R&D in the pharmaceutical industry: A world of small innovations

Beatriz Domínguez, Juan-José Ganuza and Gerard Llobet

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: It is commonly argued that in recent years pharmaceutical companies have directed their R&D towards small improvements of existing compounds instead of more risky drastic innovations. In this paper we show that the proliferation of these small innovations is likely to be linked to the lack of market sensitivity of a part of the demand to changes in prices. Compared to their social contribution, small innovations are relatively more profitable than large ones because they are targeted to the smaller but more inelastic part of the demand. We also study the effect of regulatory instruments such as price ceilings, copayments and reference prices and extend the analysis to competition in research.

Keywords: Health-care; pharmaceuticals; innovation (search for similar items in EconPapers)
JEL-codes: I11 I18 L51 O31 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-cse, nep-hea, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: R& D in the Pharmaceutical Industry: A World of Small Innovations (2009)
Working Paper: R&D in the Pharmaceutical Industry: A World of Small Innovations (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:936

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