PhRMA says industry wide R&D outlays on medicines were $51.3 billion in 2005

by James Packard Love

In this press release, which is on the front of its web page, PhRMA pegs global industry R&D outlays on new medicines at "$51.3 billion in 2005, according to a Burrill & Company analysis for PhRMA." IMS puts global pharmaceutical sales at $602 billion for 2005. That would put R&D spending on new medicines at 8.5% of global sales.

The press release reports a much higher percentage for member R&D investments. They use a number from the PhRMA 2006 Industry Profile, for PhRMA member US R&D spending, divided by US sales, which gives them 19.2 percent. Since most of their members spend the majority of their R&D in the US, this gives a big number.

The figures in the PhRMA survey that look at the combination of the US market, plus sales or R&D from "abroad," are 15.8% invested in R&D. This too is higher than the 8.5% calculated above, for the whole world market.

Part of the difference concerns the way the data is collected for the PhRMA Industry Profile. As noted in Table 6, PhRMA's report of "Sales Abroad" excludes sales generated abroad by the foreign divisions of foriegn owned PhRMA members. So too does it exclude R&D abroad by foreign divisions of foriegn owned PhRMA members. It is likely that these exclusions are more important for sales than for R&D. PhRMA only reports $86 billion in "sales abroad" for 2005 -- a year when the global pharmaceutical market was more than $600 billion. On the other hand, the $39.4 billion in reported member R&D is 77% of the estimated $51.3 billion in global R&D, by PhRMA and non-PhRMA members combined. A more inclusive reporting of PhRMA member foriegn sales and R&D would likely have given a much lower rate of R&D spending for PhRMA members, but certainly higher than the 8.5% number for the industry as a whole.

PhRMA Press Release: R&D Investments by America's Pharmaceutical Research Companies Near Record $40 Billion in 2005

Washington, D.C. — New statistics released today show that R&D investments in new medicines by PhRMA's biotechnology and pharmaceutical research member companies reached a record $39.4 billion in 2005 (up from $37 Billion in 2004), according to PhRMA's Annual Member Survey. The increased investment in biomedical R&D in 2005 continues 25 years of strong growth in R&D investments by America's research-based pharmaceutical companies – up from $2 billion in 1980. When factored together, the total investments in biotechnology and pharmaceutical R&D by both PhRMA member companies and non-PhRMA members reached a record $51.3 billion in 2005, according to a Burrill & Company analysis for PhRMA.

"America's research-based biopharmaceutical companies once again lead the world in investing in the hunt for new cures and treatments. It is the most research-intensive industry in America, and we are proud of the longstanding commitment to meeting patient needs shown by PhRMA member companies‘ R&D investments - investments that far exceed those of the international pharmaceutical industry and the National Institutes of Health," said PhRMA president and CEO, Billy Tauzin. "We are working everyday to save lives, end disease and relieve pain. The R&D investment made by PhRMA member companies is one reason that Americans today live longer, healthier and more productive lives. In 2005 there were more than 2000 compounds under development by pharmaceutical companies."

The steady growth of R&D investment continues to support important advances in better medicines and new treatments for patients made by research scientists and physicians. The over $39.4 billion invested in R&D in 2005 represents a 6.5% increase over 2004 expenditures. In 2005, PhRMA member companies invested a record 19.2 percent of domestic sales on U.S. R&D.

The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country's leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $39.4 billion in 2005 in discovering and developing new medicines. Industry wide research and investment reached a record $51.3 billion in 2005.