Shifts in industry, rather than public, investments are driving changes in the regional biomedical R&D landscape.

Regional breakdown of biomedical R&D spending, adjusted for purchasing-power parity.

The lowdown: Justin Chakma, a venture capital investor at Thomas, McNerney & Partners in La Jolla, California, and his colleagues obtained data on biomedical research and development (R&D) expenditure in the United States, Europe and Asia-Oceania to look at spending trends between 2007 and 2012 (N. Engl. J. Med. 370, 3–6; 2014). While inflation-adjusted expenditure was stable over 5 years, increasing by only US$6.3 billion (2.4%) to $268 billion in 2012, the regional balance of biomedical research funding is changing (see figure).

Biomedical spending in the United States accounted for only 45.4% of the global R&D spend in 2012, when adjusted for purchasing-power parity, down from 51.2% 5 years prior, they report. “The decline is remarkable because the United States has provided a majority of the funding for biomedical R&D globally for the past two decades — a share that some previous analyses suggested was as high as 70 to 80%,” the authors write. Overall, the compound annual growth rate of biomedical spending from 2007 to 2012 in the United States was −1.9%. Other regions that experienced a fall in compound annual growth rates were Europe, of −0.4%, and Canada, of −2.6%.

These losses were mirrored by gains in Asia–Oceania, especially in China and South Korea. The compound annual growth rate from 2007 to 2012 was 32.8% in China, and was 11.4% in South Korea.

The authors also broke funding down by source, comparing levels of public and private funding. The decline of funding in the United States was driven primarily by a $13 billion inflation-adjusted reduction in industry's investment there, they report, to $70 billion in 2012. Public funding in the United States during this time was stable, at $48–49 billion. Industry investment in China, by contrast, grew by $4.8 billion, reaching $6.3 billion in 2012. Public spending in China also grew, by $1.4 billion, to $2 billion.

“One explanation for the shift in global R&D expenditures may be the attractive cost of conducting R&D in Asia–Oceania, where labor is cheaper and greater government subsidies are available,” the authors write. “Accordingly, we found that the US share declined even as global R&D investments by industry remained flat (after adjustment for inflation), which suggests that industry is simply reallocating R&D funding to Asia–Oceania.” National Institutes of Health (NIH) funding alone is unlikely to be a sustainable way of retaining long-term R&D leadership in the United States, they add, and the US government also needs new incentives to induce industry to invest if it wants to stay competitive.