Pharmaceutical research and development (R&D) investment and number of clinical trials in Canada

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Despite strong patent protection and relatively high drug prices in Canada, the level of research and development (R&D) expenditures relative to patented medicine revenues has been declining over the last two decades, prompting the need for a closer examination of the trends of pharmaceutical R&D investment and clinical trial intensity.

Background: Innovation is vital to advancing health care. In part, the provisions of Canada’s Patent Act are intended to foster an investment climate favorable to pharmaceutical R&D in Canada. However, the ratio of R&D expenditures to sales revenues for pharmaceutical patentees in Canada has been falling since the late 1990s and has been under the agreed-upon target of 10% since 2003. In 2019, it was at 3.9% for both all patentees and members of Innovative Medicines Canada. At the same time, Canadian list prices of patented medicines are the fourth highest in the Organisation for Economic Co-operation and Development (OECD).

1. Patentee R&D expenditures in Canada are out of step with comparator countries, even when broader expenditures are factored in.

Despite having among the highest prices in the OECD, the percentage of R&D-to-sales by pharmaceutical patentees in Canada was 3.9% in 2019, its lowest level since the PMPRB first began reporting on pharmaceutical trends in the 1980s. In 2017, Canada’s R&D-to-sales ratio was the lowest among the PMPRB7 comparator countries at 4.1%. Italy had a slightly higher ratio of 5.7%, while all other PMPRB7 countries remained well above Canada. The ratio obtained by aggregating R&D spending and sales across all PMPRB7 countries was 24.0%, almost six times greater than in Canada.

While the PMPRB defines R&D based on the 1987 Scientific Research and Experimental Development (SR&ED) definition, patentee R&D expenditures in Canada continue to fall below international norms, even when broader measures of R&D are considered. Using estimates recently published by Statistics Canada, the inclusion of broader measures of R&D (SR&ED and non-SR&ED) increases Canada’s R&D-to-sales ratio to just 5.8% for Innovative Medicines Canada (IMC) members. This ratio may be an overestimate as it combines in-house and outsourced R&D that Statistics Canada generally reports separately, and which has the potential to lead to double counting of the domestically outsourced R&D.

2. Canada has a sizable number of clinical trials, and those publicly sponsored play an important role.

Clinical trial intensity in Canada, measured by the number of new clinical trials per 1 million people, is just above the OECD median, at 12 and 11, respectively. Industry funds the majority of clinical trials internationally, though to a lesser extent in Canada: the share of new clinical trials primarily sponsored by the industry in Canada (70%) is lower than the OECD median (78%), and likewise, the share of Canadian patentee-sponsored clinical trials (46%) falls below OECD norms (61%). This suggests that the public funding of clinical trials plays an important role in the relatively strong clinical trial intensity in Canada.

3. Following a temporary decline in the number of international clinical trials due to the COVID-19 pandemic, the numbers in Canada are now back in line with previous trends.

COVID-19 caused unprecedented disruptions of clinical trials around the world in the first half of 2020. Compared with the average over the previous four years (2016–2019), the number of new clinical trials declined by an average of 21% among the OECD and PMPRB7 countries, and subsequently recovered in the second half of 2020. Similarly, the number of new clinical trials in Canada declined by 29% in the first half of 2020, and subsequently recovered to average levels in the second half of 2020.

4. Over 1,000 clinical trials across the world have experienced disruptions due to the COVID-19 pandemic, with Canada seeing a comparable share of disrupted trials as other countries.

Some countries (such as United Kingdom and Estonia) have had nearly 7% of their clinical trials disrupted by the pandemic. In Canada, 158 clinical trials have been disrupted, or about 4.5% of Canada’s 2020 clinical trials, which is the OECD median.

Of all global clinical trials impacted by COVID-19, 72% were delayed or suspended and only a minority (28%) were terminated or withdrawn. Many trials experienced delayed initiation, enrollment suspensions, or overall slow enrollment, which can be attributed to patient safety measures, strict lockdown requirements, social distancing procedures, and the high demand on medical professionals to treat COVID-19 patients.

In OECD countries, Phase II and Phase III studies accounted for the greatest proportion of disrupted trials (51% and 26%, respectively) followed by Phase I and Phase IV (14% and 9%, respectively). Multinational clinical trials were more delayed or affected by the pandemic than single-country trials and oncology medicines were the most impacted therapeutic class, as they represent the most clinical trials of any therapeutic area.

5. COVID-19 clinical trial intensity is relatively high in Canada and mostly funded by the public.

Clinical trial intensity for COVID-19 medicines, measured by the number of new clinical trials per 1 million people, is higher in Canada (3.4) than the median for the OECD (2.5). Industry funds a minority of COVID-19 clinical trials internationally and even fewer of those in Canada: the share of industry-sponsored COVID-19 trials in Canada (45%) is lower than the OECD median (49%), and likewise, the share of Canadian patentee-sponsored trials (25%) falls below OECD norms (35%). This suggests that funding from public sources is a major factor in the relatively strong clinical trial intensity for COVID-19 medicines in Canada.

Data sources

1. Statistics Canada, May 2021, “The Canadian Research and Development Pharmaceutical Sector,” available at: https://www150.statcan.gc.ca/n1/en/pub/11-621-m/11-621-m2021003-eng.pdf?st+vuFRricY
2. PMPRB Annual Report, 2019.
3. GlobalData®.