Comparison of Research Spending on New Drug Approvals by the National Institutes of Health vs the Pharmaceutical Industry, 2010-2019

Abstract

ImportanceGovernment and the pharmaceutical industry make substantive contributions to pharmaceutical innovation. This study compared the investments by the National Institutes of Health (NIH) and industry and estimated the cost basis for assessing the balance of social and private returns.ObjectivesTo compare NIH and industry investments in recent drug approvals.Design, Setting, and ParticipantsThis cross-sectional study of NIH funding associated with drugs approved by the FDA from 2010 to 2019 was conducted from May 2020 to July 2022 and accounted for basic and applied research, failed clinical candidates, and discount rates for government spending compared with analogous estimates of industry investment.Main Outcomes and MeasuresCosts from the NIH for research associated with drug approvals.ResultsFunding from the NIH was contributed to 354 of 356 drugs (99.4%) approved from 2010 to 2019 totaling $187 billion, with a mean (SD) $1344.6 ($1433.1) million per target for basic research on drug targets and $51.8 ($96.8) million per drug for applied research on products. Including costs for failed clinical candidates, mean (SD) NIH costs were $1441.5 ($1372.0) million per approval or $1730.3 ($1657.6) million per approval, estimated with a 3% discount rate. The mean (SD) NIH spending was $2956.0 ($3106.3) million per approval with a 10.5% cost of capital, which estimates the cost savings to industry from NIH spending. Spending and approval by NIH for 81 first-to-target drugs was greater than reported industry spending on 63 drugs approved from 2010 to 2019 (difference, −$1998.4 million; 95% CI, −$3302.1 million to −$694.6 million; P = .003). Spending from the NIH was not less than industry spending considering clinical failures, a 3% discount rate for NIH spending, and a 10.5% cost of capital for the industry (difference, −$1435.3 million; 95% CI, −$3114.6 million to $244.0 million; P = .09) or when industry spending included prehuman research (difference, −$1394.8 million; 95% CI, −$3774.8 million to $985.2 million; P = .25). Accounting for spillovers of NIH-funded basic research on drug targets to multiple products, NIH costs were $711.3 million with a 3% discount rate, which was less than the range of reported industry costs with 10.5% cost of capital.Conclusions and RelevanceThe results of this cross-sectional study found that NIH investment in drugs approved from 2010 to 2019 was not less than investment by the pharmaceutical industry, with comparable accounting for basic and applied research, failed clinical trials, and cost of capital or discount rates. The relative scale of NIH and industry investment may provide a cost basis for calibrating the balance of social and private returns from investments in pharmaceutical innovation.

Drug Development—Social and Private Returns

“…First, as others have shown, the Bentley University team notes that virtually all new FDA-approved drugs can be traced to some NIH funding. Second, the results reported by Cleary et al indicate large spillover effects of basic research into commercial product development. This finding of spillover effects is consistent with analyses by Li et al, who reported that while 10% of NIH grants result in patents, 30% result in publications cited in patent applications.…”

“…Two articles published in JAMA Health Forum bring some new data and analysis to a debate about the apportionment of credit for new prescription drugs that has been raging since the 1950s . Some have characterized the debate as being a question of whether taxpayers are paying twice for drugs when they pay high prices for prescription drugs and make significant appropriations to the support of the National Institutes of Health (NIH).…”

“…One way this line of policy development has evolved is by making significant taxpayer investments in basic research and promoting product development through assignment of intellectual property rights through patents and US Food and Drug Administration (FDA) grants of market exclusivity, including Bayh-Dole provisions that allow patenting of publicly funded research. The articles by the team from Bentley University contribute to today’s formulation of the debate by considering the role of public funding from the NIH in the drug development process and in the nature of spending on drug development by the NIH when it does occur. Those articles inject some important contemporary facts into the discussion.…”

“…Two articles published in JAMA Health Forum bring some new data and analysis to a debate about the apportionment of credit for new prescription drugs that has been raging since the 1950s. 1,2 Some have characterized the debate as being a question of whether taxpayers are paying twice for drugs when they pay high prices for prescription drugs and make significant appropriations to the support of the National Institutes of Health (NIH). Another way of viewing the debate is to consider whether the division of labor between public and private investments in pharmaceutical research and development is making appropriate use of each sector's strengths and capabilities.…”

Do Managed Entry Agreements Contribute to Lower Pharmaceutical Spending?

“…In sum, the starting point for an initial offer will be based on the net price of therapeutic alternatives, with a ceiling price based on the lower end of either a percentage of the nonfederal average manufacturer price or the average current net price to Part D plans. This initial offer can be adjusted upward or downward based on several factors, including the research and development costs or the federal support for the drug’s discovery . MEAs have not been a specific discussion point in the recent memorandum, but may evolve in the future as a possible arrangements for price negotiations of drugs.…”