10-CBO-DrugR-D

10-CBO-DrugR-D - CONGRESS OF THE UNITED STATES...

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CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE A STUDY OCTOBER 2006 Research and Development in the Pharmaceutical Industry CBO © Unlisted images, Inc.
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Pub. No. 2589
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The Congress of the United States O Congressional Budget Office CBO Research and Development in the Pharmaceutical Industry October 2006 A STUDY
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Preface P erceptions that the pace of new-drug development has slowed and that the pharmaceuti- cal industry is highly profitable have sparked concerns that significant problems loom for future drug development. This Congressional Budget Office (CBO) study—prepared at the request of the Senate Majority Leader—reviews basic facts about the drug industry’s recent spending on research and development (R&D) and its output of new drugs. The study also examines issues relating to the costs of R&D, the federal government’s role in pharmaceutical research, the performance of the pharmaceutical industry in developing innovative drugs, and the role of expected profits in private firms’ decisions about investing in drug R&D. In keep- ing with CBO’s mandate to provide objective, impartial analysis, the study makes no recom- mendations. David H. Austin prepared this report under the supervision of Joseph Kile and David Moore. Colin Baker provided valuable consultation. Jim Baumgardner, Anna Cook, Doug Hamilton, and Dennis Zimmerman of CBO provided comments, as did Iain Cockburn of Boston Uni- versity, Mark Duggan of the University of Maryland, and Judith Wagner of the Institute of Medicine. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.) Christian Howlett edited the study, and Kate Kelly proofread it. Angela Z. McCollough pre- pared drafts of the manuscript. Maureen Costantino prepared the report for publication, with assistance from Allan Keaton, and designed the cover. Lenny Skutnik printed the initial cop- ies, and Simone Thomas prepared the electronic version for CBO’s Web site (www.cbo.gov). Donald B. Marron Acting Director October 2006
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Contents 1 Introduction and Summary 1 The Cost of Developing a New Drug 1 The Role of Federal Research and Development 2 Assessing the Drug Industry’s R&D Performance 3 The Drug Industry’s Profits and R&D Investment 4 2 Trends in R&D Spending and Output of New Drugs 7 Spending for Research and Development 7 R&D Intensity 9 Output of Innovative New Drugs 11 Leading Therapeutic Classes 12 Modifications and Approved New Uses of Drugs 14 3 What Does It Cost to Develop a New Drug? 19 Primary Determinants of R&D Costs 19 Why Have R&D Costs Risen for Innovative New Drugs? 21 4 Does Federal R&D Spending Stimulate or Substitute for Private-Sector Spending? 27 Public and Private R&D Spending 27 Does Government R&D Crowd Out Private R&D? 29 A Changing Role for Public-Sector Research 33 5 Has the Drug Industry’s Innovative Performance Declined? 35 Recent Innovative Performance 35 Did Changes in the Size of Drug Companies Affect Research Productivity? 39
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10-CBO-DrugR-D - CONGRESS OF THE UNITED STATES...

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