Who’s investing in health care R&D?

A recent Brookings research report found that the private sector—including pharmaceutical companies, venture capital firms, and impact investors—devotes at least $159.9 billion to investments related to health care research and development (R&D) annually. Though many organizations and publications have measured public sector spending on drugs, vaccines, and therapeutics, the Brookings report is the first to quantify the amount invested by private firms. So who is driving this investment—and how much are they spending?

Pharmaceutical Companies

Pharmaceutical firms represent a large investor in overall health R&D. In 2016, they spent $156.7 billion globally. Roche and Novartis were the largest investors in this space, spending $8.7 billion and $7.9 billion, respectively. The table below identifies the other 18 highest-spenders.

Table 1: Total Pharmaceutical Overall Health R&D Spending, 2016


Pharmaceutical Firms in China and India

As Table 1 shows, the top 20 pharmaceutical firms invested $93.6 billion, while the remainder ($63.1 billion) came from other pharmaceutical companies around the world. While the top 20 firms are all based in Western countries, domestic pharmaceutical firms operating in China and India are significantly increasing the size and share of their investments.
Figure 1 below shows Chinese pharmaceutical R&D spending by local firms from 2000 to 2016 and shows that expenditures rose over 4,400 percent, from $163 million in 2000 to $7.2 billion in 2016. Figure 2 shows the R&D spending by Indian pharmaceutical companies over the past decade, during which time expenditures increased 396 percent, from $480 million to $1.9 billion.

Venture Capital Firms

Though the pharmaceutical industry contributes the majority of private sector spending on health R&D, venture capital firms also invest in this space. However, information on venture capital investments is hard to find since much of the data regarding investments and returns are proprietary in nature. Brookings researchers Darrell West, John Villasenor, and Jake Schneider calculated a rough estimate of the amount spent by the world’s leading VC firms (those with $1 billion or more in assets under management) that invest in drugs, vaccines, and therapeutics. Overall, they found these firms invested around $3.2 billion in health R&D in the year running from May 1, 2016 to May 1, 2017. Third Rock Ventures and OrbiMed Advisors invested the most in health R&D, with investments of $366.9 million and $337.7 million, respectively. The table below lists all 26 firms in the data set.

Table 2: Leading Venture Capital Firms Investing in Health R&D (in millions)


These are substantial sums of money: A total of $159.9 billion spent on overall health R&D, including $156.7 billion from pharmaceutical companies and $3.2 billion from venture capital. But is it enough and is it being spent in the places that need it most? For more on those questions, explore the many publications of Brookings’s Private Sector Global Health R&D Project.