US Medical Health Research Spending on the Rise, but for How Long?

Wednesday, November 15, 2017

A new report from Research America shows that investment in medical health research and development (R&D) is on the rise, with a 20.6% growth in spending from 2013 to 2016.

The report, developed from data derived from industry sources; federal, state, and local governments; academic and research institutions; hospital research centers; and grant-giving entities, found that the total amount that the United States spent on medical and health R&D in 2016 reached $171.8 billion.

The biggest contributor to R&D spending over the study period was industry, which includes biopharmaceutical developers, medical technology developers, and healthcare service companies. These industries accounted for 67.4% of all medical and health research spending, and biopharmaceutical companies alone accounted for 52.3% of total US R&D spending in 2016. According to the report, at least 7 biopharmaceutical developers contributed over $1 billion each to R&D activities.

Other contributors were the following:

  • The US federal government, 21.9%
  • Universities, 5%
  • Foundations, 1.5%
  • Independent hospitals, 0.8%
  • Independent research institutes, 1.5%
  • State and local governments, 1.0%
  • Voluntary health associations and professional societies, 0.8%

Despite such impressive spending growth, the report noted, R&D comprises only a small fraction of overall US healthcare spending. The report’s authors estimate that the total healthcare spend in the United States reached $3.5 trillion in 2016, with R&D comprising just 4.9% of that amount.

Additionally, while R&D spending is on the rise, growth in that spending has begun to wane, with only a 6.8% growth between 2015 and 2016 (compared to annual growth of 7.9% between 2013 and 2014 and 8.2% from 2014 to 2015). The report’s authors blamed lingering industry concerns about the survival of the Affordable Care Act, as well as foreign competition and pipeline challenges, for the spending slowdown.

Federal policy makers, too, faced challenges during the study period, including the impact of the 2011 Budget Control Act, which instituted budget caps subject to sequestration. The first cap, implemented in 2013, cut federal spending by $85.3 billion with across-the-board budget reductions. However, the American Taxpayer Relief Act and the Bipartisan Budget Act, both signed into law in 2013, provided temporary loosening of budgetary restrictions, and the 21st Century Cures Act helped the National Institutes of Health (NIH) to regain ground between 2015 and 2016.

The report’s authors wrote that 2017 spending is likely to increase, primarily due to an additional $2 billion earmarked for the NIH, but the long-term outlook for R&D is uncertain. The authors cited the current administration’s calls for large cuts to federal research funding across non–defense-related areas as a potential cause of reduced spending on health research.

Such slowdowns in spending are of significant concern during the current public health crisis of opioid addiction. Research into addiction has thus far yielded 2 key tools that can be used in combatting the effects of addiction: opioid overdose reversal emergency injections and medication-assisted therapies. However, the scale of opioid addiction in the United States requires additional therapies, and significant investment into prevention and treatment of addiction will be key to solving the issue of the epidemic.

“In total, our nation spends less than 5 cents of each health dollar on R&D,” the authors concluded. “We must consider whether this level of investment is adequate to address the formidable health challenges before us.”

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Media Contacts

Tim Haynes
Senior Director of Communications 

Funding research gives all of us a better chance of living a healthier life.
Pam Hirata, heart disease survivor