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Spending on new drug development

Author

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  • Christopher Paul Adams

    (Bureau of Economics, Federal Trade Commission, Washington, DC, USA)

  • Van Vu Brantner

    (Global Consumer & Small Business Banking, Bank of America, Charlotte, NC, USA)

Abstract

This paper replicates DiMasi et al. (J. Health Econ. 2003; 22 : 151-185; Drug Inf. J. 2004; 38 : 211-223) estimates of expenditure on new drug development using publicly available data. The paper estimates that average expenditure on drugs in human clinical trials is around $27m per year, with $17m per year on drugs in Phase I, $34m on drugs in Phase II and $27m per year on drugs in Phase III of the human clinical trials. The paper's estimated expenditure on new drug development is somewhat greater than suggested by the survey results presented in DiMasi et al. (J. Health Econ. 2003; 22 : 151-185; Drug Inf. J. 2004; 38 : 211-223). The paper combines a 12-year panel of research and development expenditure for 183 publicly traded firms in the pharmaceutical industry with panel of drugs in human clinical trials for each firm over the same period. The paper estimates drug expenditure by estimating the relationship between research and development expenditure and the number of drugs in development for 1682 company|years (183 firms multiplied by the number of years for which we have financial and drug development information). The paper also estimates expenditure on drugs in various therapeutic categories. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Christopher Paul Adams & Van Vu Brantner, 2010. "Spending on new drug development," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 130-141.
  • Handle: RePEc:wly:hlthec:v:19:y:2010:i:2:p:130-141
    DOI: 10.1002/hec.1454
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    File URL: http://hdl.handle.net/10.1002/hec.1454
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    References listed on IDEAS

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    1. Light, Donald W. & Warburton, Rebecca N., 2005. "Extraordinary claims require extraordinary evidence," Journal of Health Economics, Elsevier, vol. 24(5), pages 1030-1033, September.
    2. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
    3. Danzon, Patricia M. & Nicholson, Sean & Pereira, Nuno Sousa, 2005. "Productivity in pharmaceutical-biotechnology R&D: the role of experience and alliances," Journal of Health Economics, Elsevier, vol. 24(2), pages 317-339, March.
    4. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2005. "Extraordinary claims require extraordinary evidence," Journal of Health Economics, Elsevier, vol. 24(5), pages 1034-1044, September.
    5. 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, vol. 22(2), pages 151-185, March.
    6. Cockburn, Iain M. & Henderson, Rebecca M., 2001. "Scale and scope in drug development: unpacking the advantages of size in pharmaceutical research," Journal of Health Economics, Elsevier, vol. 20(6), pages 1033-1057, November.
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    Citations

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    Cited by:

    1. Ming Liu & Sumner LaCroix, 2011. "The Impact of Stronger Property Rights in Pharmaceuticals on Innovation in Developed and Developing Countries," Working Papers 201116, University of Hawaii at Manoa, Department of Economics.
    2. Morgan, Steve & Grootendorst, Paul & Lexchin, Joel & Cunningham, Colleen & Greyson, Devon, 2011. "The cost of drug development: A systematic review," Health Policy, Elsevier, vol. 100(1), pages 4-17, April.
    3. Ming Liu & Sumner la Croix, 2013. "A Cross-Country Index of Intellectual Property Rights in Pharmaceutical Innovations," Working Papers 201313, University of Hawaii at Manoa, Department of Economics.
    4. Martin Backfisch, 2017. "Have Pharmaceutical R&D Project Success Rates Decreased? A Critical Review and New Empirical Results," MAGKS Papers on Economics 201746, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Pierre Dubois & Olivier de Mouzon & Fiona Scott-Morton & Paul Seabright, 2015. "Market size and pharmaceutical innovation," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 844-871, October.
    6. Papaioannou, Theo & Watkins, Andrew & Mugwagwa, Julius & Kale, Dinar, 2016. "To Lobby or to Partner? Investigating the Shifting Political Strategies of Biopharmaceutical Industry Associations in Innovation Systems of South Africa and India," World Development, Elsevier, vol. 78(C), pages 66-79.
    7. Barrenho, E & Smith, PC & Miraldo, M, 2013. "The determinants of attrition in drug development: a duration analysis," Working Papers 12204, Imperial College, London, Imperial College Business School.
    8. Liu, Ming & La Croix, Sumner, 2015. "A cross-country index of intellectual property rights in pharmaceutical inventions," Research Policy, Elsevier, vol. 44(1), pages 206-216.

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