52 R&DMagazine December 2013 www.rdmag.com
As represented in this Forecast, the life science industry includes
biopharmaceuticals, medical instruments and devices, animal/agricul-tural bioscience and commercial research and testing. However, the
industry’s R&D spending is driven primarily by the mass and research
intensity of the biopharmaceutical sector, which accounts for nearly
85% of all expenditures.
The life science industry’s research activities in the United States continue to lead the world, but it is an area that also remains in significant
transition. Not only is life science—led by the biopharmaceutical
sector—the leading U.S. industry in terms of volume of research, U.S.
life science R&D accounts for 46% of the global total—one of the
highest shares in any industry.
Still, pressures persist to improve on productivity, product pipelines
and ROI in consideration of expiring patents, cost pressures and the
rising complexity of innovation in drug development. While primarily affecting the biopharmaceutical sector, the medical device sector is
not immune to some of these trends. A new factor complicating the
R&D environment for the life science industry is the set of changes
in the U.S. healthcare landscape mandated by the Affordable Care Act.
While it is hard to predict exactly how this new law will affect life science R&D, these transitions and uncertainties suggest that while the
U.S. remains a global leader life science R&D, it is vulnerable, especially as European competitors and new, emerging Asian competitors
target life science research for growth.
For the U.S. life science industry, we project a small rebound over
2013 levels (up 2.2%) to R&D spending of about $93 billion in 2014,
with the growth coming primarily from smaller biopharmaceutical
innovators and medical device manufacturers.
The global expansion of the life science industry has slowed over the
last few years, but the industry is forecast to have a stronger recovery
(up 3.1%) to more than $201 billion in 2014.
Regulatory Context Influences U.S. R&D Outlook
The U.S. life science industry emerged from the combined challenges of the recession and patent expirations with fresh strategies
for R&D. Traditional pharmaceutical companies, while still massive
2014 GLOBAL R&D FUNDING FORECAST
and investing significant resources in R&D, continue to struggle with
reduced product pipelines and productivity from discovery through
development. As these firms rationalize drug development activities,
R&D spending often declines and programs are sometimes reduced
and refocused. Smaller biotech companies find opportunity in these
circumstances, and innovation through acquisition continues to be an
important strategy by larger firms. Medical device and instrumentation firms continue on a steady R&D growth trajectory, but also seek
greater efficiency. Universities have become increasingly important
sources of innovation and collaboration in life science research in applied areas like drug discovery, as well as more fundamental research
in systems biology, nanobiotechnology and other areas.
The future operating environment for this industry is complex. As
noted, the Affordable Care Act creates uncertainties in areas like the
introduction of new medical products. On one hand, expanding the
number of Americans who have health insurance coverage may increase the market for medicines and treatments, and certain regulatory
requirements like “meaningful use” of electronic data will accelerate
new markets and healthcare efficiency, as well as research in health
There also are a number of provisions that will regulate the pricing
of prescription medicines and medical treatments, such as mandatory
prescription drug rebates and discounts under Medicaid and the Inde-
Life Science Industry R&D Spending S
197.7 195.3 201.3
84.5 91.1 90.6 92.6
2011 2012 2013 2014