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Explaining Pharmaceutical R&D Growth Rates at the Industry Level: New Perspectives and Insights


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  • Giaccotto, Carmelo
  • Santerre, Rexford
  • Vernon, John


This paper uses aggregate data for the major pharmaceutical companies in the U.S. to study the rate of growth in pharmaceutical R&D intensity over the period from 1952 to 2001. The theoretical model argues and the empirical findings suggest that pharmaceutical R&D spending increases with real drug prices, after holding constant other determinants of R&D. Simulations based on our multiple regression model indicate that the capitalized value of pharmaceutical R&D spending would have been about 30 percent lower if the federal government had limited the rate of growth in drug price increases to the rate of growth in the general consumer price index during the period 1980 to 2001. Moreover, a drug price control regime would have resulted in 330 to 365 fewer new drugs brought to the global market during that same time period.

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Bibliographic Info

Paper provided by Regulation2point0 in its series Working paper with number 388.

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Date of creation: Dec 2003
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Handle: RePEc:reg:wpaper:388

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Cited by:
  1. Corinne Sauer & Robert Sauer, 2007. "Is it possible to have cheaper drugs and preserve the incentive to innovate? The benefits of privatizing the drug approval process," The Journal of Technology Transfer, Springer, vol. 32(5), pages 509-524, October.
  2. Rexford Santerre & John A. Vernon, 2005. "Assessing Consumer Gains from a Drug Price Control Policy in the U.S," NBER Working Papers 11139, National Bureau of Economic Research, Inc.


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