Total global pharmaceutical R&D spending 2012-2026

In 2020, research and development spending in the pharmaceutical industry totaled nearly 200 billion U.S. dollars globally. For comparison, R&D expenditures totaled 137 billion dollars in 2012. Pharmaceutical R&D includes all steps from the initial research of disease processes, the compound testing over pre-clinical, and all clinical trial stages. At a certain point in the process – mostly during the pre-clinical phase – a governmental authority is involved to overview, regulate, and ultimately approve the drug. In the United States, the Food and Drug Administration is the principal agency associated with processes.

The pressure to innovate

In comparison to other industries, pharmaceutical companies are more driven by the imperative to manufacture innovative products, and thus to spend significant amounts on research and development. This is largely due to the time-limited patent protection of drugs and the following threat of sales erosion through generic and biosimilar competition. Two major effects of patent expirations for the pharma industry are a specific high R&D intensity and a growing focus on specialty drugs to diversify their product portfolio.

The latest trends

For the last several years, major developments in pharmaceutical research and development have begun to change the R&D landscape. A growing number of drug manufacturers are outsourcing large parts of R&D, mostly to clinical research organizations (also contract research organizations), with the main aim to reduce costs. Another important development is the use of big data in clinical research. Thus, a predictive modeling is possible which uses clinical and molecular data to develop safer and more efficient drugs. Particularly, real-time or real-world evidence (RWE) is becoming a greater interest. This makes cooperation with technology companies necessary and includes data gathered from various sources, even that of social media.