- Pharmaceutical companies report spending a record $71.4 billion on research and development in 2017, according to an annual survey of members of PhRMA, the powerful industry lobbying group.
- The group's annual report found R&D spending was up in not only absolute terms as total spending, but also in relative terms as percentage of total sales. Proportionally, companies spent 21.4% of total sales on R&D.
- The report comes as pharmas are under pressure for escalating drug costs, with President Donald Trump proposing an array of measures to tamp down. Some critics have for years called into question the industry figures, which are a common rationale for steep drug prices.
Figures on pharmaceutical R&D spending do not come without controversy, with some questioning the verifiability of the numbers, and the industry's interest in reporting increased spending.
Still, R&D is one of the most important metrics for biopharma companies. While serious investment can demonstrate dedication to finding new drugs and treatments for diseases, other companies with low R&D spending occasionally come under criticism.
For example, Valeant Pharmaceuticals leaned on M&A to fill its drug pipeline instead of R&D, leading to massive divesting in a late-2017 turnaround push. To further shake its reputation, Valeant announced earlier this year it will change its named to Bausch Health Companies.
PhRMA changed membership criteria in May 2017 requiring member companies to invest a minimum of 10% of global sales in R&D, resulting in seven companies leaving at the time. That move could have also artificially boosted the figures in this report by removing the lowest-spending companies from the membership pool.
The 8-page report found increases in R&D spending in a variety of measurements for 2017 compared to 2016. Total R&D increased nearly 9% from $65.5 billion to $71.4 billion. As a percentage of total sales, R&D spending modestly increase from 20.4% to 21.4%.
The report also showed a slight trend of R&D dollars shifting from the U.S. and toward western Europe from 2016 to 2017, with the geographic concentration of dollars decreasing by 1.9% in the U.S. and increasing 1.1% in western Europe.
The report did show a slight decrease in the concentration of R&D dollars in the U.S. While domestic spending went up in absolute terms by roughly $5 billion, it decreased as a global percentage from 80% to 78.1% from 2016 to 2017, when compared to last year's report.
Western Europe grew over that same time period in R&D dollars from $9.1 billion to $10.8 billion, an 18.5% increase. As a geographic share, western Europe grew from 14% to 15.1%.
The most expensive area was Phase 3 testing, which accounted for nearly 30% of total R&D spending.
Overall, the industry group's findings fit BioPharma Dive's own analysis from last year, which showed an average R&D expenditure increase of about 10% year over year for the first quarter of 2017.