R&d Costs, Innovative Output and Firm Size in the Pharmaceutical Industry
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This study examines the relationships between firm size, R&D costs and output in the pharmaceutical industry. Project-level data from a survey of 12 US-owned pharmaceutical firms on drug development costs, development phase lengths and failure rates are used to determine estimates of the R&D cost of new drug development by firm size. Firms in the sample are grouped into three size categories, according to their pharmaceutical sales at the beginning of the study period. The D&D cost per new drug approved in the US is shown to decrease with firm size, while sales per new drug approved are shown to increase markedly with firm size. Sales distributions are highly skewed and suggest that firms need to search for blockbuster drugs with above-average returns. The results are consistent with substantial economies of scale in pharmaceutical R&D, particularly at the discovery and preclinical development phases. © 1995, Taylor & Francis Group, LLC. All rights reserved.
Published Version (Please cite this version)10.1080/758519309
Publication InfoDiMasi, Joseph A; Grabowski, Henry G; & Vernon, John M (1995). R&d Costs, Innovative Output and Firm Size in the Pharmaceutical Industry. International Journal of the Economics of Business, 2(2). pp. 201-219. 10.1080/758519309. Retrieved from https://hdl.handle.net/10161/6715.
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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 been publishing research papers for over four decades, from his earlier work, “The Effects of Regulatory Policy on the Incentives