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Pharmaceutical Innovation

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  • Scherer, F. M.

    (Harvard U)

Abstract

This article, written for the forthcoming Handbook of the Economics of Technical Change, surveys the costs, risks, and challenges encountered in the discovery and development of superior new pharmaceuticals. The changing methods by which drugs are discovered, the links between companies and academic science, the changing character of public regulation, and the sharp rise in the cost per new approved drug are analyzed. Determining which new drugs are both efficacious and safe poses classic statistical decision theory problems. Why patents are so important to drug developers is explored. A rent-seeking theory of new drug development is proposed to rationalize the high gross margins but only slightly supra-normal returns on investment realized by pharmaceutical companies, and the economic welfare implications are investigated.

Suggested Citation

  • Scherer, F. M., 2007. "Pharmaceutical Innovation," Working Paper Series rwp07-004, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp07-004
    as

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    File URL: https://research.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=4482&type=WPN
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    References listed on IDEAS

    as
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chart of the day: is pharmaceutical innovation running dry?
      by Adam Ozimek in Modeled Behavior on 2010-06-10 16:23:16

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    Cited by:

    1. Gamba, Simona, 2017. "The Effect of Intellectual Property Rights on Domestic Innovation in the Pharmaceutical Sector," World Development, Elsevier, vol. 99(C), pages 15-27.

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