title: Decline in economic returns from new drugs raises questions about sustaining innovations.
abstract: The sales and financial returns realized by pharmaceutical companies are a frequent topic of discussion and debate. In this study we analyzed the economic returns for four cohorts of new prescription drugs launched in the United States (in 1991-94, 1995-99, 2000-04, and 2005-09) and compared fluctuations in revenues with changing average research and development (R&D) and other costs to determine patterns in rewards for pharmaceutical innovation. We found that the average present values of lifetime net economic returns were positive and reached a peak with the 1995-99 and 2000-04 new drug cohorts. However, returns have fallen sharply since then, with those for the 2005-09 cohort being very slightly negative and, on average, failing to recoup research and development and other costs. If this level of diminished returns persists, we believe that the rewards for innovation will not be sufficient for pharmaceutical manufacturers to maintain the historical rates of investments needed to sustain biomedical innovation.
authors: Ernst R. Berndt is the Louis E. Seley Professor in Applied Economics at the Alfred P. Sloan School of Management, Massachusetts Institute of Technology, in Cambridge.
authors: Ernst R
authors: ER
authors: Berndt
authors: Deanna Nass is a senior researcher at the IMS Institute for Healthcare Informatics, in Plymouth Meeting, Pennsylvania.
authors: Deanna
authors: D
authors: Nass
authors: Michael Kleinrock is director of research development for the IMS Institute for Healthcare Informatics.
authors: Michael
authors: M
authors: Kleinrock
authors: Murray Aitken (MAitken@TheIMSInstitute.org) is executive director of the IMS Institute for Healthcare Informatics.
authors: Murray
authors: M
authors: Aitken
mesh_terms: D001688:Biological Products / Q000191:economics; D035843:Biomedical Research / Q000191:economics* / Q000639:trends; D059451:Biosimilar Pharmaceuticals / Q000191:economics; D003132:Commerce / Q000191:economics / Q000639:trends; D003365:Costs and Cost Analysis; D016527:Drug Costs / Q000639:trends*; D004345:Drug Industry / Q000191:economics* / Q000639:trends; D016568:Drugs, Generic / Q000191:economics; D004465:Economic Competition; D006801:Humans; D038622:Internationality; D013678:Technology, Pharmaceutical / Q000191:economics* / Q000639:trends; D014481:United States
chemical_list: D001688:Biological Products; D059451:Biosimilar Pharmaceuticals; D016568:Drugs, Generic
keywords: Biotechnology; Pharmaceuticals; Research And Technology