Returns on R&D for 1990s New Drug Introductions
AbstractPreviously published research by two of the authors found that returns on R&D for drugs introduced into the market in the 1970s and 1980s were highly skewed and that the top decile of new drugs accounted for close to half the overall market value. In the 1990s, there have been significant changes to the R&D environment for new medicines--the rapid growth of managed care organizations; indications that R&D costs are rising at a rate faster than overall inflation; new market strategies of major pharma firms; increased alliances with the emerging biotech sector; and, the increased attention focused on the pharmaceutical industry in the political arena. Nevertheless, analysis of new drugs entering the market from 1990-1994 resulted in findings similar to the earlier researchÃ³pharmaceutical R&D is characterized by a highly skewed distribution of returns and a mean industry internal rate of return modestly in excess of the cost-of-capital. These findings provide support for a model of intensive R&D competition by pharmaceutical firms to gain economic advantage through product innovation and differentiation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 618897000000000666.
Date of creation: 31 Oct 2003
Date of revision:
Contact details of provider:
Web page: http://www.dklevine.com/
Other versions of this item:
- Grabowski, Henry & Vernon, John & DiMasi, Joseph, 2002. "Returns on R&D for 1990s New Drug Introductions," Working Papers, Duke University, Department of Economics 02-21, Duke University, Department of Economics.
- NEP-ALL-2003-11-03 (All new papers)
- NEP-COM-2003-11-03 (Industrial Competition)
- NEP-HEA-2003-11-03 (Health Economics)
- NEP-INO-2003-11-03 (Innovation)
- NEP-MFD-2003-11-03 (Microfinance)
- NEP-TID-2003-11-03 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, Elsevier, vol. 22(2), pages 151-185, March.
- Henry Grabowski & John Vernon, 1990. "A New Look at the Returns and Risks to Pharmaceutical R&D," Management Science, INFORMS, INFORMS, vol. 36(7), pages 804-821, July.
- Henry Grabowski & John Vernon, 2000. "The determinants of pharmaceutical research and development expenditures," Journal of Evolutionary Economics, Springer, Springer, vol. 10(1), pages 201-215.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, Elsevier, vol. 10(2), pages 107-142, July.
- Baily, Martin Neil, 1972. "Research and Development Costs and Returns: The U. S. Pharmaceutical Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(1), pages 70-85, Jan.-Feb..
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If references are entirely missing, you can add them using this form.