Private Sector Drives Drug Research

January 31, 2019 1:01 pm

This past Tuesday, the House and Senate held dueling hearings on drug prices. We heard several misconceptions that we’ll correct, and the first we’ll tackle is this: that innovation is driven by government or university researchers, not those in the private sector.   


Discovering and developing a cure is not simple and individuals working in both the public and private sector are important. So are the dollars that flow from the private sector. Whether it’s at the discovery, development, or manufacturing stage of the innovation process, the private sector makes the largest research and development (R&D) contributions to translate basic research findings into therapeutic advances for patients.


As we explained in this blog post, U.S. biomedical research funding in 2012 totaled $116.5 billion. Nearly half of that came from private pharmaceutical firms and biotechnology firms. Another 10 percent came from the medical device industry and four percent came from private foundations, nonprofits, and other charities. The public sector kicked in one-third of the funding in search of cures.  


In a paper released last November, Information Technology and Innovation Foundation (ITIF) founder Robert Atkinson noted:

- The top 30 pharmaceutical companies globally are responsible for 77 percent of global pharmaceutical R&D funding. 

- According the U.S. Bureau of Economic Analysis, the industry had the fastest growth in R&D capital stock from 2005 to 2016 (231 percent).

- The U.S. life-sciences sector has invested more than 21 percent of its sales in R&D and accounted for 23 percent of domestic R&D funded by U.S. businesses, more than any other sector in the world.

- Measured by R&D expenditure per employee, the U.S. biopharmaceutical sector leads all other U.S. manufacturing sectors, investing more than 10 times the amount of R&D per employee.


Private sector researchers also contribute to the knowledge base more generally. Atkinson explained that in 2017, industry researchers authored or coauthored “more than 12,790 scientific journal articles on subjects ranging from the effect of changes in cerebrospinal fluid on Alzheimer’s to the effect of osteoporosis therapies for postmenopausal women, to reducing toxicity effects from new Car-T cancer cell therapies.”


Some witnesses at Tuesday’s hearing also attempted to mitigate private industry’s role in innovation by arguing many breakthroughs come on college campuses. That is true, but these witnesses neglected to note that many of these labs depend on private sector dollars. As we noted in this blog post, biopharmaceutical firms provided more than $2.5 billion in research funding to U.S. universities in 2017 alone – about 60 percent of all industry funding of research –  spreading the money widely across the United States. In the Maryland, Virginia, Washington, D.C. area alone, universities received more than $125 million in 2016.

When we finally discover a cure for cancer, the breakthrough won’t be attributed one person, or even one lab’s, work. Innovation comes from all sectors, including – and perhaps especially – from the private sector.