Public Release:  Health R&D spending moves slowly upward, driven by industry, philanthropy and voluntary associations

Federal R&D funding remains 'woefully inadequate' to address health threats and global competitiveness

Research!America

ALEXANDRIA, Va.--December 17, 2013--After declining in FY10-11, health-related research and development (R&D) spending in the U.S. increased by $4.3 billion (3.5%) in FY11-12, according to "Truth and Consequences: Health R&D Spending in the U.S. (FY11-12)", the 10th edition from Research!America highlighting estimates of U.S. investments. This spending increase was largely driven by industry, philanthropy and voluntary health associations as well as changes in the classification of spending within a few federal agencies. For the full report, click here.

"Industry, philanthropic and voluntary health association R&D spending increases offer a glimmer of hope in this dark era for medical research," said Research!America's chair, former Congressman John E. Porter. "Stagnant federal investments jeopardize our nation's ability to advance medical progress and fuel private sector innovation, a catalyst for job creation and economic recovery."

Federal R&D spending rose 2.2% to $41 billion in FY12 from $40 billion in FY11, fueled notably by a $315 million (18%) increase at the National Science Foundation (NSF) and a $152 million (nearly 60%) increase at the Food and Drug Administration (FDA). At NSF, most of the increase is due to reorganization within the Computer and Information Science and Engineering Directorate; at FDA, dollars that were formerly categorized under evaluation were relabeled as R&D.

National Institutes of Health (NIH) spending increased by only 0.6% or $181 million; the Centers for Disease Control and Prevention (CDC) budget decreased by $49 million or nearly 11%; and the Agency for Healthcare Research and Quality (AHRQ) budget declined by $4 million or 1%. The Patient-Centered Outcomes Research Institute (PCORI) increased spending by $7 million (700%) as the new agency geared up to perform its mission of improving health care delivery and outcomes.

"The NIH increase of 0.6% is woefully inadequate as we try to combat myriad health threats," said Mary Woolley, president and CEO of Research!America. "New preventive, diagnostic and treatment measures are desperately needed to delay and ultimately overcome tragic chronic diseases, the main driver of health care costs. Policy makers have to step up to the plate and provide robust funding levels for research."

Philanthropic, university, independent research institute and voluntary health association spending contributed to the overall jump in health spending with an increase of 7.5% ($1.42 billion) in FY12. The boost in philanthropic spending was largely due to a major grant awarded by the W.M. Keck Foundation to the University of Southern California for groundbreaking education, medical, clinical and translational research.

There was nominal growth in pharmaceutical and medical technology spending (1.1% and 2.5% respectively) and a more robust 7.2% increase in biotech spending from FY11. Pharmaceutical spending appeared to be slowly climbing out of a deep dive, from a drop of 10.6% in FY11 to a 1.1% increase in FY12. The biotechnology industry trended upward with R&D spending rising 4.7% in FY11 to 7.2%, an increase of $1.3 billion. Medical technology R&D spending rose at a more modest pace, from a $473 million (3.9%) increase to a $321 million (2.5%) increase in FY12.

While promising, industry investments do not necessarily signal the beginnings of a significant upward trend in private sector R&D. The med tech industry is contending with a 2.3% excise tax that went into effect January 1, 2013, and both the biotech industry and the pharmaceutical industry face uncertainty regarding future reimbursement levels and other policy concerns, including intellectual property and regulatory issues.

Venture capital funding for the U.S. biotech industry dropped 15% in FY12, from $4.9 billion to $4.1 billion. In contrast, venture capital for all sectors of the economy dropped 10% to $26.5 billion in FY12. The decline in venture capital for biotech is consistent with warnings by industry leaders that if the U.S. takes a passive stance on U.S. medical innovation, venture capital will begin -- and has begun -- to flow to other countries.

China, Japan, Singapore, Sweden, Mexico, the U.K. and Germany are among those accelerating their investments in medical and health R&D. China has increased investments by 15%, and Germany's investment in health R&D has increased by 60% since 2005. It is now approaching 3% of GDP.

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Research!America has issued estimates of the U.S. investment in health research since 2002. All reports in the series are available online at http://www.researchamerica.org/research_investment.

Research!America is the nation's largest nonprofit public education and advocacy alliance working to make research to improve health a higher national priority. Founded in 1989, Research!America is supported by member organizations that represent the voices of 125 million Americans. Visit http://www.researchamerica.org.

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