For the first time in 10 years there is no pharmaceutical company among the three biggest R&D spenders!

According to the Global Innovation 1000 ranking, this year Volkswagen, Samsung and Intel knocked Roche, Pfizer and Novartis off the top spots.  The publication, Proven Paths to Innovation Success  gives a global overview of the sectors and companies with the highest levels of R&D investment. However, there is limited information on pharmaceutical companies. My own personal belief is that the healthcare industry is still the biggest player in terms of R&D investment. I can’t imagine automotive companies (assuming their cutting-edge research focuses on electric cars and the hydrogen economy) being more innovative than Pharmas, so I tried to find an explanation.

The main reason is based on the structure of the healthcare industry.  Until a few years ago, Pharmas were willing to develop new drug projects from outset of the discovery all the way through to market. They made large-scale infrastructure investments and hired thousands of scientists. Nowadays, however, in the wake of the patent cliff and falling sales due to generics, their strategies seem to have changed, ushering in a restructuring of the industry.

The big players are looking for projects that offer “quick” returns. Although the word “quick” is relative in this sector, they are looking for returns in less than the 10–15 years required for the development of a new drug. As a result, Pharmas seem to have moved from being the main players in the healthcare sector to playing the role of a kind of “investor” focusing on late stage projects. I am not saying the big Pharmas no longer invest: they still invest large sums of money, but today they are not the only ones to do so. The sector now has several third parties, such as biotech companies, governments, non-profit organizations and other types of investors, which also inject significant amounts of money into early-stage R&D healthcare projects. Might it be the case that these new investments have diluted global R&D investment in the healthcare sector, causing an apparent decrease in global R&D spending by the big pharmaceutical companies?

Drugs are highly complex products that require years of development and the participation of many actors, including companies, universities, patients’ associations and government. In my opinion, it is difficult to track such investment and compare it to others sectors involving completely different products. To properly analyze the trend in healthcare R&D spending, it would be interesting to explore the metrics used by the publication and pinpoint the decrease. Was it in staffing? Infrastructure? Licensing-in?