U.S. pharma industry R&D spending as a percent of total revenues 1990-2018

In relation to total revenue, the pharmaceutical industry is among the biggest investors in research and development (R&D). Based on data from the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry in the United States spent around 19.5 percent of global revenues on R&D in 2018 – this share has remained around 20 percent for the past few years.

Analyzing the revenues and R&D expenditure

Members of the PhRMA trade group generated global revenues of approximately 407 billion U.S. dollars in 2018, with domestic revenues accounting for around 70 percent of that figure. With regard to R&D expenditure, PhRMA members spent close to 80 billion U.S. dollars worldwide in 2018, with spending in their domestic market of the United States accounting for a 78 percent share of the global figure.

Product lifecycles in the pharmaceutical industry

Pharmaceutical manufacturers require time and money if they are to develop new innovative medicines: it can take 10 to 15 years to develop a new medicine, at an average cost of approximately 2.6 billion U.S. dollars. Due to patents and exclusivity, brand name drugs can expect to be on the market for an average of twelve years before a generic version enters. Generics contain the same active ingredients as branded drugs but can be considerably cheaper. The healthcare system in the United States generated around 293 billion U.S. dollars in savings through generic medicines in 2018.