The pharmaceutical industry is fueling an increase in basic research investment by companies.

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Data check: U.S. government share of basic research funding falls below 50%

For the first time in the post–World War II era, the federal government no longer funds a majority of the basic research carried out in the United States. Data from ongoing surveys by the National Science Foundation (NSF) show that federal agencies provided only 44% of the $86 billion spent on basic research in 2015. The federal share, which topped 70% throughout the 1960s and ’70s, stood at 61% as recently as 2004 before falling below 50% in 2013.

The sharp drop in recent years is the result of two contrasting trends—a flattening of federal spending on basic research over the past decade and a significant rise in corporate funding of fundamental science since 2012. The first is a familiar story to most academic scientists, who face stiffening competition for federal grants.

But the second trend will probably surprise them. It certainly flies in the face of conventional wisdom, which paints U.S. companies as so focused on short-term profits that they have all but abandoned the pursuit of fundamental knowledge, an endeavor that may take decades to pay off. (This month, for example, Duke University’s Center for Innovation Policy will hold a conference entitled “The Decline in Corporate Research: Should We Worry?”)

NSF defines basic research as “activity aimed at acquiring new knowledge or understanding without specific immediate commercial application or use.” In contrast, it says applied research is “aimed at solving a specific problem or meeting a specific commercial objective.”

The U.S. pharmaceutical industry is the major driver behind the recent jump in corporate basic research, according to NSF’s annual Business Research and Development and Innovation Survey (BRDIS), which tracks the research activities of 46,000 companies. Drug company investment in basic research soared from $3 billion in 2008 to $8.1 billion in 2014, according to the most recent NSF data by business sector. Spending on basic research by all U.S. businesses nearly doubled over that same period, from $13.9 billion to $24.5 billion.

Basic research comprises only about one-sixth of the country’s spending on all types of R&D, which totaled $499 billion in 2015. Applied makes up another one-sixth, whereas the majority, some $316 billion, is development. Almost all of that is funded by industry and done inhouse, as companies try to convert basic research into new drugs, products, and technologies that they hope will generate profits. (The pharmaceutical and biotech industry, for example, spent a total of $102 billion on research and development in 2015, according to Research!America, an Arlington, Virginia–based advocacy group.)

Those private sector efforts are now the dominant form of research activity in the United States, with business spending $3 on research for every $1 invested by the U.S. government. In the 1960s the federal government outspent industry by a two-to-one margin, but the balance tipped in 1980.

Although eye-opening, the NSF business data are not as definitive as agency officials might like. About 30% of the companies that receive the BRDIS don’t respond; in comparison, nearly every university fills out NSF’s survey on research in higher education. And even companies that do return the business survey often ignore the question asking them to divide the company’s overall research investment into basic and applied pots, notes John Jankowski, head of R&D statistics within NSF’s National Center for Science and Engineering Statistics in Arlington.

The NSF data capture another notable trend: a slow but steady rise in spending on basic research by universities and private foundations. Their combined $22 billion investment in 2015 represents a 25% share of the U.S. total, up from 21% in 2010 and 17% in 1995.