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New Research Confirms Evidence of Faltering U.S. Investment in Biomedical Research

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In 2012, ITIF’s report Leadership in Decline: Assessing U.S. International Competitiveness in Biomedical Research—which National Institutes of Health Director Francis Collins told the New York Times last July was the one publication he’d most recommend President Barack Obama read—warned that the United States has not been sustaining the historically strong investments in biomedical research that previously propelled it to global life sciences leadership. The report noted that an increasing number of countries are investing more in biomedical research as a share of their economy than the United States. For example, in terms of government funding for pharmaceutical industry-performed research, Korea’s government provides seven times more funding as a share of GDP than does the U.S., while Singapore and Taiwan provide five and three times as much, respectively.

Now comes a new report, Asia’s Ascent—Global Trends in Biomedical R&D Expenditures, from The New England Journal of Medicine confirming these findings. As summarized by a recent Economist article, Biomedical research budgets: The party’s over, the report finds that, from 2007 to 2012, average annual investment in biomedical R&D increased by 33 percent in China, 12 percent in South Korea, and 10 percent in Singapore, while it fell by 2 percent in the United States. And, as both the ITIF and New England Journal of Medicine reports note, the National Institute of Health’s 2013 budget of $29 billion (itself $1.7 billion less than in 2012 due to sequestration) was in fact 22 percent less, in real terms, than it was a decade ago.

Nor are these trends likely to abate; in fact, they’re only likely to exacerbate. As ITIF’s Leadership in Decline report explains, if current (and, in fact, pre-sequestration) trends hold, the U.S. government’s investment in life sciences research over the ensuing half-decade is likely to be barely half that of China’s in current dollars and roughly one-quarter China’s level as a share of GDP. Specifically, as one of China’s seven identified Strategic and Emerging Industries (SEIs), China intends to invest $308.5 billion in biomedical research over the next 5 years, while U.S. investment, in the vicinity of $30 billion annually, will come to about half that level (in current dollars). And even leaving the future aside, China’s Beijing Genomics Institute (BGI) already has the world’s largest next-generation sequencing capacity—with more sequencing capacity than the entire United States and about one-third of total global capacity.

Public and private investments in R&D are complementary. (In fact, research finds that each additional dollar of public contract research added to the stock of government R&D has the effect of inducing an additional 27 cents of private R&D investment.) Thus, it’s no surprise that, as relative public investment in biomedical research in the United States declines while it increases in Asia, combined public-private investment in biomedical R&D has been rising in Asia while it falls in the United States. In fact, investment in biomedical R&D in the United States in 2012 was $20 billion less than it was in 2007, while in Asia it increased by $20 billion. The link between increased public investment in biomedical research and increased venture capital investment is already quite clear in China, which has now become the world’s second-largest source of venture capital for inventions involving medical technology.

The United States cannot take its leadership in life sciences industries—which support more than 7 million jobs and annually contribute about $70 billion to U.S. GDP—for granted. Rather, the United States must re-establish as a national priority strong and continuing support for the National Institutes of Health and similar agencies. Specifically, Congress should permanently reverse the R&D budget sequestration cuts scheduled to take force again in FY 2015, and going forward fund the National Institutes of Health at a level commensurate with at least one quarter of one percent (0.25%) of national GDP or higher. And critically, Congress needs to maintain the stability of biomedical research funding levels with minimal fluctuations from year to year.

If the United States wants to remain the leader in global life sciences innovation, it will have to sustain the same level of robust investment in basic scientific research that over the past half-century contributed significantly to the United States becoming the leader in the first place.

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About the author

Stephen Ezell is vice president, global innovation policy, at ITIF. He focuses on innovation policy as well as international competitiveness and trade policy issues. He is coauthor of Innovating in a Service-Driven Economy: Insights, Application, and Practice (Palgrave MacMillan, 2015) and Innovation Economics: The Race for Global Advantage (Yale, 2012). Ezell holds a B.S. from the School of Foreign Service at Georgetown University.