Returns to R&D on new drug introductions in the 1980s.
This study finds that the mean IRR for 1980-84 U.S. new drug introductions is 11.1%, and the mean NPV is 22 million (1990 dollars). The distribution of returns is highly skewed. The results are robust to plausible changes in the baseline assumptions. Our work is also compared with a 1993 study by the OTA. Despite some important differences in assumptions, both studies imply that returns for the average NCE are within one percentage point of the industry's cost of capital. This is much less than what is typically observed in analyses based on accounting data.
Duke University, Department of Economics, Durham, NC 27708.
H G
HG
Grabowski
J M
JM
Vernon
D003132:Commerce / Q000191:economics; D003365:Costs and Cost Analysis / Q000706:statistics & numerical data; D003625:Data Collection; D004345:Drug Industry / Q000191:economics* / Q000706:statistics & numerical data; D015507:Drugs, Investigational / Q000191:economics*; D006291:Health Policy; D007182:Income / Q000706:statistics & numerical data*; D012109:Research Support as Topic / Q000191:economics*; D014481:United States; D014486:United States Food and Drug Administration; D014491:United States Office of Technology Assessment