Economic return of UK public medical research is between 15-18% a year

A new study finds publicly funded biomedical research in the UK is more than paying its way, with returns on investment between 15 and 18 per cent a year. 

For every pound invested in medical research, pharmaceutical companies invest a further £0.83–£1.07 into the UK economy, with almost half of that investment occurring within a year.

Drawing on 30 years of data, the report, funded by the Medical Research Council (MRC) and led by the Policy Institute at King’s College London, measures the return on government and charity funding for research, and its power to spur investment from industry in the UK.

The “spillover effect” of publicly funded medical research, “implies a real annual rate of return to public biomedical and health research in the UK of 15–18%,” the report says. This is “greatly in excess of the 3.5% real annual rate of return required by the UK government to public investments generally.”

While these numbers may seem impressive, they are slightly less than reported in earlier studies. “Although previous estimates had put the rate of return at 30 per cent, these were based on data that was US-centric and increasingly out of date. The new estimates in this report are lower, but much more reliable,” said MRC Chair Donald Brydon.

In principle, most people agree that investment in science is a good thing. How much, in what sectors, under what circumstances and over what time span are more complex questions.

By putting precise figures on return on biomedical investment, the report delivers a politically strong message, especially at a time when many countries are trying to tighten their research budgets amid weak growth or bad recessions.

“The rate is incredibly significant, particularly when we consider that it improves not only the UK economy, but the health of millions,” Brydon noted.

The researchers specifically examined whether public and private investments in medical research complement, or substitutes for, one another. In other words, whether public research spurs additional private R&D spending or replaces it. Past attempts to assess causality used data from the US.

They conclude public research ‘crowds in’ private R&D rather than crowding it out, which runs contrary to the finding of other economists, who find extra public expenditure has the unintended effect of stifling private investment.

In the time period of the study, from 1982 to 2012, year-on-year public expenditure was more stable than pharmaceutical spending.

Even so, there was an almost five-fold total increase in pharma research budgets over the last thirty years. In 1982, private R&D spending was £925 million, rising to £4.2 billion in 2012. 

In 2012, UK government and charities spent £3.43 billion on medical research. In the same year, pharmaceutical R&D spend in the UK was £4.21 billion.