respectively. Biopharma companies are investing greater and greater amounts into R&D (or certain types of research programs are increasingly expensive).
The breakdown of how those monies are spent in 2017 are:
Pre-human/Pre-clinical…….. $11.1687 billion or 15.6%
Phase I……………………… $6.201 billion or 8.7%
Phase II…………………….. $8.2774 billion or 11.6%
Phase III…………………….. $21.377 billion or 29.9%
Approval……………………. $2.7887 billion or 3.9%
Phase IV…………………….. $13.4338 billion or 11.4%
Uncategorized………………. $13.4338 billion or 18.8%
The report also includes detailed information about the geographic areas represented by PhRMA member companies and how much is spent on R&D, domestic sales and sales abroad, and sales by geographic area.
PhRMA notes, “The complex R&D enterprise is the foundation for the 4.7 million jobs the biopharmaceutical sector supports throughout the economy, including the 140,000 biopharmaceutical researchers working tirelessly to develop new treatments and cures. Thanks to continued investment in R&D, we are closer every day to discovering the next lifesaving breakthrough.”