Another decline in R&D spending in 2014 by the Canadian pharmaceutical industry has set off a new round of counterclaims and recriminations. Data from the annual report of the Patented Medicines Prices Review Board (PMPRB) show that pharma R&D fell 1.8% from 2013 to $729.2 million for an R&D-to-sales ratio of 4.4%.

Companies that are members of Innovative Medicines Canada (Rx&D) fared marginally better, boosting R&D outlays by 1% to $658.7 million for a 5% ratio — half of what the sector committed to achieving 30 years ago in return for more generous patent protection. The 4.4% ratio represents a 166% decrease from the 1995 peak year of 11.7%.

The PMPRB report prompted the Canadian Generic Pharmaceutical Association to charge "brand-name companies" with breaking their promise and sending its ratio to "the lowest value recorded since the PMPRB began reporting on these figures in 1988".

Rx&D countered by claiming that — according to data generated by KPMG — the PMPRB report significantly undercounts its members' R&D spending.

"Once again the report does not capture what our industry actually invests in R&D in this country. In fact, based on figures from KPMG, between 30-50% of our investments are not captured by the almost 30-years-old PMPRB criteria," states an Rx&D press release. "Our industry's research model is completely different than it was even 10 years ago, not to mention 30 ... We need the right regulatory, financing and intellectual property and access policies, so we can meet the challenge of international competition."

Regardless of the veracity of the competing claims, there's no doubt Canadian pharma R&D expenditures are disturbingly low, particularly when ranked against seven comparator countries used by PMPRB. Canada was dead last in 2012 (the most recent year for which comparator data are available), falling below the previous bottom-dweller (Italy). The aggregate ratio for all eight countries is 21.8% compared to 5.3% in Canada.

Quebec has been particularly hard hit in recent years with the closure of many R&D facilities maintained by large multinational pharma corporations. In 2013, Quebec was home to $236.2 million in R&D for a 33.1% share of the national total, compared to Ontario where $343.6 million was spent for a 48.1% share. The western provinces accounted for $115.7 million (16.2%) while Atlantic Canada accounted for $18.6 million (2.6%).

The shift in pharma research to other jurisdictions is reflected in the declining resources allocated to basic research, which accounted for 11.4% of the total in 2014. Activities defined as "other qualifying" (including drug regulation submissions, bioavailability studies and Phase IV clinical trials) have steadily risen in recent years and currently account for one quarter of the total.

Applied R&D is the single largest area of pharma R&D spending, accounting for nearly two-thirds of the 2014 total. Fully one half of applied R&D is devoted to Phase III clinical trials ($231.2 million), followed by Phase II clinical trials ($61.2 million), manufacturing process ($51.1 million), and pre-clinical trials ($48.9 million).

The report also found that 39 of the 75 reporting companies spent less than 10% of sales on R&D while accounting for 83.2% of sales revenue.

Intramural spending accounted for $349.5 million or 48.9% of the 2014 total, down from $364.9 million in 2013. Universities and research hospitals raised their share from $94.7 million to $107.1 million in the same period while R&D spending by other companies was down slightly to $178.2 million.

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