Related Experiment Videos
Returns on research and development for 1990s new drug introductions
Henry Grabowski1, John Vernon, Joseph A DiMasi
1Department of Economics, Duke University, Durham, North Carolina, USA.
Pharmacoeconomics
|November 30, 2002
Summary
Pharmaceutical research and development (R&D) returns remain highly skewed, with a few top drugs driving market value. Despite industry changes, R&D profitability continues to exceed capital costs.
Area of Science:
- Pharmaceutical economics
- Drug development
- Market analysis
Background:
- Previous research indicated highly skewed returns for drugs launched in the 1970s and 1980s.
- The 1990s saw significant shifts in the pharmaceutical R&D landscape, including managed care growth and rising costs.
Purpose of the Study:
- To analyze worldwide R&D returns for drugs introduced to the US market in the early 1990s.
- To assess the impact of recent changes on pharmaceutical R&D profitability.
Main Methods:
- Analysis of new drug market introductions from 1990 to 1994.
- Examination of worldwide R&D returns.
Main Results:
- Findings mirror earlier research, showing a highly skewed distribution of returns in pharmaceutical R&D.
- The mean industry internal rate of return slightly exceeds the cost of capital.
Conclusions:
- The distribution of R&D returns for new drugs remains highly skewed.
- R&D costs, introductions, sales, and margins have significantly increased compared to the 1980s, indicating dynamic industry forces.