OBJECTIVES:   To estimate the impact of cost-containment reforms on R&D indicators of pharmaceutical firms in eight countries and draw policy recommendations.  METHODS: The average treatment effect on the treated is econometrically estimated with difference-in-difference (DiD); before-after comparisons; DiD with correlated random trend and a synthetic control group; kernel and nearest neighbour matching DiD methods. RESULTS: This study estimates short-term effects of recent regulatory changes in public health care on financial indicators related to pharmaceutical R&D in Denmark, France, Germany, Italy, Japan, Norway, Sweden, and the US. The dataset represents a panel of financial statements of 1306 pharmaceutical firms for the period 1997-2007. The evaluated indicators include R&D expenditure, R&D expenditure to total revenue, cash flow, gross margin, and price-to-book ratio. The national pharmaceutical expenditures, population, availability of credit for the private sector, patent applications, and regulatory quality have been controlled for. Negative impacts of the recent reforms on R&D expenditures for Germany and Norway and, in some instances, for Italy and Japan are detected. A positive impact of the 2003 reform on R&D related indicators has been found for the US. The reforms reduced R&D expenditures by 0.76% for Italian firms, decreased R&D intensity of Norwegian firms by 2.42%, lowered cash flows of French firms by 0.72%, but increased the R&D of American firms by 0.27%. These results can be explained by the degree of the reform rigidness for price and reimbursement controls, drug development lags, the importance of R&D for competition and firm valuation, and growing exports to less regulated markets. The results can also be explained with a theoretical R&D reproduction cycle model. CONCLUSIONS: Stronger shifts to more rigid cost-containment reimbursements impeded R&D expenditures. However, despite the adverse regulatory shocks, most firms' R&D related indicators tend to be persistent in the short run.