In this article we are going to list the top 15 pharmaceutical companies with the highest R&D spending. Click to skip ahead and jump to the Top 5 Pharmaceutical Companies With Highest R&D Spending.
Pharma companies have always been among the most important companies in the world, even if they have been much maligned as well. Over the past century, medicine has evolved significantly, to the point that surgeries which would have been thought of as black magic years ago, are now routine and easily performed with minimal risks. We have treatments for so many diseases; less than a century ago, a normal flu would be equivalent to a death sentence. Now, for most people, it is just an inconvenience.
But how exactly are pharmaceutical companies able to come up with these lifesaving drugs? And why in the world are they so expensive? Well, to answer the first question, these companies invest tens of billions of dollars every single year into research and development. Research and development expenses refer to expenses incurred into trying out new medicine and checking its efficacy, including trials to ensure that the drugs work as intended. Now, these expenses aren’t cheap. To develop just one drug, it can cost billions over a number of years to test different possible combinations and find out the best possible treatment for a disease. If these companies stopped engaging in research and development, then the pharma industry would immediately decline and new treatments would not be developed. To obtain investment for R&D, most major pharmaceutical companies are listed on a stock exchange, which allows them to sell shares and hence, obtain money which can be invested in R&D. Meanwhile, many governments which want to develop the medical sector and improve it also provide grants to various companies to allow them to work on developing even better drugs.
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This leads us directly to the next question; why are these drugs so expensive? Well, number one, this is generally an American problem and not a global one, especially in developed economies. Firstly, these drugs are expensive especially because of the research and development expenditure that has been incurred. After all, a company spends billions of dollars in developing a new miracle drug and simply recouping the cost of production of each individual unit means that the company will forever be in loss. This is why these drugs are expensive, and are patented by the companies to ensure that no one else can use their expertise. However, there is something known as a generic. When the patent of a company expires, then it can be used by other drug companies to also produce the same drug, even without having incurred the same research and development expenses. Because of this, these companies are able to offer the same drug for much cheaper rates, which is why many major pharma companies lose out on market share.
This brings us to 2020 and the worst pandemic in a century. When the coronavirus pandemic began, and most countries across the world started suffering major outbreaks, hospitals didn’t know what to do. The virus was completely new and there was no way to cure someone who had fallen sick because of the disease. All hospitals could do was make life as comfortable as possible for patients, without actually being able to cure the disease. Even the biggest pharmaceutical companies watched on helplessly initially. But in a year where tragedy was met at every corner, pharma companies were actually in the spotlight for the most positive news as several different companies started working on vaccines which would inoculate the population from the virus. And remember, it often takes years or even decades to come up with a vaccine. Even then, there is no guarantee that the vaccine is going to work, and sometimes, even after a decade or more, they may not be any vaccine available. The fact that many pharmaceutical companies were able to develop a vaccine in less than a year, and even that with a massive success rate, often more than 90%, is nothing short of phenomenal and showcases how advanced we have become in medicine. This leads me to believe that in the next few decades, we’ll be seeing some more incredible breakthroughs that could improve our quality of life significantly.
However, it is also safe to say that this does not mean that pharmaceutical companies are only looking out for the best interests of patients. These are for profit companies which have to answer to shareholders and can often engage in unethical activities such as price gouging or kickbacks or even misleading advertising to increase sales and profits. GSK holds the record for the biggest fine ever given to pharmaceutical companies because of misleading advertising and kickbacks to physicians. The fine amounted to $2 billion USD. This is why the term ‘Big Pharma’ was developed, which is basically a conspiracy that major pharma companies engage in activities which are against the public’s benefit, such as purposefully hiding the cure for a cancer. While these conspiracy theories are childish and misinformed at best and dangerous (vaccines cause autism) at worst, it is true that many pharma companies need to do more to rehabilitate their image. And finding a vaccine for the worst pandemic in a century should definitely help in this regard.
Even among the biggest pharmaceuticals companies, there are differences in approach. Some pharma companies prefer to spend a lot on research and development while others don’t invest quite as much. Hence, to prepare our rankings for the pharmaceutical companies with the highest R&D spending, we have considered both their actual R&D spend, as well as R&D spend as a percentage of net sales. All of the information below has been taken from the annual reports of each company, as each company in our list is listed. We have given 70% weightage to R&D spending as a percentage of sales as we believe this is more indicative of the company’s inclination on spending on research and development. So without further ado, let’s take a look at the companies most likely to come up with next big medical breakthrough, starting with number 15:
15. Abbott (NYSE:ABT)
Total R&D spend by the company in 2019 (in millions of dollars): 2,440
Total R&D spend by the company in 2019 (as a percentage of net sales): 7.65%
The US company is 133 years old, having been founded in 1888 and reported more than $34 billion in sales in 2020.
