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Canada’s Research-Based Pharmaceutical Industry is a Significant Contributor to the Economy

Tuesday, March 15, 2022

Over the past two years, Canadians have seen first-hand the contributions of the research-based pharmaceutical industry at work. Vaccines and other medicines have taken centre stage as critical tools in the response to the pandemic. But what is behind bringing not only those vaccines and therapies, but also other innovative medicines to Canadians? People, jobs, investment and research have all played a big part. We now have access to a growing body of more accurate evidence on the economic value generated by the research-based pharmaceutical industry in Canada.

Recently, Statistics Canada published a report in collaboration with Innovative Medicines Canada (IMC) to define the economic contribution of Canada’s innovative pharmaceutical industry. This study examines the economic footprint of the sector on the Canadian economy in 2019, with a focus on the contribution of IMC member companies, including Pfizer Canada. The report is significant in that it captures the overall value generated, the jobs supported, and the investments made in an independent and rigorous manner.

The study builds upon findings published for the 2018 reference year with a comparable objective – to create a better understanding of the significance of the sector to the Canadian economy. In addition to the important work of advancing medical research, Statistics Canada found that the more than 200 companies in our sector added $15 billion in value added GDP to the Canadian economy, supported over 100,000 full-time jobs within Canada, exported more than $5.9 billion worth of goods, and spent between $1.6 billion and $2.2 billion on research and development in 2019 – an increase of 13%.

These impressive research and development (R&D) figures reflect investments in both in-house projects and key external activities such as study contracts with universities and hospitals.

In-house R&D expenditures by our industry totaled $1.1 billion in 2019, which accounted for 5.1% of all business enterprise expenditures on research and development (BERD) in Canada. In addition to conducting in-house R&D, our industry also funded $1.1 billion of outsourced R&D expenses through grants, contracts, and other funding. Over half ($617 million) of this outsourced R&D spending stayed in Canada, while the remaining $519 million was outsourced internationally.

R&D investments by our industry stimulate innovation across the life science ecosystem in clinical medicine, basic medicine, and medical biotechnology. IMC members generated over half of the sector’s value added, with an economic impact of $8.1 billion within Canada. IMC members also directly employed more than 24,800 full-time equivalent (FTE) jobs and supported an additional 30,500 FTE Canadian jobs.

External innovation is increasingly important. As science continues to evolve, our industry further supports Canadian R&D by fostering collaborations and partnerships with Canadian hospitals, universities and other organizations. IMC members undertook important partnerships with Canadian institutions in 2019. Their partnerships accounted for 26.1% of the $537 million that was outsourced to Canadian hospitals and universities by companies across the entire Canadian economy in 2019.

Statistics Canada’s work underlines the importance of a competitive research-based pharmaceutical industry to Canada. It also helps provide much more accurate information about the industry – a critical component to any informed discussion of public policies impacting the industry.

Statistics Canada’s work contrasts sharply with the Patented Medicine Prices Review Board’s (PMPRB) annual report for 2019 (released in early 2021). The PMPRB continues to utilize an antiquated definition of pharmaceutical R&D (based on the SR&ED tax credit as defined in 1987) to arrive at an R&D to sales ratio of 3.9% for the sector. But based on the data provided in the Statistics Canada report, the innovative pharmaceutical sector’s R&D to sales ratio is much higher at 9.7%.

Using more accurate information benefits all stakeholders, including government agencies. It can inform better policy development and support new partnerships. Our industry stands ready to play a leading role in Canada’s economic recovery while driving improved health outcomes for all Canadians.