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R&d Costs, Innovative Output and Firm Size in the Pharmaceutical Industry

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Date
1995-01-01
Authors
DiMasi, Joseph A
Vernon, John
Grabowski, Henry
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Abstract
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.
Type
Journal article
Permalink
https://hdl.handle.net/10161/6715
Published Version (Please cite this version)
10.1080/758519309
Publication Info
DiMasi, Joseph A; Vernon, John; & Grabowski, Henry (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.
This is constructed from limited available data and may be imprecise. To cite this article, please review & use the official citation provided by the journal.
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