Embedded Files
Page 10
The aggregate evidence in that study suggests a lag of about 18 years between the initial funding for basic research and the Food and Drug Administration’s approval of additional new drugs. That gap is approximately consistent with the seven-year lag noted above plus the time required for drug development, which averages about 12 years. By implication, current federal funding for life-sciences research may broadly predict the number of NMEs that will be approved in the future. But the evidence in that study remains tentative, and the most recent data used in the study are now a dozen years old. The findings may not hold up when newer data are included. In general, studies that compare different industries find that, on balance, increases in government R&D spending appear to complement private R&D investment. Such comparisons, however, cannot rule out the possibility that changes in public and private R&D spending may simply reflect similar responses to underlying shifts in available technological opportunities rather than having any causal link. Firm-level studies avoid that possibility by including companies that conduct research in different areas of technology; those studies have been somewhat more likely than cross-industry studies to conclude that government spending for R&D displaces private-sector spending.
In the end, the prevalence of crowding out or stimulus probably depends on the industry in question. For phar-maceuticals, the importance of advances in basic science to the search for new drugs, and the ease with which the benefits of basic research flow beyond the researcher’s control, provide rationales for a government role in basic R&D, even if such R&D can directly displace private investment in some circumstances.
Impact on Salaries and Other Research Costs
Government spending on research and development can also indirectly crowd out private investment by causing R&D costs to rise. Pharmaceutical research requires highly trained scientists, and the supply of those researchers cannot adjust quickly to changes in demand. Rapid increases in government (or private) R&D spending may cause salaries for researchers to rise in both public- and private-sector organizations. The supply of researchers eventually increases in response to higher salaries. But that response takes several years, because new workers drawn to the field by higher pay must first receive graduate training. When additional researchers enter the labor force, real salaries tend to decline to reflect the increase in supply. Until that adjustment occurs, however, increases in government R&D spending can push private R&D costs higher, which may discourage or delay some private-sector investment. That form of indirect crowding out is more likely to occur when federal R&D spending is growing more quickly. In addition, it may have a greater effect on firms’ decisions about whether to undertake specific future projects (or cancel specific current projects) that are of marginal expected profitability than on projects with higher expected payoffs. Public and private spending levels on R&D have been growing rapidly in recent years; during that time, both total employment in biomedical research and researchers’ real salaries have also risen.
A Changing Role for Public-Sector Research
The role of the public sector in the development of new drugs has evolved with changes in science and public pol-icy. The potential returns to the private sector from academic and government-sponsored biomedical research have increased dramatically over the past generation, raising the issue of how best to maximize the benefits from publicly funded research. In 1980, lawmakers enacted the Bayh-Dole Act to address concerns that only a small fraction of government patents were being developed commercially. The law gave universities, nonprofit organizations, and small businesses the property rights to inventions stemming from government-funded research they conducted. As a result, the marketing of such research discoveries has greatly increased, generating significant royalty income for those institutions and perhaps substantial benefits for society as well. Basic research discoveries tend not to be patentable, so the assignment of property rights has less effect on the social value that results from basic research than it would have otherwise. Much of that value instead derives from academic traditions of scientific openness and the free flow of ideas. As the Supreme Court’s decision in Diamond v. Chakrabarty illustrates, however, the scope of what is patentable can shift over time—and thus the balance between the social benefits of “open science” and of property rights and commercial development can change as well. Some analysts argue that in addressing such issues, it may be counterproductive in the long run to further weaken the institutions of open science, increase the market orientation of public-sector researchers, or give taxpayers a greater share of the benefits that private companies derive from developing ideas generated in the public sector. For example, gaining price concessions from drug firms that benefit from publicly funded research would increase taxpayers’ current benefits but could reduce their future benefits. Such concessions would reduce firms’ expected profits from licensing and developing taxpayer-funded research and thus would affect their future decisions about R&D . Moreover, benefits can also flow the other way: academic and government researchers have sometimes made valuable discoveries that built on research done in the private sector. For example, public-sector researchers have dis-covered new approved uses for aspirin, antiepileptics, and antibiotics—drugs that were originally developed in the private sector.
Google Sites
Report abuse