Rushed Innovation: Evidence from Drug Licensing

Published Online:https://doi.org/10.1287/mnsc.2019.3530

References

  • Abadie A, Imbens GW (2006) Large sample properties of matching estimators for average treatment effects. Econometrica 74(1):235–267.Google Scholar
  • Abrantes-Metz R, Adams C, Metz A (2004) Pharmaceutical development phases: A duration analysis. Federal Trade Commission, Bureau of Economics Working Paper No. 274, Federal Trade Commission, Washington, DC.Google Scholar
  • Acemoglu D, Linn J (2004) Market size in innovation: Theory and evidence from the pharmaceutical industry. Quart. J. Econom. 119(3):1049–1090.CrossrefGoogle Scholar
  • Aghion P, Tirole J (1994) The management of innovation. Quart. J. Econom. 109(4):1185–1209.CrossrefGoogle Scholar
  • Alcacer J, Cantwell J, Gittelman M (2009) Are licensing markets local? An analysis of the geography of vertical licensing agreements in bio-pharmaceuticals. Working paper, Harvard Business School, Boston.Google Scholar
  • Arora A, Gambardella A (2010) The market for technology. Hall BH, Rosenberg, eds. Handbook of the Economics of Innovation, vol. 1 (Elsevier, Amsterdam), 641–678.CrossrefGoogle Scholar
  • Arora A, Fosfuri A, Gambardella A (2004) Markets for Technology: The Economics of Innovation and Corporate Strategy (MIT Press, Cambridge, MA).Google Scholar
  • Arora A, Gambardella A, Magazzini L, Pammolli F (2009) A breath of fresh air? firm type, scale, scope, and selection effects in drug development. Management Sci. 55(10):1638–1653.LinkGoogle Scholar
  • Arrowsmith J (2011) Trial watch: Phase III and submission failures: 2007-2010. Nature Rev. Drug Discovery 10(2):87.CrossrefGoogle Scholar
  • Athey S, Tibshirani J, Wager S (2019) Generalized random forests. Ann. Statist. 47(2):1148–1178.CrossrefGoogle Scholar
  • Ball GP, Macher JT, Stern AD (2018) Recalls, innovation, and competitor response: Evidence from medical device firms. Harvard Business School Working Paper No. 19-028, Harvard Business School, Boston.Google Scholar
  • Bayus BL (1997) Speed-to-market and new product performance trade-offs. J. Product Innovation Management 14(6):485–497.CrossrefGoogle Scholar
  • Breiman L (2001) Random forests. Machine Learn. 45(1):5–32.CrossrefGoogle Scholar
  • Chan T, Nickerson JA, Owan H (2007) Strategic management of R&D pipelines with cospecialized investments and technology markets. Management Sci. 53(4):667–682.LinkGoogle Scholar
  • Chan TY, Hamilton BH (2006) Learning, private information, and the economic evaluation of randomized experiments. J. Political Econom. 114(6):997–1040.CrossrefGoogle Scholar
  • Chandy R, Hopstaken B, Narasimhan O, Prabhu J (2006) From invention to innovation: Conversion ability in product development. J. Marketing Res. 43(3):494–508.CrossrefGoogle Scholar
  • Chaney PK, Devinney TM, Winer RS (1991) The impact of new product introductions on the market value of firms. J. Bus. 64(4):573–610.CrossrefGoogle Scholar
  • Cockburn I (2004) The changing structure of the pharmaceutical industry. Health Affairs 23(1):10–22.CrossrefGoogle Scholar
  • Cockburn IM, Henderson RM (2001) Scale and scope in drug development: Unpacking the advantages of size in pharmaceutical research. J. Health Econom. 20(6):1033–1057.CrossrefGoogle Scholar
  • Cohen J (1988) Statistical Power Analysis for the Behavioral Sciences, 2nd ed. (Lawrence Erlbaum Associates, Hillsdale, NJ).Google Scholar
  • Cohen MA, Eliasberg J, Ho T-H (1996) New product development: The performance and time-to-market tradeoff. Management Sci. 42(2):173–186.LinkGoogle Scholar
