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

Joseph DiMasi (), Henry G. Grabowski and John Vernon

No 95-16, Working Papers from Duke University, Department of Economics

Abstract: This study examines the relationships between firm size, R&D costs and output in the pharmaceutical industry. Porject-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 sampel are grouped into three size categories, according to their pharmaceutical sales at the beginning of the study period. The R&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.

JEL-codes: L65 O32 (search for similar items in EconPapers)
Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (21)

Published in INTERNATIONAL JOURNAL OF THE ECONOMICS OF BUSINESS, vol. 2, 1995, pages 201-219

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: R&D Costs, Innovative Output and Firm Size in the Pharmaceutical Industry (1995)
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:duk:dukeec:95-16

Access Statistics for this paper

More papers in Working Papers from Duke University, Department of Economics Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097.
Bibliographic data for series maintained by Department of Economics Webmaster ().