IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v28y2007i4-5p267-283.html
   My bibliography  Save this article

Uncertainty and choice: the challenges of pharmaceutical efficacy, safety, and cost

Author

Listed:
  • F.M. Scherer

    (Harvard University Emeritus, Cambridge, MA, USA)

Abstract

This paper addresses the role of uncertainty in challenges confronting the US pharmaceutical industry and its regulators. It begins with a macroeconomic overview, showing how rising health care costs, including rising ethical drug costs, squeeze the wage and salary share of national income. It addresses the claim that pharmaceutical companies' new drug pipelines are drying up. Taking a stochastic approach, it shows that both the trend of new medical entity approvals and the trend of pharmaceutical company gross margins can be explained as random walks-the latter as a result of sampling from a highly skew distribution. It then focuses on problems of ascertaining efficacy and especially low-probability adverse effects from clinical trial samples of acceptable size. Noting the need for post-NDA surveillance of adverse effects and observing the incentive failures that occur at that stage, it proposes two new approaches to identifying adverse reactions. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • F.M. Scherer, 2007. "Uncertainty and choice: the challenges of pharmaceutical efficacy, safety, and cost," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 267-283.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:267-283
    DOI: 10.1002/mde.1340
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/mde.1340
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.1340?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jean O. Lanjouw, 2005. "Patents, Price Controls and Access to New Drugs: How Policy Affects Global Market Entry," Working Papers 61, Center for Global Development.
    2. Henry Grabowski & John Vernon, 1990. "A New Look at the Returns and Risks to Pharmaceutical R&D," Management Science, INFORMS, vol. 36(7), pages 804-821, July.
    3. Peltzman, Sam, 1987. "The Health Effects of Mandatory Prescriptions," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 207-238, October.
    4. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    5. Scherer, F. M. & Harhoff, Dietmar, 2000. "Technology policy for a world of skew-distributed outcomes," Research Policy, Elsevier, vol. 29(4-5), pages 559-566, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Seyb, Stella K., 2022. "Red flags and rave reviews: Explaining too-good-to-be-true crowdfunding campaigns," Business Horizons, Elsevier, vol. 65(1), pages 69-78.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Scherer, F.M., 2010. "Pharmaceutical Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 539-574, Elsevier.
    2. Ryan, Michael P., 2010. "Patent Incentives, Technology Markets, and Public-Private Bio-Medical Innovation Networks in Brazil," World Development, Elsevier, vol. 38(8), pages 1082-1093, August.
    3. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    4. F. M. Scherer, 1993. "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 97-115, Summer.
    5. William Kingston, 2004. "Nelson's Concerns About Intellectual Property," Levine's Working Paper Archive 122247000000000461, David K. Levine.
    6. Stefan Schiman, 2013. "Langfristige Perspektiven der öffentlichen Finanzen in Österreich. Projektionen des Staatshaushalts bis 2050," WIFO Studies, WIFO, number 46670, April.
    7. Kurt Hornschild & Stephan Raab & Jörg-Peter Weiß, 2005. "Die Medizintechnik am Standort Deutschland: Chancen und Risiken durch technologische Innovationen, Auswirkungen auf und durch das nationale Gesundheitssystem sowie potentielle Wachstumsmärkte im Ausla," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, edition 2, volume 10, number pbk10, January.
    8. Patricia Apps & Ray Rees, 2007. "Population Ageing, Taxation, pensions and Health Costs," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(2), pages 79-97.
    9. Hille, Erik & Althammer, Wilhelm & Diederich, Henning, 2020. "Environmental regulation and innovation in renewable energy technologies: Does the policy instrument matter?," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    10. Leila Agha & David Molitor, 2018. "The Local Influence of Pioneer Investigators on Technology Adoption: Evidence from New Cancer Drugs," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 29-44, March.
    11. Silverberg, Gerald & Verspagen, Bart, 2002. "A Percolation Model of Innovation in Complex Technology," Research Memorandum 032, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    12. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
    13. Borrás , Susana & Edquist , Charles, 2014. "Innovation Policy for Knowledge Production and R&D: the Investment Portfolio Approach," Papers in Innovation Studies 2014/21, Lund University, CIRCLE - Centre for Innovation Research.
    14. Maynou, L. & McGuire, A. & Serra-Sastre, V., 2019. "Exploring the Impact of New Medical Technology on Workforce Planning," Working Papers 19/07, Department of Economics, City University London.
    15. Anna Maria Biscotti & Eugenio D’Amico, 2019. "Does Equity Market Differently Perceive IC Management and Disclosure Behaviours?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 756-775, June.
    16. David M. Cutler & Louise Sheiner, 1998. "Managed Care and the Growth of Medical Expenditures," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 77-116, National Bureau of Economic Research, Inc.
    17. Wasem, Jurgen, 1997. "A study on decentralizing from acute care to home care settings in Germany," Health Policy, Elsevier, vol. 41(Supplemen), pages 109-129, September.
    18. Yu-Shan Chen & Ke-Chiun Chang, 2009. "Using neural network to analyze the influence of the patent performance upon the market value of the US pharmaceutical companies," Scientometrics, Springer;Akadémiai Kiadó, vol. 80(3), pages 637-655, September.
    19. Thomas Ã…stebro, 1998. "Basic Statistics on the Success Rate and Profits for Independent Inventors," Entrepreneurship Theory and Practice, , vol. 23(2), pages 41-48, December.
    20. Jacques H. Drèze, 1997. "Sur la spécificité économique des soins de santé," Économie et Prévision, Programme National Persée, vol. 129(3), pages 1-9.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:267-283. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.