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The Effect of Longer Development Times on Product Pipeline Management Performance

Author

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  • Paulo S. Figueiredo
  • Xisto L. Travassos
  • Elisabeth Loiola

Abstract

In the pharmaceutical industry, value is being destroyed through longer product development times. Given that patent lives are (normally) fixed at 20 years, the double hit of increasing time to market is evident - higher R & D costs and less time at market before generic competitors are able to be released into the marketplace. The Policy implications are massive: A huge and permanent shift away from internal R & D towards partnerships, licensing deals and acquisitions of more innovative biotechnology companies. In this study, we build a system dynamics model of the product development pipeline for a single company operating in the pharmaceutical market. The study shows that in the presence of loss of value due to longer lead times, it is more advantageous to: (a) work faster to reduce the backlog of projects; (b) increase the number of projects started whenever it is possible reduce complexity in the pipeline; and also (c) the optimal decision on resource allocation is independent of the loss of value due to longer lead times.

Suggested Citation

  • Paulo S. Figueiredo & Xisto L. Travassos & Elisabeth Loiola, 2015. "The Effect of Longer Development Times on Product Pipeline Management Performance," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 19(4), pages 461-485.
    • Handle: RePEc:abg:anprac:v:19:y:2015:i:4:1115
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    References listed on IDEAS

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    1. Ely Dahan & Haim Mendelson, 2001. "An Extreme-Value Model of Concept Testing," Management Science, INFORMS, vol. 47(1), pages 102-116, January.
    2. Clark, Anne Marie & Berven, Heidi, 2004. "The face of the patent is not the "Whole Story": determining effective life of a pharmaceutical patent in the United States," World Patent Information, Elsevier, vol. 26(4), pages 283-295, December.
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    Cited by:

    1. Jayanti Mala Nayak & A V Manjunatha, 2019. "Risk sources and management strategies of farmers: Evidence from mahanadi river basin of Odisha in India," Working Papers 436, Institute for Social and Economic Change, Bangalore.

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