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Returns to R&D on new drug introductions in the 1980s.

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Date
1994-12
Authors
Grabowski, HG
Vernon, JM
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Abstract
This study finds that the mean IRR for 1980-84 U.S. new drug introductions is 11.1%, and the mean NPV is 22 million (1990 dollars). The distribution of returns is highly skewed. The results are robust to plausible changes in the baseline assumptions. Our work is also compared with a 1993 study by the OTA. Despite some important differences in assumptions, both studies imply that returns for the average NCE are within one percentage point of the industry's cost of capital. This is much less than what is typically observed in analyses based on accounting data.
Type
Journal article
Subject
Commerce
Costs and Cost Analysis
Data Collection
Drug Industry
Drugs, Investigational
Health Policy
Income
Research Support as Topic
United States
United States Food and Drug Administration
United States Office of Technology Assessment
Permalink
https://hdl.handle.net/10161/6703
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Scholars@Duke

Grabowski

Henry G. Grabowski

Professor Emeritus of Economics
Professor Grabowski specializes in the investigation of economics in the pharmaceutical industry, government regulation of business, and the economics of innovation. His specific interests within these fields include intellectual property and generic competition issues, the effects of government policy actions, and the costs and returns to pharmaceutical R&D. He has over one hundred peer reviewed articles analyzing the economics of pharmaceuticals and also several books and monograph publica
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