Pharmaceutical-industry R&D and hospital financial performance in Japan: a fixed-effects analysis

Rising pharmaceutical prices and increasing research and development (R&D) expenditure by pharmaceutical companies have raised concerns about hospital financial sustainability worldwide. Nevertheless, evidence on the association between pharmaceutical-industry R&D expenditure and hospital financial performance remains limited.

To examine whether the associations between pharmaceutical-industry R&D expenditure and hospital financial performance differ between the special functioning hospital category, which provides advanced medical care, and other hospital categories.

This study integrated annual financial data for four institutionally defined hospital categories with firm-level R&D data for listed pharmaceutical companies. Hospital data were obtained from a national survey by Japan's Ministry of Health, Labour and Welfare. Firm-level R&D data from NEEDS-Financial QUEST 2.0, eol, and company disclosures were aggregated into an industry-level measure aligned with the hospitals' fiscal year. Hospital-category fixed-effects models were used in the analyses.

The association between pharmaceutical-industry R&D expenditure and the pharmaceutical cost ratio was more positive for the special functioning hospital category than for the other categories. The association with the medical operating margin was also more negative for this category.

Higher R&D expenditure was associated with less favorable financial indicators for the special functioning hospital category than for the other categories. These findings suggest that hospitals providing advanced medical care may face greater financial pressures related to pharmaceutical R&D and high-cost medicines, although hospital-level evidence is needed to confirm this interpretation.