Further, EBP companies’ dominance over R&D activities has only grown over time. In 2018, EBP companies accounted for 80% of total pipeline projects from discovery to filing, while large pharmaceutical companies, those that have annual global sales over $10 billion, only accounted for 15% of pipeline projects. According to IQVIA’s report “Emerging Biopharma’s Contribution to Innovation,” emerging biopharmaceutical (EBP) companies are defined as companies that spend less than $200 million annually on R&D or have less than $500 million in global revenue. Furthermore, the correlation between PhRMA’s spending on R&D and the 5-year average for new drug approvals was only moderately positive at 0.58.īeyond high levels of spending on R&D by PhRMA members, it is also notable that the sources of innovation are shifting, further complicating the relationship between R&D spending and the supply of new drugs. However, during the same time, the 5-year average for new drug approvals went from 36.8 in 2000, then declined for nearly a decade hitting a low in 2009 with 22 new drugs, before the 5-year average steadily increased to 44 new drugs in 2019.
As seen in the graphic below, annual R&D budgets for PhRMA members have been on the rise, growing from $37.5 billion in 2000 to $83.0 billion in 2019. While it may seem in theory that high levels of spending on R&D would result in high production of new drugs, the empirical evidence suggests that the relationship between R&D spending and new drugs is modest. Observation 1: The relationship between R&D spending and the supply of new drugs is modest We assemble extant data and evidence on each of these issues as well as make observations pertaining to these questions. When markets size changes, how does it affect the supply of new cures and how innovative are the new drugs?.When markets for prescription drugs expand or contract, how does that affect the supply of new drugs?.How is the financial risk of investing in R&D borne?.How much does it cost to bring a new drug to market?.What is the relationship between spending on pharmaceutical R&D and new drugs?.To better understand the extent to which innovation and prices are tied together, we identify five important things to know about pharmaceutical research and development (R&D) and its relationships to drug prices and revenues.
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