Pharmaceutical company spending on research and development and promotion in Canada, 2013-2016: a cohort analysis

Pharmaceutical companies typically claim that one of the reasons for high drugs prices is because of the amount that they spend on research and development (R&D). According to the industry, it costs USD $2.6 billion to bring a drug to market [1]. Critics of the industry counter that companies are more focused on and spend more on promotion than on R&D. Gagnon and Lexchin produced figures that showed that in the United States (US) in 2004 the industry spent USD $57.5 billion on promotion versus USD $31.5 billion on R&D [2]. A report from the California-based Institute for Health and Socio-Economic Policy stated that in 2015 out of the top 100 pharmaceutical companies by sales, 64 spent twice as much on marketing and sales than on R&D, 58 spent three times, 43 spent five times as much and 27 spent 10 times the amount [3]. To date, arguments about promotion versus R&D spending have been based on American data. This study had two aims: first to estimate total industry-wide promotion and compare that to total industry-wide R&D spending and second, to look at the ratio of R&D versus promotional spending for individual companies marketing the most heavily promoted drugs in Canada.

Depending on the method used to determine promotion spending, industry-wide the ratio of R&D spending to promotion ranges from 1.45 to 2.18 (sales representatives and journal advertising only) or from 0.88 to 1.32 (total promotional spending) for the years 2013 to 2016. The amount spent on promotion used in calculating the former set of ratios is more accurate but is limited to just two types of promotion. The amount spent on promotion used in calculating the latter set of ratios is an estimate for all types of promotion but is less accurate. Both sets of ratios also only apply to the amount spent on the 50 most heavily promoted drugs. For the individual companies promoting one or more of the 50 most promoted drugs, 2.11 to 2.32 times more is spent on R&D compared to promotion. Even using the limited data on individual company promotion, 8-10 companies per year still spent less on R&D than they did on promotion.

However, all of these results should be interpreted cautiously for a number of reasons. First, the QuintilesIMS reports only provide figures for spending on sales representatives and journal advertising whereas companies engage in a number of other methods of promotion, among them, distributing free samples, hiring key opinion leaders to give talks, sponsoring meals and meetings and using social media. Second, the estimate for total promotional spending based on the mean of the 2002-2005 figures assumes that the proportion of the total used on journal advertising and detailing remained stable. Finally, for many companies promotion spending was based on the amount spent on just 1 or 2 drugs.

The reason for the abrupt decline in spending on detailing and journal advertising in 2016 compared to 2013-2015 requires further investigation. The variation in the year-to-year amount spent on both R&D and promotion by individual companies most likely reflects research priorities and how many drugs companies are aggressively marketing.

Beyond examining the amount of money spent on R&D and promotion, looking at the focus of that spending and the outcomes is another way of assessing the priorities that companies attach to each of these activities. Innovative Medicines Canada (IMC), the organization representing the research-based industry, signals the importance that it attaches to R&D on its website: “At present, there are more than 500 new products in development in Canada, including therapies focused on cancer treatments, infectious diseases and vaccines. These products have the potential to help Canadians and people all over the world live longer and healthier lives” [12]. However, industry spending on R&D in Canada has been declining ever since 1997/1998 when it peaked at 11.5% of sales and it now stands at 4.4% [11]. Out of 564 new patented medicines introduced into Canada from 2010 to 2016 inclusive, only 37 (6.6%) were rated by the PMPRB as breakthroughs or substantial therapeutic improvements [11]. Although most products that fail in the clinical development stage do so because of a lack of efficacy or for safety reasons, 57% and 17% respectively, 22% are stopped for commercial reasons [13] indicating that products that might be both safe and efficacious are not brought to market.

Industry is also positive about the role of promotion, especially the activities of sales representatives. This orientation is reflected in a statement about the role of pharmaceutical sales representatives issued by Rx&D, the predecessor to IMC: “Provider-supported detailing generates awareness about new treatments and provides science-based and Health Canada approved advice on how to administer these medications” [14]. Previous research that examined the most heavily promoted products in Canada, showed that the vast majority of spending went to medications that offered little to no additional therapeutic value over existing therapies [15]. The comprehensiveness of the safety information provided by sales representatives when they visit doctors was investigated in a study involving primary care practitioners in Vancouver and Montreal. “Minimally adequate safety information” defined a priori as the mention of one or more of the following: approved indications, serious adverse events, common non-serious adverse events and contraindications and no unapproved indications or unqualified safety claims (e.g., “this drug is safe”) was provided in 5/412 (1.2%) of promotions in Vancouver and 7/423 (1.7%) in Montreal. Representatives did not provide any information about harms (a serious adverse event, a common adverse event or a contraindication) in two-thirds of interactions [16].

It would appear that regardless of the amount of money spent on these two activities – R&D or promotion – that commercial objectives are one of the main considerations behind how pharmaceutical companies direct their expenditures.

Based on the available data, individual pharmaceutical companies in Canada, on average, are spending more on R&D than on promotion; however, the reverse is true for a minority of companies. For the industry as a whole, more may be spent on promotion versus R&D although a definite conclusion would require access to more complete data.