Opinion: Canada is missing out on global pharma boom, and things are about to get worse

The global pharmaceutical industry is riding a wave of innovation that is passing Canada by as research and development spending stagnates here.

pharmaceutical industry spent US$83-billion on R&D in 2019 alone, or more than 10 times the amount it spent on research in the 1980s after adjusting for the effects of inflation.

“On average, pharmaceutical companies spent about one-quarter of their revenues (net of expenses and buyer rebates) on R&D expenses in 2019, which is almost twice as large a share of revenues as they spent in 2000,” the CBO found.

The Organization for Economic Co-operation and Development estimated that the pharmaceutical industry spent nearly 12 per cent of gross sales on R&D in 2016 in OECD member countries, totalling more than US$100-billion.

Globally, total pharma industry R&D spending is estimated to have topped US$170-billion in 2019.

While most the rest of the developed world has seen an upsurge in drug research in recent years, however, R&D spending has been in decline for two decades in Canada.

The brand-name pharmaceutical industry has spent less than $1-billion on R&D in Canada every year since 2011, according the Patented Medicine Prices Review Board (PMPRB).

Innovative Medicines Canada, which represents brand-name drug companies, counters the PMPRB figures do not include industry-funded research conducted in hospitals and universities.

Any way you slice it, however, Canada remains a laggard in pharmaceutical R&D.

And most observers argue that new rules that will remove the United States and Switzerland from the list of benchmark countries the PMPRB uses to set maximum prices for patented drugs in Canada will further discourage R&D spending here.

“Most pharmaceutical companies in Canada are affiliates of multinational businesses, which means they must compete with affiliates in other countries for a finite amount of global research money,” researcher Nigel Rawson wrote in recent article for the Canadian Health Policy Institute, a think tank that advocates for market-driven health-policy decisions.

Ottawa should ensure that multinational pharmaceutical companies see this country as a good place to do R&D to capture our share of an expanding global research pie.

Otherwise, brand-name pharmaceutical companies will be reluctant to launch new treatments in Canada until they recoup development costs from sales in countries with friendlier price regulations.