Pharmaceutical research and development (R&D) is funded via a mix of private and public sources. Governments typically fund basic and early-stage research through budget allocations, research grants and public ownership of research and higher education institutions. The pharmaceutical industry funds R&D across all phases and most pre‑registration clinical trials, but mostly contributes to translating and applying knowledge to develop products, with some support from R&D subsidies or tax credits.
In 2022, governments in the 35 OECD countries for which data are available collectively budgeted USD 73 billion for health-related R&D. While this figure goes beyond pharmaceuticals, it understates total government support, as it excludes most tax incentives and funding for higher education and publicly owned enterprises. The United States accounted for about two‑thirds of the total (USD 49.5 billion) and devoted the largest share relative to GDP (Figure 9.16), followed by the United Kingdom (USD 3.7 billion) and Japan (USD 3.3 billion).
In the period 2010‑2023, government-allocated budgets for health-related R&D in OECD countries increased by approximately 13% (in real terms), decreasing from a peak in 2020 during the COVID‑19 pandemic (+24% since 2010). More specifically, in real terms, OECD countries collectively allocated USD 60 billion on average in the period 2010‑2019, reaching a peak of USD 80 billion in 2020, and decreasing to an average of USD 72 billion in the period 2021‑2023.
The pharmaceutical industry spent USD 129 billion on R&D in 2022, with the majority again spent in the United States (USD 103.9 billion). Business enterprise expenditure on R&D (BERD) in the pharmaceutical sector has increased by nearly 76% in real terms since 2010. Most of this growth occurred in OECD countries (+60% since 2010), specifically driven by the United States (69% of the OECD total). However, the non-OECD share is increasing. Notably, BERD in China increased from USD 5.0 billion in 2010 (in constant 2015 PPPs) to USD 23.4 billion in 2022 (+365%) – a higher growth rate than in any OECD country.
On average across OECD countries, the pharmaceutical sector accounts for about 8% of total BERD, although this share varies widely between countries (Figure 9.17). In half of OECD countries, business investment in pharma R&D represents less than 5%, while in Switzerland, Slovenia, Denmark and Belgium, the sector’s share exceeds 20%, reflecting the significant role the pharmaceutical industry plays in their economies.
Actual R&D activity can be observed through the number of products or medicines in development by therapeutic class and indication of treatment. Between 2013 and 2023, the total number of product-indication combinations that were in active development worldwide more than doubled, to reach 41 370 (Figure 9.18), although this was driven in part by products with multiple indications. In terms of disease focus, product development priorities have not changed dramatically since 2013. Cancer has accounted for the largest share of product indications in development in every year since 2013 and has increased steadily – from 27% of all product-indication pairs in 2013 to 43% in 2023.
