Thursday, October 7, 2010

Eye on Investment: U.S. Health Research

Research!America has been annually estimating how much the U.S. spends on health research for nearly a decade. The past few estimates have been fairly predictable, but I was interested to begin work on the 2009 report (released today) to see the impacts of the recession and the American Recovery and Reinvestment Act funding meant to stimulate research and the economy.

Without the ARRA funding, the investment in health research would have practically flat-lined in actual dollar amounts. It is the only reason that the percentage of the national expenditures for health that was spent on research was stable at 5.6%. Let’s take a closer look at some of the numbers, starting with industry.

We rely on the annual Pharmaceutical Industry Profile published by the Pharmaceutical Research and Manufacturers of America for our pharmaceutical and biotechnology industry numbers. Although some may be skeptical of the data, I learned at a meeting last year that we are considered lucky by many others in the field of research resources tracking to have an industry that does a comprehensive annual survey on R&D expenditures. The 2010 Profile estimates that the biopharmaceutical industry spent $65.3 billion in 2009. That is a $1.6 billion increase over the actual 2008 amount of $63.7 billion, but just $0.1 billion over the previous year’s $63.2 billion estimate (which is what we used in our 2008 report).

Tracking R&D resources in the medical technology industry as a whole is a fairly new endeavor. Ernst & Young published for the first time last year their Pulse of the Industry: Medical Technology Report. Ernst &Young shared with us their most up-to-date figures for the industry—$9.047 billion spent on R&D in 2009— which can vary based on the make-up of the current roster of public U.S. companies as well as re-statements by the companies.

Although the health research industry did not experience a big decline in R&D spending as some other industries have, it is apparent that the recession brought steady growth in industry R&D to a halt. Other private funders, such as the voluntary health associations, were also negatively affected. Not surprising since many rely on donations and their investments to support their research and other programs. On the flip-side, independent research institutes stepped-up their R&D spending from their endowments, possibly to compensate for reduced funding from other sources.

The ARRA funding played the greatest role by far in helping to counteract the effects of the recession as well as several years of flat federal funding for research to improve health. That said, it also made analyzing the funding much more complicated since it was all appropriated in 2009, but it could be spent by the agencies through the end of fiscal year 2010. To stay as consistent as possible with previous estimates, I tried to only include ARRA dollars that were spent in 2009 in the current estimate. Some agencies made that easier than others…

The National Institutes of Health, which accounts for the majority of federal health research funding, spent $4.953 billion of its ARRA funding in 2009 in addition to its regular program level of $30.554 billion. The National Science Foundation’s FY 2011 budget request shows the actual 2009 ARRA funding, which added up to $880 million for the disciplines that we include based on our definition of health research. Another agency that received a significant boost in research funding due to ARRA was the Department of Energy Office of Science, of which $327 million was for research to improve health.

Nearly three-quarters of the increase in the U.S. investment in health research from 2008 to 2009 was due to ARRA funding. The effects of stimulus will last through FY 2010, but the funding for research to improve health must grow long-term. Industry, the federal government, academic institutions, state and local governments and other private funders must make a commitment to improving the health of Americans and the economy by increasing their investments in research.

Read the 2009 U.S. Investment in Health Research report for more information.

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