Have Pharmaceutical R&D Project Success Rates Decreased? A Critical Review and New Empirical Results

Martin Backfisch ()
Additional contact information
Martin Backfisch: Baden-Wuerttemberg Cooperative State University Center for Advanced Studies and Philipps-Universität Marburg

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In the context of the ongoing debate about an innovation crisis in the pharmaceutical industry, we study the success rates of pharmaceutical R&D projects as a measure of innovative productivity. The empirical literature suggests success rates have been decreasing during recent decades. We critically review this literature and only find few studies with a focus on the development of success rates over time. Further, the empirical analysis of success rates imposes difficulties with respect to methodological aspects like data censoring, the definition of success, and the range of firms included in the samples. These difficulties are generally not discussed by the literature. We therefore discuss these issues when critically reviewing the empirical studies and complement this discussion with own empirical results. While most other studies use samples containing a small number of firms and cover just a short time period, we use a broad sample containing firms of different sizes over an observation period of more than 20 years (1989-2010). Descriptive results suggest a declining success rate of pharmaceutical projects during recent years. Correcting for censored observations shows there has been a stabilization of success rates, but at a lower level than before. The main underlying reason for a lower success rate is the start of many more projects in more recent time periods. Results from hazard rate models even suggest there has only been a temporary drop in the success rate for projects between 1995 and 2002.

Keywords: pharmaceutical R&D; drug development; innovation; success rates (search for similar items in EconPapers)
JEL-codes: L65 O32 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017
New Economics Papers: this item is included in nep-hea, nep-ino and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Forthcoming in

Downloads: (external link)
http://www.uni-marburg.de/fb02/makro/forschung/mag ... 6-2017_backfisch.pdf First 201746 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201746

Access Statistics for this paper

More papers in MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) Contact information at EDIRC.
Bibliographic data for series maintained by Bernd Hayo ().