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The Impact of R&D Cooperations on Drug Variety Offered on the Market. Evidence from the Pharmaceutical Industry

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  • Tannista Banerjee
  • Ralph Siebert
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    Abstract

    Our study puts special attention to the fact that R&D cooperations in the pharmaceutical industry are formed at different stages throughout the drug development process. We study if the timing to engage in R&D cooperations in the pharmaceutical industry has different impacts on the technology and product markets. Using a comprehensive dataset on the pharmaceutical industry, and estimating a heterogeneous treatment effects model (Heckman et al., 2006) our results show that R&D cooperations formed at the early stages increase the number of R&D projects and the number of drugs launched on the product market. Most interestingly, late stage R&D cooperations significantly reduce the number of drugs launched on the market, even though they increased firms’ activity in the technology markets. This result highlights the fact that firms re-optimize their drug development portfolio to avoid wasteful duplication and cannibalizing the sales of the jointly developed drug in R&D cooperations. Our study show that firms cooperating in late stage collaborations re-optimize their individual drug development portfolios, which significantly reduces the number of drugs offered on the market.

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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4567.

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    Date of creation: 2014
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    Handle: RePEc:ces:ceswps:_4567

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    Keywords: drug development; dynamics; co-development; pharmaceutical industry; product variety; product market competition; Research and Development cooperation;

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