Fact of the Week: The Pharmaceutical Industry Invested $83 Billion on R&D in 2019, a Tenfold Increase Since the 1980s

Source: Congressional Budget Office, “Research and Development in the Pharmaceutical Industry,” April 2021.

Commentary: The U.S. life-sciences sector has long been a leader in domestic research investment. Private biopharmaceutical R&D spending makes up a significant share of this, and the ratio of R&D spending to revenue for private biopharma companies has risen in recent years. Higher R&D investment has also coincided with increased approvals for new drugs. The Congressional Budget Office (CBO) reported in a recent publication that R&D spending for drugs increased nearly 50 percent from just 2015 to 2019.

The most significant change the CBO identified was that in 2019 alone, the U.S. biopharmaceutical industry spent roughly 10 times what it spent per year in the 1980s when adjusted for inflation. In total, the industry invested $83 billion on R&D in 2019, indicating growth in the industry’s technology innovations and research productivity. This growth comes with real-world improvements to patient outcomes. The decade from 2010 through 2019 saw a 60 percent increase in new drug approvals compared to the previous decade. Whereas drug innovations during the 1990s were concentrated toward broad-purposed pharmaceuticals with larger patient pools, IP rights and growing revenues since then have helped drive increased investment toward more expensive R&D in niche drugs for rarer health needs.