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Public medical research funding stimulates private R&D investment

Posted on 24/02/2016
Spillovers puff

Every additional pound of public money invested in medical research results in an additional 99p investment from the private sector, according to research published today in BMC Medicine. The paper examines how spending public money on medical research in the UK can help stimulate private sector investment and contribute to the broader economy.

The researchers, led by Professor Jonathan Grant, Director of the Policy Institute at King’s College London, found an economic ‘spillover’ effect equivalent to a real annual rate of return for the economy of around 17%, so a £1 public spending investment is equivalent to the UK economy receiving 17p interest each and every year.

Professor Grant, said ‘A core question underpinning any research funding decision – whether made by the government on behalf of taxpayers or medical research charities on behalf of donors – is what benefit that research will have. Disease prevention or treatment and advancing scientific knowledge are strong drivers for investment, but so too is whether investment will benefit the wider economy.’

Jon Sussex, Chief Economist at RAND Europe, said: ‘Pound-for-pound, public spending in medical research is stimulating almost exactly the same private spending. This highlights the huge benefit of publicly funded medical research to the UK economy, as it is driving significant private industry research and development (R&D).’

Previous estimates for economic returns to the UK economy of publicly funded research in the fields of cardiovascular disease and cancer were calculated as 39% and 40% respectively. These figures were generated by combining the estimated monetised value of health gains to the UK population (9% and 10% respectively) with an estimated benefit to the UK economy of 30%. These studies have been widely cited to support government spend on medical research. As the investigators highlighted at the time, the 30% estimated rate of return was based on old data from the United States.

This new research, funded by the Medical Research Council (MRC), provides an estimation of the impact of publicly funded medical research on private R&D investment in the UK, using the latest available UK data.

Dr Yan Feng, Senior Economist at the Office of Health Economics, said ‘We used a time series of 31 years of government, charity and pharmaceutical industry R&D spend in the UK across 10 disease areas to generate a new estimate of the effect of public medical research on private sector R&D.’

Based on this new evidence, it is estimated that the economic gain – or rate of return – from UK publicly funded medical research is 17%.

Professor Grant said ‘We should stress this does not imply that there has been a decline in the economic rate of return to public spending on biomedical and health research – we have developed a more accurate and contemporary estimate for the UK specifically. When also combined with the monetised value of health gains to the UK population (of around 10%), the total return on government and charitable research investment in the UK is around 27% - a significant return on investment in anyone’s book.’


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Notes to editors:

The Policy Institute at King’s College London acts as a hub, linking insightful research with rapid, relevant policy analysis to stimulate debate, inform and shape policy agendas. Building on King’s central London location at the heart of the global policy conversation, our vision is to enable the translation of academic research into policy and practice by facilitating engagement between academic, business and policy communities around current and future policy needs, both in the UK and globally. We combine the academic excellence of King’s with the connectedness of a think tank and the professionalism of a consultancy. For more information on King’s see our ‘King’s in Brief’ pages

The Medical Research Council  is at the forefront of scientific discovery to improve human health. Founded in 1913 to tackle tuberculosis, the MRC now invests taxpayers’ money in some of the best medical research in the world across every area of health. Thirty-one MRC-funded researchers have won Nobel prizes in a wide range of disciplines, and MRC scientists have been behind such diverse discoveries as vitamins, the structure of DNA and the link between smoking and cancer, as well as achievements such as pioneering the use of randomised controlled trials, the invention of MRI scanning, and the development of a group of antibodies used in the making of some of the most successful drugs ever developed. Today, MRC-funded scientists tackle some of the greatest health problems facing humanity in the 21st century, from the rising tide of chronic diseases associated with ageing to the threats posed by rapidly mutating micro-organisms.

RAND Europe is a not-for-profit organisation whose mission is to help improve policy and decision making through research and analysis. Our clients include European institutions, governments, charities, foundations, universities and private sector firms with a need for impartial research. We operate as a research-focused business, using a professional services model within the context of a public good mission. We combine deep subject knowledge across diverse policy areas including health, science and innovation; defence, security and infrastructure; and home affairs and social policy. Combined with proven methodological expertise in evaluation, impact measurement and choice modelling, we are able to offer quality-assured research and analysis, unbiased insights and actionable solutions that make a difference to people’s lives.

The Office of Health Economics conducts research and provides consultancy services on health economics and related policy issues that affect health care and the life sciences industries. OHE was founded in 1962 to (1) commission and undertake research on the economics of health and health care; (2) collect and analyse health and health care data for the UK and other countries; (3) disseminate the results of its work and stimulate discussion of them and their policy implications. Its independent Editorial Board and Policy Board have helped maintain OHE's international reputation for the quality and independence of its research.

The University of York was founded in 1963 with 230 students. It now has around 16,000 students and more than 30 academic departments and research centres. A member of the Russell Group, it features regularly in the ranks of the UK’s foremost universities. In the 2014 Research Excellence Framework, York ranked tenth out of 155 UK universities for the impact of its research. York was named Times Higher Education University of the Year in 2010 and the University has won five Queen’s Anniversary Prizes. The University of York places equal emphasis on research and teaching. Students in every department -¬ both undergraduate and postgraduate – are taught and advised by leaders in their field. 

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