The private sector now provides most of the funding (56 percent) for health R&D in the United States. That was not always the case. Prior to1992, the public sector (including Federal, state, and local government) was the leading source of funds spent on health R&D.
In 1994, industrial firms and nonprofit organizations supplied an estimated $17.1 billion and $1.3 billion, respectively, for health-related R&D. Private sector health R&D funding more than doubled between 1988 and 1994. Most of this increase is attributable to pharmaceutical and biotechnology companies' R&D activities, which have been expanding rapidly in recent years. (See Industrial Research and Development in this chapter.)
The public sector provided an estimated $14.5 billion in funds for health R&D in 1994. More than 70 percent of this money ($12.3 billion) was supplied by NIH; state and local governments furnished $2.2 billion.
About 20 percent of all Federal R&D money supports health-related activities, up from 13 percent in 1986. The increase in Federal support, however, has been lagging behind the increase in the private sector. Although Government support for health R&D increased steadily in the late 1980s and early 1990s (28 percent in real terms between 1986 and 1992), the rate of increase slowed after 1992. In fact, Government health R&D investment did not keep pace with inflation between 1992 and 1994.
In the United States, $9 out of every $10 spent on health R&D performed in the United States are used to finance work undertaken in private laboratories. Most of the R&D is performed by industrial firms (almost $14 billion in 1994), followed by universities and colleges($10 billion). Nonprofit organizations spent $2.7 billion in 1994, slightly less than the total amount ($3.0 billion) spent in the public sector (mostly in NIH laboratories). In the late 1980s and early 1990s, industry increased its share of health-related R&D performance in the United States while the proportion conducted in the academic and Federal sectors fell during the same period.