Measuring US Pharmaceutical Industry R&D Spending

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Government policy debates on pharmaceutical pricing often turn on whether higher drug prices fund greater company-financed R&D spending. In the US, debate breaks down because each side uses a different measure of R&D spending, and the measures are far apart. Government agencies, Congress and consumer groups use government-generated survey data from the National Science Foundation (NSF), and the pharmaceutical industry uses survey data from the Pharmaceutical Research and Manufacturers of America (PhRMA). This issue is also relevant to academic work because some studies use NSF data, and others use PhRMA data. This article illustrates the pros and cons of these survey data series, and offers a more reliable, comprehensive and replicable alternative series, based on Compustat data.

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