Pharmaceutical Innovation

F.M. Scherer

Chapter Chapter 12 in Handbook of the Economics of Innovation, 2010, vol. 1, pp 539-574 from Elsevier

Abstract: This chapter surveys the costs, risks, and challenges encountered in the progressive discovery and development of new pharmaceuticals. The changing methods by which drugs are discovered, the links between companies and academic science, the changing character of public regulation, and the sharp rise in the cost per new approved drug are analyzed. Determining which new drugs are both efficacious and safe poses classic statistical decision theory problems. Why patents are so important to drug developers is explored. A rent-seeking theory of new drug development is proposed to rationalize the high gross margins but only slightly supranormal returns on investment realized by pharmaceutical companies, and the puzzling economic welfare implications are investigated.

Keywords: innovation; parallel paths; pharmaceuticals; product quality regulation; profitability; research and development; virtuous rent-seeking (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:haechp:v1_539

DOI: 10.1016/S0169-7218(10)01012-9

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