The Pharmaceutical Industry
Abstract
FISHER and TEMIN (1973) have argued recently that many empirical studies1 relating to the Schumpeterian hypothesis are inappropriate for testing that hypothesis. They observe that Schumpeter can be interpreted as hypothesizing that the elasticity of the value of research and development (R and D) output with respect to firm size is greater than unity. On the other hand, the empirical studies have been concerned with investigating the elasticity of R and D inputs with respect to firm size. Fisher and Temin demonstrate that a finding that the R and D input elasticity exceeds unity does not imply that the R and D output elasticity exceeds unity also. Given that public policy formulation should be based on tests of the Schumpeter hypothesis rather than on tests of the R and D input elasticity, their point is well taken. Of course, in defense of the empirical studies, it can be argued that data limitations have restricted testing to the R and D input elasticity, and that most of the researchers have been aware that they were not testing the Schumpeter hypothesis.............
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Scholars@Duke
Henry G. Grabowski
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 publications. Professor Grabowski has testified several times before Congress on the issues of FDA regulation, health care reform, drug innovation and generic competition and vaccine policies. He has received numerous awards and professional recognition including a special issue of essays published in his honor in 2011 in the International Journal of the Economics of Business. He also has served as an advisor to various government and business organizations, including the National Academy of Sciences, the Institute of Medicine, the Office of Technology Assessment, the Federal Trade Commission, and the General Accounting Office. The US Congress has recognized the significant role that a paper he published with Duke colleagues David Ridley and Jeff Moe had in the passage of legislation that incentivized development of new therapies for neglected diseases through the creation of priority review vouchers.
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