In real terms, spending on American biomedical research has doubled since 1994. By 2003, spending was up to $94.3 billion (there is no comparable number for Europe), with 57 percent of that coming from private industry. The National Institutes of HealthÂ’s current annual research budget is $28 billion, All European Union governments, in contrast, spent $3.7 billion in 2000, and since that time, Europe has not narrowed the research and development gap. America spends more on research and development over all and on drugs in particular, even though the United States has a smaller population than the core European Union countries.
From 1989 to 2002, four times as much money was invested in private biotechnology companies in America than in Europe.
Dr. Thomas Boehm of Jerini, a biomedical research company in Berlin, titled his article in The Journal of Medical Marketing in 2005 “How Can We Explain the American Dominance in Biomedical Research and Development?” (ostina.org/downloads/pdfs/bridgesvol7_BoehmArticle.pdf) Dr. Boehm argues that the research environment in the United States, compared with Europe, is wealthier, more competitive, more meritocratic and more tolerant of waste and chaos. He argues that these features lead to more medical discoveries.
About 400,000 European researchers are living in the United States, usually for superior financial compensation and research facilities.
Americans do not live longer than people in other countries in part because the innovations that get funded in America get used around the world.
In Canada and some European countries drugs are sold for lower prices than in the US. So drug companies make most of their profits and therefore get most of their revenue to fund research by selling products in the United States. Effectively the United States is subsidizing medical research for the rest of the world.
FuturePundit: Tyler Cowen: High US Medical Spending Spurs Innovation