R&D Costs, Innovative Output and Firm Size in the Pharmaceutical Industry
AbstractThis study examines the relationships between firm size, R&D costs and output in the pharmaceutical industry. Project-level data from a survey of 12 US-owned pharmaceutical firms on drug development costs, development phase lengths and failure rates are used to determine estimates of the R&D cost of new drug development by firm size. Firms in the sample are grouped into three size categories, according to their pharmaceutical sales at the beginning of the study period. The R&D cost per new drug approved in the US is shown to decrease with firm size, while sales per new drug approved are shown to increase markedly with firm size. Sales distributions are highly skewed and suggest that firms need to search for blockbuster drugs with above--average returns. The results are consistent with substantial economies of scale in pharmaceutical R&D, particularly at the discovery and preclinical development phases.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.
Volume (Year): 2 (1995)
Issue (Month): 2 ()
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Other versions of this item:
- Joseph A. Dimasi & Grabowski, Henry G. & Vernon, John, 1995. "R&D Costs, Innovative Output and Firm Size in the Pharmaceutical Industry," Working Papers 95-16, Duke University, Department of Economics.
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
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- Giuseppe Moscarini & Lones Smith, 1998.
"Wald Revisited: The Optimal Level of Experimentation,"
Cowles Foundation Discussion Papers
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- Giuseppe Moscarini & Lones Smith, 1998. "Wald Revisited: The Optimal Level of Experimentation," Working papers 98-4, Massachusetts Institute of Technology (MIT), Department of Economics.
- Finn Valentin & Henrich Dahlgren & Rasmus Lund Jensen, 2006. "Research Strategies in Science-based Start-ups - Effects on performance in Danish and Swedish biotechnology," DRUID Working Papers 06-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Schwartz, Eduardo S., 2002. "Patents and R& D as Real Options," University of California at Los Angeles, Anderson Graduate School of Management qt86b1n43k, Anderson Graduate School of Management, UCLA.
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