  • Cox D (1972) Regression models and life-tables. J. Royal Statist. Soc. Series B: Methodological 34(2):187–220.Google Scholar
  • Danzon PM, Epstein A, Nicholson S (2007) Mergers and acquisitions in the pharmaceutical and biotech industries. Managerial Decision Econom. 28(4–5):307–328.CrossrefGoogle Scholar
  • Danzon PM, Nicholson S, Pereira NS (2005) Productivity in pharmaceutical–biotechnology R&D: The role of experience and alliances. J. Health Econom. 24(2):317–339.CrossrefGoogle Scholar
  • Davies R (2013) The relevance and importance of business development and licensing in the biopharmaceutical industry. J. Commercial Biotechnology 19(3), https://doi.org/10.5912/jcb592.CrossrefGoogle Scholar
  • Diestre L, Rajagopalan N (2012) Are all ‘sharks’ dangerous? New biotechnology ventures and partner selection in R&D alliances. Strategic Management J. 33(10):1115–1134.CrossrefGoogle Scholar
  • DiMasi JA, Grabowski HG, Hansen RW (2016) Innovation in the pharmaceutical industry: New estimates of R&D costs. J. Health Econom. 47(2016):20–33.CrossrefGoogle Scholar
  • DiMasi JA, Hansen RW, Grabowski HG (2003) The price of innovation: New estimates of drug development costs. J. Health Econom. 22(2):151–185.CrossrefGoogle Scholar
  • DiMasi JA, Feldman L, Seckler A, Wilson A (2010) Trends in risks associated with new drug development: Success rates for investigational drugs. Clinical Pharmacology Therapeutics 87(3):272–277.CrossrefGoogle Scholar
  • Dranove D, Meltzer D (1994) Do important drugs reach the market sooner? RAND J. Econom. 25(3):402–423.CrossrefGoogle Scholar
  • Dranove D, Garthwaite C, Hermosilla M (2014) Pharmaceutical profits and the social value of innovation. NBER Working Paper No. 20212, National Bureau of Economic Research, Cambridge, MA.Google Scholar
  • Dubois P, De Mouzon O, Scott-Morton F, Seabright P (2015) Market size and pharmaceutical innovation. RAND J. Econom. 46(4):844–871.CrossrefGoogle Scholar
  • Fine JP, Gray RJ (1999) A proportional hazards model for the subdistribution of a competing risk. J. Amer. Statist. Assoc. 94(446):496–509.CrossrefGoogle Scholar
  • Freidlin B, Korn EL, George SL (1999) Data monitoring committees and interim monitoring guidelines. Controlled Clinical Trials 20(5):395–407.CrossrefGoogle Scholar
  • Gans JS, Stern S (2010) Is there a market for ideas? Indust. Corporate Change 19(3):805–837.CrossrefGoogle Scholar
  • Gans JS, Hsu DH, Stern S (2002) When does start-up innovation spur the gale of creative destruction? RAND J. Econom. 33(4):571–587.CrossrefGoogle Scholar
  • Giovannetti G, Spence P (2017) Beyond borders: The global biotechnology report. Accessed November 19, 2019, https://www.ey.com/Publication/vwLUAssets/ey-biotechnology-report-2017-beyond-borders-staying-the-course/$FILE/ey-biotechnology-report-2017-beyond-borders-staying-the-course.pdf.Google Scholar
  • Girotra K, Terwiesch C, Ulrich KT (2007) Valuing R&D projects in a portfolio: Evidence from the pharmaceutical industry. Management Sci. 53(9):1452–1466.LinkGoogle Scholar
  • Goodman M (2009) Market watch: Sales of biologics to show robust growth through to 2013. Nat. Rev. Drug Discovery 8(11):837.Google Scholar
  • Guedj I, Scharfstein D (2004) Organizational scope and investment: Evidence from the drug development strategies of biopharmaceutical firms. NBER Working Paper No. 10933, National Bureau of Economic Research, Cambridge, MA.Google Scholar
  • Hay M, Thomas DW, Craighead JL, Economides C, Rosenthal J (2014) Clinical development success rates for investigational drugs. Nature Biotechnology 32(1):40–51.CrossrefGoogle Scholar
