The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&Dalliances and external research (both national and international) within three of the majorpharmaceutical companies listed in Figure 6-1. All companies are not U.S.-owned, butthey have substantial activities in the U.S. and are members of the Pharmaceutical Researchersand Manufacturers in America. Further interviews have been conducted withindustry experts (herein referred to as Industry Experts I and II) who have experienceworking with a large number of pharmaceutical companies; these interviews offer additionalperspective outside of the three selected companies.The data collected from a limited number of interviews will not offer a definitive answerto the second question above, but will, through an exploratory approach, help identify keyissues and behavioral patterns among a limited set of actors within the population.6.2 Where Do Pharmaceutical Companies Conduct R&D?The average large pharmaceutical company spends 3,348 million dollars on R&D peryear. This amount represents, on average, 15 percent of total revenue. Figure 6-1 showsthe specific numbers for the 13 largest pharmaceutical companies. These companiesconstitute 13 of the 34 main members in PhRMA, not counting daughter companies tothe large pharmaceutical companies.Figure 6-1 Research and development expenditure in pharmaceutical companies with revenueabove 5 billion dollars in 2003.Company NameR&D Expenditure(million dollars)R&D as a Share ofTotal Revenue(percent)R&D ExpenditureperEmployee(U.S. dollars)Abbott laboratories 1,830 9.3 25,404Amgen 1,655 20.0 128,326AstraZeneca 3,451 18.1 55,751Aventis (Sanofi) 3,683 15.5 48,743Bristol Myers Squibb 2,279 10.9 51,795GlaxoSmithKline 4,942 12.9 47,906Johnson & Johnson 5,602 13.4 50,651Lilly (Eli) & Co 2,350 18.7 50,980Merck & Co 3,280 14.6 51,897Novartis 3,756 15.1 47,822Pfizer 7,131 15.8 58,450Schering-Plough 1,469 17.6 48,164Wyeth 2,094 13.2 39,964Group average 3,348 15.0 50,193Source: RTEC 2004.154
THE INTERNATIONALIZATION OF CORPORATE R&DNew-drug development costs have increased from 231 million dollars per drug in 1987to 802 million dollars in 2000 (DiMasi et al. 2003). The total spending in R&D hasincreased, as reflected in Figure 6-2. The figure also shows the share of R&D performedwithin the U.S. versus the share performed outside the U.S.Figure 6-2 R&D performed by member companies of the Pharmaceutical Researchers andManufacturers in America (PhRMA), 1970–2003.30 00025 000million dollars20 00015 00010 0005 000019701972197419761978198019821984198619881990199219941996199820002002R&D performed in the USR&D performed outside the USSource: PhRMA 2004.The amount of money spent on R&D by pharmaceutical companies continues to increase.In 2004 members of PhRMA invested 38.8 billion dollars, which is 12.6 percent morethan in 2003 and more than four times the investment made in 1990 (PhRMA 2005).Figure 6-2 shows that the PhRMA companies spend most of their R&D budgets in theU.S. We find that PhRMA-member companies perform 84 percent of their R&D in theU.S., 13 percent in Europe, 2 percent in Japan and the remaining 1 percent divided inthe rest of the world (PhRMA 2004).If, however, we examine the number of R&D laboratories instead of absolute researchdollars, we see a sharp increase in the internationalization of the companies. In 1960,most of the U.S. pharmaceutical companies performed their work within one U.S.-based laboratory. In 1997, the average company had two laboratories within the U.S.and two laboratories outside of the U.S. A major reason for the change was that newways of performing drug discovery had emerged, and companies needed to find moresources of knowledge. Considering the combined resources of the 21 largest U.S.155
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The Swedish Institute for Growth Po
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