Calls grow for changes to reporting of pharma R&D as PMPRB reports record drop

Canada's pharmaceutical industry is intensifying calls for the way its R&D spending is reported following the release of new data showing the largest one-year decline since 1988. The new data from the Patented Medicine Prices Review Board (PMPRB) show that pharmaceutical R&D expenditures in 2013 fell 15.9% to $752.8 million from $894.8 million in 2012– its worst performance since 1997 (in dollars unadjusted for inflation).

The industry's R&D performance by all patent-holding firms accounts for just 4.5% of sales, far from the 10% to which the industry committed in 1987 and adhered to between 1993 and 2000. The R&D-to-sales performance by patent-holding firms that are also members of Rx&D was slightly higher at 5.4% on R&D outlays of $652 million.

Earlier this year, however, a KPMG survey commissioned by Rx&D reported that the industry's R&D performance for 2013 was $1.276 billion, down 4.2% from 2012 or double the amount captured by PMPRB. The KPMG report's methodology has been agreed upon by Industry Canada, the Canadian Institutes of Health Research and PMPRB itself.

"For the fourth year in a row, one out of two dollars has not been counted (by PMPRB)," says Russell Williams, president of Rx&D which represents the vast majority of innovative pharmaceutical firms. "If public policy is being set on these figures and we know we have inaccurate information, we have a serious problem."

The KPMG data show Rx&D members spent $698.9 million in 2013 on R&D spending that is traditionally reported by PMPRB and qualifies for Scientific Research & Experimental Development (SR&ED) tax credits. In addition, the survey found $317 million for R&D expenditures which are not SR&ED eligible and include activities like "amounts paid to persons engaged in various R&D activities, studies required for regulatory and reimbursement approvals as well as research-related donations".

The 2013 total also includes $254.5 million in donations to promote health and well being, product donations and investment in community, education and environmental, arts and cultural activities — spending Williams acknowledges are not R&D.

Williams says the decline in Canadian pharmaceutical R&D spending can be partly attributed to the seismic shift occurring in the industry globally, but he argues that much of the loss of pharma R&D capacity can be attributed to Canada's failure to keep pace with the intellectual property (IP) and regulatory regimes of competing nations.

"We have no effective right of appeal. We are one of three countries in the OECD without patent term restoration," he says, adding that Canada provides eight years of patent protection compared to 10 for EU nations. "It's fiercely competitive. Everyone is trying to build partnerships with our industry ... We have to be in that kind of environment."

The federal government is moving towards harmonization with some improvements included in the Comprehensive Economic and Trade Agreement (CETA) being negotiated with the European Union. But Williams says even if the agreement is ratified, there will be at least 18 months of "legal positioning" before changes to right of appeal and patent term restoration are implemented.

"We have to build an ambitious package so that VPs of research at global head offices say Canada is the place to (conduct R&D)," says Williams.

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