Benchmarking US Biopharmaceutical R&D and Manufacturing Activity

Although the US gets high marks for biopharmaceutical R&D and manufacturing activity, its long-term advantage depends of favorable policy to support the industry, concludes a recent report.

A recent analysis by the Pharmaceutical Research and Manufacturers of America (PhRMA) and Battelle, The US Biopharmaceutical Industry: Perspectives on Future Growth and The Factors That Will Drive It, examines the current and future direction of biopharmaceutical R&D and manufacturing activity in the US and other developed nations compared to emerging markets. The conclusion was that although the US and other developed nations still hold an edge in R&D and manufacturing activity, that advantage may be eroding and the long-term outlook depends on reducing business uncertainty in certain areas. The report outlines two potential growth trajectories for the US biopharmaceutical sector and the top policy factors that would enable the industry to innovate and contribute economically.

US R&D and manufacturing environment 

The PhRMA/Battelle report points to several positive indicators for the US biopharmaceutical industry relative to other US-based manufacturing industries.The US biopharmaceutical industry has the highest total amount of industry domestic R&D expenditures across all industries, accounting for approximately one in five dollars spent on R&D by US businesses, according to the report. It also has the second highest level of R&D investment per employee compared to the other capital-intensive, advanced manufacturing industries. The biopharmaceutical industry ranks second to the semiconductor and electronic components industries with respect to US patent applications (6,777) and US patent awards (4,405). Based on R&D expenditures per issued patent, which reflects the complexity of the technology and the level of investment needed to produce a patentable invention, the biopharmaceutical industry requires twice the level of investment per patent than the automotive industry, for example, which ranks third in US patent applications (4,368) and US patent awards (2,679).

The US biopharmaceutical industry employs a total of 813,523 workers. It employs 12.4% of the nation’s manufacturing R&D workforce, which is the highest among capital-intensive, advanced manufacturing industries analyzed, more than the semiconductor industry (10.1%), the aerospace (8.3%), and automotive (7.1%) industries.

The report also ranked US competitiveness against select benchmark countries (Brazil, China, Singapore, Germany, Japan, and the United Kingdom) to evaluate its position in biopharmaceutical innovation as measured by several indicators. Several indicators were favorable:

  • The US stands out in biopharmaceutical research with 37% of the publications in peer-reviewed medical journals worldwide
  • The US leads the world in biopharmaceutical intellectual property generation with 37% of biopharmaceutical patents
  • The US leads the world in both overall clinical trial activity (see Table I) and early-stage clinical research
  • More than 70% of worldwide venture-capital investments in high-growth potential start-up biopharmaceutical companies are in the US. 
 Table I: Active Clinical Trials, December 2012

 Country  Phase I and Phase II  Total
 United States  8,256  13,394
 Germany  953  2,188
 United Kingdom  805  1,798
 China  363  1,008
 Brazil  202  819
 Japan  290  779
 Singapore  130  288
 Source: as found in The US Biopharmaceutical Industry: Perspectives on Future Growth
 and the Factors That Will Drive It
(PhRMA and Battelle, April 2014).


Although developed markets hold the edge in biopharmaceutical consumption and production, the share of emerging markets in the global market is increasing. From 2001 to 2011, biopharmaceutical production increased 140% on a global basis while overall economic activity increased 117%, according to the PhRMA/Batelle report. Although this is positive, there are increased pressures in developed markets as  consumption and production both increase in emerging markets. The report specifies that China’s domestic biopharmaceutical consumption (independent of the source of production) increased 894% from 2001 to 2011, and biopharmaceutical production kept pace with growth of 884%. By comparison, growth in US biopharmaceutical production was 53% from 2001 to 2011, which was in line with the average for other developed nations, which experienced biopharmaceutical production growth of 58% during that period. Given the lower rates of internal biopharmaceutical consumption (mainly due to population differences), growth in the total production of biopharmaceuticals was generally much lower than production in emerging countries, concluded the PhRMA/Battelle report.

The report points to a narrowing “innovation gap” between the US and emerging economies, as measured by capabilities in both biopharmaceutical manufacturing and R&D capabilities. “While the US is currently the leader in innovative biopharmaceutical production and R&D activity, it risks ceding ground as emerging countries grow their capability in biopharmaceutical manufacturing and R&D capabilities,” said the report. “The challenge for the US is that an emerging country’s growing capacity for biopharmaceutical production is a precursor for growing R&D capabilities in the future.”

Benchmarking performance
The PhRMA/Battelle report surveyed senior biopharmaceutical industry executives with strategic planning and commercial development responsibilities to assess the US and select countries (Brazil, China, Singapore, Germany, Japan, and the United Kingdom) on various measures that impact the quality of the operating environment for R&D and manufacturing (see Table II) and the cost of doing business in those countries (see Table III). The countries were then evaluated in a relative quality-cost tradeoff. The results showed that with respect to R&D, China and Brazil were rated as low-cost-low-quality relative operating environments while the developed nations (US, Germany, Japan, and the UK) were rated as high-cost-high-quality operating environments-meaning while providing high quality for an operating environment, they are more costly to operate as expected from a traditional tradeoff standpoint. Singapore was the one country to outperform the fair value tradeoff of quality to cost, where executives viewed it as high-quality operating environment but a lower cost than expected.

 Table II: Key Quality Aspects
 Private funding of R&D in early-stage and emerging companies
 Trade environment
 Market opportunities
 Government basic R&D funding and technology transfer environment
 Regulatory system
 Healthcare coverage and payment
 Intellectual property protection
 Scientific R&D workforce
 Manufacturing workforce
 Source: The US Biopharmaceutical Industry: Perspectives on Future Growth and the
 Factors that Will Drive IT (
PhRMA and Battelle, April 2014).
  Table III: Key Cost Aspects
  Cost of R&D operations
  Cost of manufacturing operations
  Taxation rates for industry
 Source: The US Biopharmaceutical Industry: Perspectives on Future Growth and The Factors That Will
 Drive It
(PhRMA and Battelle, April 2014).

On a manufacturing level, both Singapore and Germany outperformed the fair value tradeoff of quality to cost, meaning the countries offer a lower-than-expected cost relative to their high quality. The UK was rated as having a fair value in its high manufacturing quality compared to its net cost. The US and Japan were considered to have relatively high-quality-high-cost manufacturing environments while China and Brazil were viewed as having relatively low quality, but also lower costs. 

Future of R&D and manufacturing

The PhRMA/Battelle report further examined the future of US R&D and manufacturing activities when weighted against two policy scenarios. In a “status quo” scenario where business uncertainty exists, US R&D expenditures and manufacturing output will increase modestly during the next 10 years. The results from the executive survey showed potential growth of 19% in domestic biopharmaceutical R&D activities and a slightly higher 21% increase in domestic biopharmaceutical manufacturing activities over the next decade. This current projection represent the growth rates with the highest statistical likelihood of occurring based on the executive survey. 

In another scenario, where reasonable improvements are made to the US business operating environment, which only has a 20% chance of occurring, would translate into a 36% increase in US biopharmaceutical R&D activities and a 31% increase in US biopharmaceutical manufacturing output over the next decade. 

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