Nearly twenty years ago, Canada’s Patent Act was amended to more closely reflect international standards. A requirement was imposed to annually report pharmaceutical companies’ investments in Canadian research and development as a percent of Canadian pharmaceutical sales through the Patented Medicines Prices Review Board (PMPRB).
At that time, the funding of medical research was fundamentally different than it is today. In the late 1980’s and early 1990’s, most innovative pharmaceutical companies operated massive in-house research operations and outsourced significant elements of that research to universities and research institutions. Today, the catalyst for medical research in Canada is not in-house spending by pharmaceutical giants but rather the venture capital that the pharmaceutical industry and others provide to support literally hundreds of Canadian biotech companies that are at the forefront of medical and pharmaceutical discovery.
Despite the significant investment in biotech, the ratio of research and development spending as a proportion of Canadian pharmaceutical sales may be lower today than in the past, but the trend to fund home grown Canadian biotechnology has an even bigger impact than the industry’s previous contributions to R&D.
Multi-national research-based pharmaceutical companies are the primary catalyst for both direct and indirect funding of Canadian medical research. Canadian medical innovation and the creation of cutting–edge research jobs comes from hundreds of small health-related biotech companies. These companies exist and flourish because of their ability to attract venture capital and that venture capital exists primarily because of the prospect of partnerships or acquisitions by innovative multinational pharmaceutical companies.
For example, earlier this year Northern Biologics, a small Canadian company, received an upfront payment of $30 million and the potential for additional payments from Celgene, a large multi-national pharmaceutical company. In 2012, US based multi-national Alexion acquired Enobia, a small Canadian biotech for nearly $1 billion. These are significant investments in the outputs of Canadian medical research that will never be captured in R&D to sales ratio statistics.
Similarly, Charles River Laboratories’ massive investment in Quebec, and the nearly 2,000 highly skilled jobs that that entails, comes about because Charles River provides contract research work for major pharmaceutical companies all over the world. Again, a significant positive impact on Canadian medical research not captured by the R&D to sales statistic.
Canada’s outdated, and perhaps largely irrelevant, requirement to report R&D expenditures as a percent of sales through Patented Medicines Prices Review Board (PMPRB) does not reflect the reality of the Canadian research and development environment. Start-ups, venture capital, and acquisitions are the norm for all R&D based industries including bio-pharmaceutical.
In Canada small biotech companies are driving knowledge-based industrial growth. To prosper these companies depend on venture capital that flows both directly and indirectly from the prospect of commercialization deals with large multi-national pharmaceutical companies. Times have changed and how we measure the bio pharmaceutical sector’s contribution to our overall economy needs to reflect modern realities.
Nearly two thirds of Canadian biotechnology is in the area of health care and medicines. In short, medical innovation in Canada is vibrant. The Canadian research-based biotechnology sector contributes significantly in terms of both employment and the development of life-saving medicines used globally.
Data Source: Daniela Fisher, Canada’s Biotech Industry, Driving Canada’s Economic Transformation, Biotechnology Focus, September 26, 2012