Health Continues to Absorb Increasing Share of National Research and Development Budget

Data on the source and performance of health-related R&D have been collected annually by NIH (Department of Health and Human Services, 1993). These tabulations are more comprehensive than the Office of Management and Budget function data presented elsewhere, because NIH attempts to includeAccording to the NIH data, a total of $32.9 billion was spent on health R&D in the United States in 1994. (See appendix table 4-31.) This is estimated to be nearly 20 percent of total U.S. R&D expenditures in that year. Health R&D, as a percentage of total R&D, has been increasing steadily since 1986; in that year, it was approximately 12 percent of total R&D expenditures. (See figure 4-21.)

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.