Abstract
Slow Growth of Pharmaceuticals Market Significantly Affects R&D
Spending
The most pervasive reason for the slowdown in drug discovery spending is the
sluggish growth of virtually every segment that contributes to product
purchasing. The top 20 pharmaceutical companies dedicated $39.3 billion to
R&D spending in 2002, of which 32 percent was spent on pre-clinical
development. This translated into R&D product purchases of approximately
$6.6 billion. As pharmaceutical top line grows at 5 to 6 percent, R&D
expenditure is not expected to increase at more than 6 percent.
"Drug discovery spending is driven by three major forces: the
pharmaceutical industry's need to continue to produce novel therapeutics, the
biotech industry's need for continued R&D, and academic/government
research," says the analyst of this research service. Advanced study and
development of pharmaceuticals and therapeutics requires a significant
expenditure. The R&D spending is not solely dedicated to product purchases
as overheads and the payroll represent significant expenses.
In 2002, global drug discovery spending was estimated at $19.6 billion. This
number is expected to reach $25.1 billion by 2006, at a compound annual growth
rate of 6.3 percent. The National Institutes of Health's (NIH) budget is the
single largest contributor to research product sales. Market growth will be
significantly affected by a substantial decrease in the growth rate of the NIH
budget, as well as a slowing of pharmaceutical and biotech R&D spending.
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