A new report shows that European research and development (R&D) investments in health have stagnated since 2010, and this is the first time after decades of annual increases. The report was commissioned by Janssen Pharmaceutica and the research was conducted by Deloitte Health Economics group.

Healthcare Spending
Healthcare spending in Europe has increased substantially over the past three decades. A large part of this increase can be attributed to the ability to pay. About 90% of the observed cross-national variation in health spending across the OECD countries in 2001 can be explained simply by differences in GDP per capita.
However, healthcare expenditure in European countries has risen faster than economic growth, gradually committing a far higher share of their annual GDP to healthcare (see Figure 1).


Fig.1: Annual healthcare expenditure (Source: OECD 2012)

Future Healthcare Expenditure
With an increasing demand for healthcare services due to population dynamics; supply of healthcare is growing as a result of technological advancements and technology conversions; and the potential for productivity gains is limited due to the nature of the healthcare sector. Unless societies will deny care to, for example, diabetes, dementia and cancer patients, all these factors point to rising healthcare budgets in the years to come (see Figure 2). With a wide range of new state-of-the-art technologies to anticipate, it appears that an increasing share of most countries' economies will continue to be spent on healthcare services.


Fig.2: Future annual healthcare expenditure (Source: OECD)

Clinical and Economic Burden
Most of the burden of illness and mortality arises from non-communicable, often chronic, diseases (NCDs). Four examples were selected based on WHO prevalence data for Europe and disease-specific healthcare spending in a number of countries.
The increasing clinical burden of these diseases, for which the incidence or prevalence is growing on average by 1% per year, will be reflected directly in healthcare expenditure. In order to avoid a deterioration of care to these patients, healthcare budgets have to increase by 1% per year just to cover the growth in patient numbers (see Figure 3) and hence by 23% by 2030.


Fig.3: The impact of growing incidence/prevalence of chronic diseases (Source: Calculations based on sources mentioned in the report)

Comparison with Other Industries
The European Commission estimates that of all industries, pharmaceuticals is the most R&D intensive (R&D investments as percentage of turnover) and the second largest R&D sector in Europe (see Figure 4). It is therefore one of the key contributors to a knowledge based economy operating in a global growing market.


Fig.4: R&D Distribution and intensity by sector (Source: European Commission - EU R&D Scorecard 2012)

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The full report is available for free on www.JanssenHealthPolicyCentre.com