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Dubois, Pierre
, De Mouzon, Olivier, Scott Morton, Fiona and Seabright, Paul
(2011)
Market Size and Pharmaceutical Innovation.
TSE Working Paper, n. 11-232
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Abstract
This paper quantifies the relationship between market size and innovation in the pharmaceutical industry using improved, and newer, methods and data. We find positive 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 one billion per drug, and marginal costs of manufacture and distribution near 50%. An elasticity below 1 is also a plausible implication of the hypothesis that innovation in pharmaceuticals is becoming more difficult over time, as costs of regulatory approval rise and as the industry runs out of "low-hanging fruit".
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | April 2011 |
| Uncontrolled Keywords: | Innovation, Market Size, Elasticity, Pharmaceuticals |
| JEL Classification: | L65 - Chemicals; Rubber; Drugs; Biotechnology O31 - Innovation and Invention - Processes and Incentives O34 - Intellectual Property Rights - National and International Issues |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 18 Jan 2012 06:03 |
| Last Modified: | 15 Feb 2021 14:24 |
| OAI Identifier: | oai:tse-fr.eu:24353 |
| URI: | https://publications.ut-capitole.fr/id/eprint/3571 |
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