According to a scoreboard produced by the European Commission, the pharma and biotech industries spent 15.7 per cent more than last year to total €70.5bn invested in R&D globally in 2006, thus overtaking technology hardware & equipment, which spent €64.5bn. Worldwide corporate R&D investment accelerated, growing by 10 per cent over the past year. As well as the drug industry coming out as the biggest collective spenders, Pfizer overhauled Ford Motor as the largest individual spender (€5.76bn compared to €5.50bn). In fact, three of the top ten investors worldwide are in the pharma sector, with Johnson & Johnson (J&J) in third and the UK's GlaxoSmithKline (GSK) representing the highest EU investor in seventh place. The report includes the top 1000 R&D investors whose registered offices are in the EU, and also the top 1000 registered elsewhere. The figures are perhaps not all that surprising though as it is well known that R&D spending within the pharma and biotech industries has been skyrocketing. However, with all this money being spent, two questions immediately spring to mind - is this enormous amount of money spent on R&D actually addressing the oft-cited lack of innovation in the drug industry; and secondly, which company gives you the most 'bang for your buck'? Predictably, answers to the first question vary. As reported in DrugResearcher.com, according to Wyeth's head of business development, Dr Thomas Hofstaetter, the problem has now been solved and the pipelines are diverse and high quality; it's just that to get a drug to market takes 15 years so we are not seeing the benefits of increased spending yet. This is partly true although there are still numerous expensive, late-stage failures, such as Pfizer's torcetrapib and the feeling within the industry is that it is harder than ever to get a drug past regulators. The US Food and Drug Administration (FDA) is seen as increasingly cautious, and safety concerns over marketed drugs, such as Vioxx and more recently, GSK's Avandia (rosiglitazone), are hardly going to relax it. Best-value pharma Which company provides the most innovation for the money it ploughs into R&D is almost impossible to answer - it depends which way you spin the numbers for a start. The EC report compares R&D spending to annual sales, which, in turn could perhaps be seen as a measure of quality products. However, this is problematic for an industry where a great deal of innovative biotechs don't have any sales. Even so, of the big pharma companies, Amgen and Merck & Co spend the greatest proportion of their sales on R&D (over 20 per cent each). The top ten spenders in the drug industry after Pfizer, J&J and GSK are Sanofi-Aventis, Roche, Novartis, Merck & Co, AstraZeneca, Amgen and Eli Lilly. The report also looks at R&D expenditure per employee but this could also be seen as an unfair comparison in an industry where large big pharma sales forces means a higher proportion of their employees are not anything to do with R&D. Perhaps the best comparator would be setting R&D costs alongside the number of New Drug Applications (NDAs) a company produces. And indeed, many different surveys do just this. Earlier this year a report from the Government Accountability Office (GAO) states that between 1993 and 2004, R&D spending went up 147 per cent to $40bn (€30.4bn) but the number of NDAs only increased by 38 percent. Over the same time, the number of New Molecular Entity (NME) applications, drugs that contain ingredients that have never before been marketed in the US, only increased 7 per cent. Although these figures only go up to 2004, the pattern of dwindling innovation doesn't seem set to change yet (perhaps due to that time lag Hofstaetter mentions). In 2006, the FDA approved less NMEs than ever before and so far this year, the FDA has only ticked off eleven NMEs, suggesting numbers this year could be even lower. A further problem with statistics such as these for the pharma industry is that some R&D money could end up being counted twice, thanks to licensing deals. Although the number of these deals is the same, or increasing slowly, the cost of the alliances has increased dramatically. Research costs for a bigger pharma company will include a wedge of cash spent on licensing potential drugs or technology from smaller firms. Therefore, the initial, pre-deal research is effectively counted twice - once by the smaller company's accounts and once for the upfront fee of the licensing deal (assuming the smaller company is included in the survey). The biggest 'licensing shops' in pharma, such as Merck &Co, Novartis, GSK and AZ, did between 35 and 57 deals in 2004, according to Michael McCully, director and senior analysts at recombinant Capital. The impact of these deals on total R&D expenditure is unclear since the initial payments are much less than the total value of the deal (McCully also estimated that in 2006, over $80bn will be committed to licensing deals). It is undeniably a good thing that the pharma industry is spending such vast sums of money - after all they are in the business of saving lives. However, whether anyone is getting their money's worth is a totally different question.