Pharma R&D rebounds in 2015 after hitting all-time low in 2014: PMPRB data

A 9.7% uptick in Canadian pharmaceutical R&D in 2015 raised the sector's R&D-to-sales ratio 0.1% to 4.4%. That's nowhere near the eight-year run of more than 10% between 1993 and 2000 but an encouraging sign that the long, slow decline of recent years may be at an end.

The results — contained in the latest annual report from the Patented Medicines Prices Review Board (PMPRB) — were greeted with cautious optimism by industry lobby group Innovative Medicines Canada (IMC). But it reiterated its contention that the quasi-judicial body's definition of R&D is outdated and fails to capture a significant portion of the industry's R&D outlays (R$, January 26/16).

R&D spending by all patentees rose to $869.1 million in 2015, up from less than $800 million in both 2013 and 2014 but short of the 2012 total of $936.1 million.

The all-time spending high was 2007 when the pharma sector accounted for $1.3 billion in R&D expenditures. But even in that year, the 10% threshold agreed to by the industry in 1987 was not achieved.

In fact, the sector's declining R&D-to-sales ratio is a factor of both relatively stagnant R&D spending and growing drug sales, which have increased every year except one since PMPRB began compiling data in 1988. The result has been a ratio below 10% for the past 15 years.

Patentees who are also IMC (formerly Rx&D) members spent $767.4 million in 2015, up 7.8% from the previous year. While pleased that the PMPRB data reflect what it terms "an ongoing upward trend in industry R&D", an IMC press release repeats IMC's oft-invoked assertion that the agency does not capture the full spectrum of innovative activity.

"It remains a challenge that our industry is held to a nearly 30-year-old definition of R&D spending that does not accurately capture the significant investments our members make in Canada," states the IMC. "The industry continues to be negatively impacted by a challenging access, regulatory and intellectual property environment."

IMC members have also collectively missed the 10% threshold for the past 13 years but IMC contends a KPMG report it commissioned found that between 30% and 50% of industry R&D investments are excluded by PMPRB's criteria.

In a global context, the Canadian pharma sector's R&D-to-sales ratio ranked at the bottom of seven comparator nations using 2013 data — France (17.9%), Germany (22.5%), Italy (5.8%), Sweden (21.9%), Switzerland (122.4%), UK (28.8%) and US (22.7%).

Within Canada, Ontario and Quebec remain the dominant locations for conducting pharma R&D, accounting for 52.3% and 28.7% respectively of the 2015 national total. Western Canada accounts for 15.4% while Atlantic Canada is home to 2.5%.

At $390 million, patentees are the single largest performer of current R&D expenditures ($790.1 million) , followed by other companies ($170.3 million), universities and hospitals ($134.6 million) and others ($95.2 million).

In terms of source of funds, companies bankrolled $791.7 million of total R&D spending, followed by federal and provincial governments ($8.3 million) and others ($69.1 million).

Applied R&D remains the single largest type of R&D conducted by firms at 57.7% of the 2015 total, followed by "other qualifying" (29.3%) and basic (12.9%) Basic research has increased for the past two years after hitting an all-time low of 8.7% in 2013.

R$