R&D expenditures by pharmaceutical patentees

In 2025, annual pharmaceutical R&D expenditures by patentees in Canada are estimated at $801.9 million, a level reflecting persistent stagnation despite Canada's strong academic base and government pledges for research funding. Global competition, particularly from countries offering aggressive incentives like China and India, has contributed to a subdued investment climate. Uncertainty stemming from proposed national pharmacare regulations has also weighed on brand-name pharmaceutical companies' willingness to conduct R&D in Canada, with many opting to delay or shift research abroad to protect margins. The continued allure of generous tax incentives in competing jurisdictions remains a key deterrent to local pharmaceutical innovation.

Over the five years to 2025, Canadian pharmaceutical R&D spending has experienced negligible annualized growth of 0.3%, amid shifting international industry dynamics and successive macroeconomic shocks. From 2020 onward, the onset of the COVID-19 pandemic initially redirected much of the R&D focus toward antivirals, diagnostics, and vaccines, supported by more than $300 million in targeted government research funding. Despite this contribution, the broader industry trend was defined by increased offshoring of pharmaceutical research as global pharmaceutical organizations capitalized on more competitive cost structures and tax benefits available internationally. In parallel, lingering economic uncertainty and interest rate hikes suppressed private sector investment in high-cost, high-risk research initiatives. Canadian regulatory reforms, such as the potential for a national pharmacare scheme emphasizing generic drug purchasing and limiting spending on brand-name pharmaceuticals, further discouraged large-scale R&D commitments among patentees. Although Canada's research institutions and skilled workforce remain strong assets, these advantages have not counteracted the overarching trend of limited R&D growth.

From 2020 to 2025, additional macro trends include the growing importance of policy incentives, increased pressure to demonstrate returns on R&D investment, and heightened global integration of the pharmaceutical sector. These factors have collectively reduced Canada's relative attractiveness as an R&D destination, while economic and regulatory uncertainty, alongside more appealing international environments, have hindered robust domestic R&D expenditure.