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Health Tracking

TRENDS

The Link Between Gross Profitability And Pharmaceutical R&D Spending

Since the late 1950s, when the Kefauver Committee investigated the business practices of U.S. pharmaceutical companies, representatives of that industry have argued that its profits are an important stimulus to, and source of funding for, research and development (R&D)—which in turn leads to a stream of health-enhancing new products. Although the argument is plausible on its face, quantitative evidence on the robustness of the linkage has been scarce. This paper reports the results of a simple data analysis yielding surprising new insights.

Profitability and investments in R&D can, in principle, be linked in three rather different ways. First, successful R&D . . . [Full Text of this Article]

Time-series analysis.

 

Gross margins versus R&D outlays.

 

A virtuous rent-seeking model.

 

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