Higher pharmaceutical R&D spending boosts sector's research intensity

Canada's pharmaceutical firms reversed a decade-long slide in R&D intensity in 2007, with a $115-million spike in expenditures that pushed the annual total up 9.8% to $1.274 billion. The upswing was accompanied by a 7.3% increase in sales to $16 billion — the largest since 2003 — resulting in an R&D-to-sales ratio (R&D intensity) of 8.3%. The data are contained in the latest annual report of the Patented Medicine Prices Review Board (PMPRB).

Of the 82 firms included in the data, a slightly higher research intensity of 8.9% was achieved by the R&D intensity for the 35 companies that are members of Canada's Research Based Pharmaceutical Companies (Rx&D) — still well below the target of 10% to which the industry committed in 1988. The pharmaceutical industry has missed the target since 2000 (albeit only slightly in 2001 and 2002) while Rx&D members fell below 10% in 2003.

The overall increase in 2007 was entirely due to Rx&D members which hiked R&D expenditures 24.4% over 2006 to $1.184 billion. R&D outlays by patent-holding firms that are not Rx&D members registered a steep 45.9% decline to $141 million and now account for just 10.6% of the 2007, compared to 21.6% in 2006. Pharmaceutical sales in 2007 rose 7.3% to $16 billion.

spike in other qualifying R&D

The increase in R&D outlays occurred primarily in the category of Other Qualifying R&D (up 37.7% to $326.8 million) and basic research (up 20.3% to $269 million), while the largest category of applied R&D was stagnant at $688.2 million. In fact, the latter's portion of the total came to just 54.4%, the lowest level since PMPRB began compiling data in 1988. Clinical trials accounted for 78% or $537.4 million of all applied research. Of that total, $353.8 million or 51.4% is Phase III clinical trials.

In a statement, Rx&D president Russell Williams acknowledged recent federal and provincial initiatives designed to encourage greater pharmaceutical R&D spending. But he said government must go further "to ensure patients can access more innovative medicines through their provincial drug plans and by guaranteeing stability and predictability in the intellectual property regime."

Williams also referenced a recent study by the right-leaning Fraser Institute which purports to show that Canadians paid 53% less than their US counterparts for brand-name medicines but paid 112% more for generic drugs compared to the US.

Compared to other countries, the R&D intensity of Canada's pharmaceutical sector lags far behind its top-ranked competitors. For the years 2000 and 2005, Canada stood at 10.1%. That compares to Switzerland at 102.5%. and Sweden at 44.4%. France, Germany and the US all fall within the 16-18% range.

Apotex #1 R&D spender

In 2006, a generic firm — Apotex Inc — was the highest pharmaceutical spender in Canada with $178.8 million in outlays. It was closely followed by GlaxoSmithKline at $177 million, according to data from Research Infosource, a sister firm to RE$EARCH MONEY. Only three other firms broke the $100-million barrier — Pfizer Canada Inc ($131.8 million), Biovail Corp ($108.3 million) and Sanofi Pasteur ($105.4 million).

Of the 82 companies included in the PMPRB data, 26 reported no R&D spending but accounted for 3.2% of sales revenues. There were 43 companies with an R&D of less than 10% accounting for 72.8% of total revenue while there were 13 companies with an R&D intensity of greater than 10% and 24% of overall sales.

Ontario and Quebec continue to be home for the vast majority of pharmaceutical R&D spending in almost equal amounts: $561.7 million in Quebec and $567.8 million in Ontario. Alberta and British Columbia trail far behind at $50.6 million and $43.8 million respectively. Manitoba ranks fifth with $24.9 million.

R$