Courtesy of Abbott Labs
14. Novo Nordisk (NYSE:NVO)
Total R&D spend by the company in 2019 (in millions of dollars): 2,132
Total R&D spend by the company in 2019 (as a percentage of net sales): 11.65%
The Danish company has production facilities in at least 8 countries, which allowed it to earn DKK 122 billion back in 2019.
adriaticfoto/Shutterstock.com
13. Bayer AG
Total R&D spend by the company in 2019 (in millions of dollars): 5,993.7
Total R&D spend by the company in 2019 (as a percentage of net sales): 12.27%
Bayer ranks 13th on our list of the top pharmaceutical companies with the highest R&D spending. Bayer is the biggest pharma company in Germany, famous for its first and most well-known product, aspirin.
Pixabay/Public Domain
12. Novartis (NYSE:NVS)
Total R&D spend by the company in 2019 (in millions of dollars): 9,402
Total R&D spend by the company in 2019 (as a percentage of net sales): 19.82%
Europe has plenty of entries in our list of pharmaceutical companies with the highest R&D spending, and manufactures Clozaril, Voltaren, Tegretrol and Diovan.
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11. GSK (NYSE:GSK)
Total R&D spend by the company in 2019 (in millions of dollars): 4,568
Total R&D spend by the company in 2019 (as a percentage of net sales): 13.53%
GSK ranks 11th on our list of the top pharmaceutical companies with the highest R&D spending. GSK is perhaps most famous for its OTC drug Panadol. Its biggest pharma drug is Augmentin, with other medicine such as Amoxil and Seretide also doing really well.
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10. Amgen (NASDAQ:AMGN)
Total R&D spend by the company in 2019 (in millions of dollars): 4,116
Total R&D spend by the company in 2019 (as a percentage of net sales): 17.62%
AMGN ranks 10th on our list of the top pharmaceutical companies with the highest R&D spending. One of the biggest biotech companies globally, Amgen is famous for various products, such as Neulasta, Enbrel and Prolia among others.
9. Sanofi (NASDAQ:SNY)
Total R&D spend by the company in 2019 (in millions of dollars): 6,752
Total R&D spend by the company in 2019 (as a percentage of net sales): 16.66%
SNY ranks 9th on our list of the top pharmaceutical companies with the highest R&D spending. Sanofi partnered with GSK to prepare a vaccine against the novel coronavirus; however despite initial success, the company has lagged far behind other companies in the race to develop a vaccine and now expected approval in the second half of 2021.
8. Johnson & Johnson (NYSE:JNJ)
Total R&D spend by the company in 2019 (in millions of dollars): 12,245
Total R&D spend by the company in 2019 (as a percentage of net sales): 14.92%
JNJ ranks 8th on our list of the top pharmaceutical companies with the highest R&D spending. Johnson & Johnsons has also worked on a vaccine against the coronavirus and is considered to be among the biggest companies engaged in the pharma sector, with over $82 billion in revenue and a presence in more than 175 countries.
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7. Pfizer (NYSE:PFE)
Total R&D spend by the company in 2019 (in millions of dollars): 8,650
Total R&D spend by the company in 2019 (as a percentage of net sales): 16.71%
PFE ranks 7th on our list of the top pharmaceutical companies with the highest R&D spending. Pfizer has been the clear winner in the vaccine race, and developed an extremely effective vaccine, with deals for billions of doses already made with various countries, including the UK and the US. The Pfizer biotech vaccine has been rolled out across the US as well as the EU.
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6. AbbVie (NYSE:ABBV)
Total R&D spend by the company in 2019 (in millions of dollars): 6,407
Total R&D spend by the company in 2019 (as a percentage of net sales): 19%
A spin-off of Abbott, AbbVie was only founded 8 years ago in 2013 and currently has a presence in more than 170 countries across the world.
Please continue to see the Top 5 Pharmaceutical Companies With Highest R&D Spending.
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Disclosure: None. Top 15 Pharmaceutical Companies With Highest R&D Spending is originally published at Insider Monkey.
