This article quantifies the relationship between market size and innovation in the pharmaceutical industry using improved, and newer, methods and data. We find significant elasticities of innovation to expected market size with a point estimate under our preferred specification of 0.23. This suggests that, on average, $2.5 billion is required in additional revenue to support the invention of one new chemical entity. This magnitude is plausible given recent accounting estimates of the cost of innovation of $800 million to $1 billion per drug, and marginal costs of manufacture and distribution near 50%.">
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Market size and pharmaceutical innovation

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. What’s at stake if U.S. drug prices fall?
    by Jason Shafrin in Healthcare Economist on 2018-02-02 06:14:36

Citations

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Cited by:

  1. Dosi, Giovanni & Palagi, Elisa & Roventini, Andrea & Russo, Emanuele, 2023. "Do patents really foster innovation in the pharmaceutical sector? Results from an evolutionary, agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 564-589.
  2. Heidi L. Williams, 2016. "Intellectual Property Rights and Innovation: Evidence from Health Care Markets," Innovation Policy and the Economy, University of Chicago Press, vol. 16(1), pages 53-87.
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  4. Dubois, Pierre & Moisson, Paul-Henri & Tirole, Jean, 2022. "The Economics of Transferable Patent Extensions," TSE Working Papers 22-1377, Toulouse School of Economics (TSE), revised Dec 2022.
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  6. Agarwal, Ruchir & Gaule, Patrick, 2022. "What drives innovation? Lessons from COVID-19 R&D," Journal of Health Economics, Elsevier, vol. 82(C).
  7. Kortelainen, Mika & Markkanen, Jaakko & Siikanen, Markku & Toivanen, Otto, 2023. "The Effects of Price Regulation on Pharmaceutical Expenditure and Availability," Working Papers 157, VATT Institute for Economic Research.
  8. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
  9. Jeffrey P. Clemens & Morten Olsen, 2021. "Medicare and the Rise of American Medical Patenting: The Economics of User-Driven Innovation," CESifo Working Paper Series 9008, CESifo.
  10. Simona Gamba & Laura Magazzini & Paolo Pertile, 2019. "R&D and market size: who benefits from orphan drug regulation?," Working Papers 09/2019, University of Verona, Department of Economics.
  11. Gamba, Simona & Magazzini, Laura & Pertile, Paolo, 2021. "R&D and market size: Who benefits from orphan drug legislation?," Journal of Health Economics, Elsevier, vol. 80(C).
  12. Pierre Dubois & Morten Sæthre, 2020. "On the Effect of Parallel Trade on Manufacturers' and Retailers' Profits in the Pharmaceutical Sector," Econometrica, Econometric Society, vol. 88(6), pages 2503-2545, November.
  13. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
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  21. Kazuhiro Takauchi & Tomomichi Mizuno, 2019. "Consumer-benefiting transport cost: The role of product innovation in a vertical structure," Discussion Papers 1911, Graduate School of Economics, Kobe University.
  22. Matthew J. Higgins & Mathias J. Kronlund & Ji Min Park & Joshua Pollet, 2020. "The Role of Assets In Place: Loss of Market Exclusivity and Investment," NBER Working Papers 27588, National Bureau of Economic Research, Inc.
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  34. Marek Ignaszak & Petr Sedlácek, 2021. "Profitability, Productivity and Growth," Economics Series Working Papers 937, University of Oxford, Department of Economics.
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  44. Marco Sahm, 2020. "Advance-Purchase Financing of Projects with Few Buyers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 909-933, December.
  45. Wei Fu & Shin-Yi Chou & Li-San Wang, 2022. "NIH Grant Expansion, Ancestral Diversity and Scientific Discovery in Genomics Research," NBER Working Papers 30155, National Bureau of Economic Research, Inc.
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  48. Callejas, Jerónimo & Mohapatra, Debi Prasad, 2021. "Welfare effects of public procurement of medicines: Evidence from Ecuador," International Journal of Industrial Organization, Elsevier, vol. 75(C).
  49. Civelek Mehmet & Červinka Michal & Gajdka Krzysztof & Nétek Václav, 2021. "Marketing communication tools and their influence on marketing innovation: Evidence from Slovakian SMEs," Management & Marketing, Sciendo, vol. 16(3), pages 210-227, September.
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  51. Dubois, Pierre & Majewska, Gosia, 2022. "Mergers and Advertising in the Pharmaceutical Industry," TSE Working Papers 22-1380, Toulouse School of Economics (TSE).
  52. Higgins, Matthew J. & Yan, Xin & Chatterjee, Chirantan, 2021. "Unpacking the effects of adverse regulatory events: Evidence from pharmaceutical relabeling," Research Policy, Elsevier, vol. 50(1).
  53. Eric Budish & Benjamin N. Roin & Heidi Williams, 2015. "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials," American Economic Review, American Economic Association, vol. 105(7), pages 2044-2085, July.
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