SOURCE: The Boston Consulting Group

The Boston Consulting Group

January 13, 2015 11:00 ET

U.S. Role in Global Biomedical Research and Funding for Health Service Innovation Declining, Study Finds

New Study by The Boston Consulting Group and Partnering Health-Care Institutions Reveals Declining U.S. Global Medical-Research Share but Rapid Growth in Asian Investment

BOSTON, MA--(Marketwired - Jan 13, 2015) - A new peer-reviewed article on international health research, published today in JAMA, The Journal of the American Medical Association, reveals a significant decline in the growth of U.S. spending on biomedical research and health service innovation, from 6 percent per year from 1994 through 2004 to 0.8 percent per year from 2004 through 2012.

The shift in U.S. research funding by both public and private sources affected its contribution to the global total. From 2004 through 2012, total U.S. research funding, from both public and private sources, declined from 57 percent to 44 percent of the global total. Although the U.S. still has a strong lead in absolute terms, recent trends indicate that U.S. leadership is eroding, and some observers are speculating that China's total investment could bypass U.S. spending in the next decade.

"We were struck by the fact that rather than doubling down on research during this golden age of biomedical science, U.S. funding growth is declining, and, in real terms, funding for early-stage research is falling," said Sarah Cairns-Smith, PhD, a senior partner with The Boston Consulting Group (BCG) and a coauthor of the study. "Given current trends, the U.S. risks failing to reap the benefits of previous medical advances and relinquishing its historical international leadership in medical innovation."

"The natural cycle is for funding in basic biology to crack open areas for therapeutic innovation," Cairns-Smith said. We're seeing that now play through in areas such as HIV and cancer, but if we don't fund other basic research sufficiently, our time line for addressing highly debilitating diseases such as diabetes, Alzheimer's and schizophrenia stretches out." 

The study is based on publicly available data for 1994 through 2012 from the U.S. and the 40 largest developed nations. The analysis of the data was performed by BCG, Alerion Advisors, Johns Hopkins Medicine, and the University of Rochester School of Medicine and Dentistry.

The article also highlighted health services innovation -- which examines access to care, the quality and cost of care, and the health and well-being of individuals, communities, and populations -- indicating that it is significantly underfunded in the U.S., accounting for only 0.3 percent ($5 billion) of total health-care expenditures. A comparison of investment in health service innovation with that of other industries shows a clear gap. 

"Insurers and health systems rank among the lowest in research and development funding. At 0.1 percent of R&D spending as a portion of revenues, it is far below high-innovation industries -- companies in industries such as biopharma and software and the Internet spend approximately 10 to 20 percent. Perhaps even more surprising was that R&D spending is below the banking, utility, and food and beverage sectors," Cairns-Smith added. "This suggests a systemic problem and a major missed opportunity to improve the continued delivery of health services in the U.S."

Other major findings include the following:

  • From 2004 through 2012, U.S. government research funding declined from 57 percent to 50 percent of the global total, and that of U.S. companies declined from 50 percent to 41 percent.
  • Industry accounted for 58 percent of U.S. research funding in 2012, an increase in share from 46 percent in 1994, but it also shifted investment away from early-stage activity to late-phase clinical trials. Furthermore, 2004 through 2012 showed slower growth in spending than 1994 through 2004.
  • The disease burden in the U.S. is disproportionally addressed by both public and private sources. The National Institutes of Health funds cancer and HIV well above the predicted levels based on U.S. disability, while industry funding has increasingly focused on commercially attractive therapeutics for cancer and rare diseases.
  • Even as the U.S. share of global research funding declined, spending in Asia increased dramatically from 2004 through 2012. Total spending in Asia increased from $1.6 billion to $14.6 billion, and spending by China tripled to $4.9 billion from $1.6 billion. China's investment in the science and technology workforce has been especially strong.
  • The U.S. share of patents, often cited as a key research-output metric, also declined from 73 percent to 59 percent of the most valuable patents from 1981 through 2012.
  • Funding for health services innovation would increase $8 billion to $15 billion yearly if service firms would increase their innovation funding to even the median levels reached by other industries in the top in 20 for R&D spending. Currently, private insurers ranked last and health systems ranked nineteenth among 22 industries in their investment in innovation.

A copy of the article "The Anatomy of Medical Research: U.S. and International Comparisons," can be obtained from the JAMA website at http://jama.jamanetwork.com/journal.aspx.

To arrange an interview with one of the authors, please contact Madeleine Desmond at +1 212 446 2856 or desmond.madeleine@bcg.com.

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Contact Information

  • The Boston Consulting Group
    Madeleine Desmond
    Senior Media Relations Specialist

    Tel +1 212 446 2856
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    desmond.madeleine@bcg.com