Big pharma seeks regulatory changes as R&D spending continues downward spiral

R&D spending in Canada by patent-holding pharmaceutical firms declined 2.9% in 2009 — the largest single annual drop in the past 22 years — amidst escalating calls by industry for a more globally competitive regulatory and operating environment. The latest report from Patented Medicines Prices Review Board (PMPRB) shows that 81 reporting companies spent $1.27 billion on R&D last year, down from $1.31 billion in 2008.

Of the total, $1.1 billion or 89.1% was accounted for by members of Canada's Research-Based Pharmaceutical Companies (Rx&D), down 3.3% from its members' 2008 tally. (R&D outlays by non-Rx&D members declined 0.1% to $138.6 million). The Rx&D members' R&D expenditures represent 8.2% of their Canadian revenues, the lowest level since 1990. It also makes 2009 the seventh year running in which R&D has failed to reach the all-important level of 10% of revenues — a commitment made in the late 1980s when significant changes were made to the Patent Act.

Following publication of the PMPRB report, Rx&D issued a press release warning that the deteriorating environment for conducting pharmaceutical R&D in Canada means "the commitment may no longer be sustainable unless Canada becomes more internationally competitive".

"I'm proud that the industry has held as high an investment as it has," says Rx&D president Russell Williams. "The reduction (in R&D expenditures) is partly because Canada hasn't kept up with the issues."

Those issues are highly contentious and wide-ranging, from restrictive access to medicines and vaccines to an intellectual property regime that Williams says hasn't kept pace with competing nations.

Perhaps the most intriguing issue cited by Rx&D is the loss of up to 20% of committed pharmaceutical R&D funds due to "deficiencies in the research infrastructure".

Rx&D recently began tracking the phenomenon and it appears that the unspent funding relates to clinical trials which make up 77% of all pharmaceutical R&D in Canada. Phase III clinical trials are down 20% and Williams says much of that business is going to the so-called BRIC nations — Brazil, Russia, India and China.

"Governments in Canada are working on this. We're on a good path to getting a solution but we don't have it now," says Williams. "Because of barriers ... the monies allocated by companies to invest in the clinical side are not being fully spent. We have not done the full analysis yet but 20% is $200 million."

Other issues such as patent term restoration, longer data protection and shorter approval times are also putting pressure on firms' decision on where to conduct R&D.

"Industry is looking at ways of conducting R&D in Canada but it goes hand-in-hand with timely access to innovative new products," says Sanofi-Pasteur president Mark Lievenon. "The industry has changed a lot since the 1980s legislation and (the creation of) PMPRB."

The latest PMPRB report shows that intramural expenditures account for $628.8 million or 51.6% of the 2009 total. Extramural funding is split between other companies ($242.6 million/19.9%), universities and hospitals ($187.9 million/15.4%) and others ($159.9 million/13.1%).

Companies provided 89.6% of the funding, augmented by $33.8 million from governments and $98.6 million from other sources. Ontario continues to account for the largest single amount of R&D spending at 46.6%, followed by Quebec (40.8%), the western provinces (10.9%) and the Atlantic provinces (1.6%).

Canada ranks second to the bottom on PMPRB's list of comparator countries in terms of R&D-to-sales ratios, just ahead of Italy.

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