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How Bayer Makes Decisions to Develop New Drugs


  • Jeffrey S. Stonebraker

    () (Bayer Biological Products, 4101 Research Commons, 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 27709-3387)


Drug development is time consuming, resource intensive, risky, and heavily regulated. To ensure that it makes the best drug-development decisions, Bayer Pharmaceuticals (Pharma) uses a structured process based on the principles of decision analysis to evaluate the technical feasibility and market potential of its new drugs. In July 1999, the biological products leadership committee composed of the senior managers within Bayer Biological Products (BP), a business unit of Pharma, made its newly formed strategic-planning department responsible for the commercial evaluation of a new blood-clot-busting drug. Even though Pharma's use of decision analysis began in the late 1980s, this commercial evaluation was BP's first decision analysis project. Previously, BP had analyzed a few business cases for review by Pharma. Pharma senior managers considered our recommendations relevant to their decision making. The project also institutionalized decision analysis at the business-unit level.

Suggested Citation

  • Jeffrey S. Stonebraker, 2002. "How Bayer Makes Decisions to Develop New Drugs," Interfaces, INFORMS, vol. 32(6), pages 77-90, December.
  • Handle: RePEc:inm:orinte:v:32:y:2002:i:6:p:77-90

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    References listed on IDEAS

    1. Samuel E. Bodily & Michael S. Allen, 1999. "A Dialogue Process for Choosing Value-Creating Strategies," Interfaces, INFORMS, vol. 29(6), pages 16-28, December.
    2. Donald L. Keefer & Samuel E. Bodily, 1983. "Three-Point Approximations for Continuous Random Variables," Management Science, INFORMS, vol. 29(5), pages 595-609, May.
    3. Donald L. Keefer, 1995. "Facilities Evaluation under Uncertainty: Pricing a Refinery," Interfaces, INFORMS, vol. 25(6), pages 57-66, December.
    4. Robert L. Schmidt, 1996. "A Stochastic Optimization Model to Improve Production Planning and R&D Resource Allocation in Biopharmaceutical Production Processes," Management Science, INFORMS, vol. 42(4), pages 603-617, April.
    5. William B. Poland, 1999. "Simple Probabilistic Evaluation of Portfolio Strategies," Interfaces, INFORMS, vol. 29(6), pages 75-83, December.
    6. Carl S. Spetzler & Carl-Axel S. Staël Von Holstein, 1975. "Exceptional Paper--Probability Encoding in Decision Analysis," Management Science, INFORMS, vol. 22(3), pages 340-358, November.
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    Cited by:

    1. Jeffrey S. Stonebraker, 2013. "Product-Generation Transition Decision Making for Bayer's Hemophilia Drugs: Global Capacity Expansion Under Uncertainty with Supply-Demand Imbalances," Operations Research, INFORMS, vol. 61(5), pages 1119-1133, October.
    2. Fossett, Sarah J. & Wunnava, Phanindra V., 2017. "Active Ingredients: Exploring the Key Factors Affecting the Rising Cost of Developing New Drugs," IZA Discussion Papers 10817, Institute for the Study of Labor (IZA).
    3. Jeffrey S. Stonebraker & Donald L. Keefer, 2009. "OR Practice---Modeling Potential Demand for Supply-Constrained Drugs: A New Hemophilia Drug at Bayer Biological Products," Operations Research, INFORMS, vol. 57(1), pages 19-31, February.


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