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The Vertical Chain of Research and Development in the Pharmaceutical Industry

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  • Ward, Michael R
  • Dranove, David

Abstract

This paper examines the relationship between basic and applied pharmaceutical research. The authors focus on three stages of R&D: government-funded basic research; publication in medical journals; and industry-funded applied R&D. They estimate that a one percent increase in basic research in a particular therapeutic category causes a 0.76 percent increase in industry R&D in that category, and a 1.71 percent increase in other categories, over seven years. The authors also find that research incentives differ across government, academic, and industry researchers. For example, government funding favors diseases that are less prevalent and more debilitating than industry funding. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Ward, Michael R & Dranove, David, 1995. "The Vertical Chain of Research and Development in the Pharmaceutical Industry," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 70-87, January.
    • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:1:p:70-87
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    Cited by:

    1. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
    2. Gamal Atallah, 2002. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(3), pages 179-209.
    3. Margaret K. Kyle & Anita M. McGahan, 2012. "Investments in Pharmaceuticals Before and After TRIPS," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1157-1172, November.
    4. Dranove, David & Garthwaite, Craig & Heard, Christopher & Wu, Bingxiao, 2022. "The economics of medical procedure innovation," Journal of Health Economics, Elsevier, vol. 81(C).
    5. Steven Buccola & David Ervin & Hui Yang, 2009. "Research Choice and Finance in University Bioscience," Southern Economic Journal, John Wiley & Sons, vol. 75(4), pages 1238-1255, April.
    6. Hermosilla, Manuel, 2024. "Regulating ethical experimentation: Impacts of the breakthrough therapy designation on drug R&D," Journal of Health Economics, Elsevier, vol. 94(C).
    7. 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.
    8. Nasirov, Shukhrat & Joshi, Amol M., 2023. "Minding the communications gap: How can universities signal the availability and value of their scientific knowledge to commercial organizations?," Research Policy, Elsevier, vol. 52(9).
    9. Agarwal, Ruchir & Gaule, Patrick, 2022. "What drives innovation? Lessons from COVID-19 R&D," Journal of Health Economics, Elsevier, vol. 82(C).
    10. Unterschultz, James R. & Lerohl, Mel L. & Peng, Yanning & Gurung, Rajendra Kumar, 1998. "A Nutraceutical Industry: Policy Implications for Future Directions," Project Report Series 24051, University of Alberta, Department of Resource Economics and Environmental Sociology.
    11. Anna Giunta & Filippo M. Pericoli & Eleonora Pierucci, 2016. "University–Industry collaboration in the biopharmaceuticals: the Italian case," The Journal of Technology Transfer, Springer, vol. 41(4), pages 818-840, August.
    12. Laura Grigolon & Laura Lasio, 2023. "Biased Beliefs and Stigma as Barriers to Treatment and Innovation Adoption," CRC TR 224 Discussion Paper Series crctr224_2023_277v2, University of Bonn and University of Mannheim, Germany.
    13. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    14. Stephan Eger & Jörg Mahlich, 2014. "Pharmaceutical regulation in Europe and its impact on corporate R&D," Health Economics Review, Springer, vol. 4(1), pages 1-9, December.
    15. Toole, Andrew A., 2005. "Does Public Scientific Research Complement Industry R&D Investment? The Case of NIH Supported Basic and Clinical Research and Pharmaceutical Industry R&D," ZEW Discussion Papers 05-75, ZEW - Leibniz Centre for European Economic Research.
    16. Manuel Hermosilla & Jorge Lemus, 2018. "Therapeutic Translation of Genomic Science: Opportunities and Limitations of GWAS," NBER Chapters, in: Economic Dimensions of Personalized and Precision Medicine, pages 21-52, National Bureau of Economic Research, Inc.
    17. Office of Health Economics, 2010. "Enhancing the Benefits from Biomedical and Health Research Spillovers," Occasional Paper 000217, Office of Health Economics.
    18. Peter T. Leeson & Henry A. Thompson, 2023. "Public choice and public health," Public Choice, Springer, vol. 195(1), pages 5-41, April.
    19. Office of Health Economics, 2010. "Innovation in Medicines: Can We Value Progress?," Seminar Briefing 000219, Office of Health Economics.
    20. David Dranove & Craig Garthwaite & Manuel Hermosilla, 2022. "Does consumer demand pull scientifically novel drug innovation?," RAND Journal of Economics, RAND Corporation, vol. 53(3), pages 590-638, September.
    21. Toole, Andrew A, 2007. "Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 81-104, February.

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