  • Henderson R, Cockburn I (1996) Scale, scope, and spillovers: The determinants of research productivity in drug discovery. RAND J. Econom. 27(1):32–59.CrossrefGoogle Scholar
  • Hendricks KB, Singhal VR (1997) Delays in new product introductions and the market value of the firm: The consequences of being late to the market. Management Sci. 43(4):422–436.LinkGoogle Scholar
  • Hermosilla M (2016) Imperfect outsourcing of technological innovations. Working paper, Johns Hopkins Carey Business School, Baltimore.Google Scholar
  • Hermosilla M, Lemus J (2019) Therapeutic translation of genomic science: Opportunities and limitations of GWAS. Berndt ER, Goldman DP, Rowe JW, eds. Economic Dimensions of Personalized and Precision Medicine (University of Chicago Press, Chicago), 21–52.Google Scholar
  • Hermosilla M, Wu Y (2018) Market size and innovation: The intermediary role of technology licensing. Res. Policy 47(5):980–991.CrossrefGoogle Scholar
  • Higgins MJ, Rodriguez D (2006) The outsourcing of R&D through acquisitions in the pharmaceutical industry. J. Financial Econom. 80(2):351–383.CrossrefGoogle Scholar
  • Hwang TJ, Carpenter D, Lauffenburger JC, Wang B, Franklin JM, Kesselheim AS (2016) Failure of investigational drugs in late-stage clinical development and publication of trial results. JAMA Internal Medicine 176(12):1826–1833.CrossrefGoogle Scholar
  • Jones A (2007) Minimizing leakage of value from R&D alliances. Nature Rev. Drug Discovery 6(9):711–719.CrossrefGoogle Scholar
  • Kimes M (2008) The case of Pfizer. Fortune Magazine (December 1).Google Scholar
  • Kneller R (2010) The importance of new companies for drug discovery: Origins of a decade of new drugs. Nature Rev. Drug Discovery 9(11):867.CrossrefGoogle Scholar
  • Kola I, Landis J (2004) Can the pharmaceutical industry reduce attrition rates? Nature Rev. Drug Discovery 3(8):711.CrossrefGoogle Scholar
  • Krieger J, Li X, Thakor RT (2018) Find and replace: R&D investment following the erosion of existing products. Preprint, submitted September 17, http://dx.doi.org/10.2139/ssrn.3240344.Google Scholar
  • Lerner J, Malmendier U (2010) Contractibility and the design of research agreements. Amer. Econom. Rev. 100(1):214–246.CrossrefGoogle Scholar
  • Lerner J, Merges RP (1998) The control of technology alliances: An empirical analysis of the biotechnology industry. J. Indust. Econom. 46(2):125–156.CrossrefGoogle Scholar
  • Mason R, Savva N, Scholtes S (2008) The economics of licensing contracts. Nature Biotechnology 26(8):855–857.Google Scholar
  • Merrill J (2016) Surprise! It’s a phase III failure. Scrip Pharma Intelligence (August 12), https://scrip.pharmaintelligence.informa.com/SC097113/Surprise-Its-A-Phase-III-Failure.Google Scholar
  • Mittra J (2007) Life science innovation and the restructuring of the pharmaceutical industry: Merger, acquisition and strategic alliance behaviour of large firms. Tech. Anal. Strategic Management 19(3):279–301.CrossrefGoogle Scholar
  • Moorman C, Miner AS (1998) The convergence of planning and execution: Improvisation in new product development. J. Marketing 62(3):1–20.Google Scholar
  • Mowery DC, Oxley JE, Silverman BS (1998) Technological overlap and interfirm cooperation: Implications for the resource-based view of the firm. Res. Policy 27(5):507–523.CrossrefGoogle Scholar
  • Palermo V, Higgins MJ, Ceccagnoli M (2019) How reliable is the market for technology? Rev. Econom. Statist. 101(1):107–120.CrossrefGoogle Scholar
  • Pammolli F, Magazzini L, Riccaboni M (2011) The productivity crisis in pharmaceutical R&D. Nature Rev. Drug Discovery 10(6):428.CrossrefGoogle Scholar
  • Paul SM, Mytelka DS, Dunwiddie CT, Persinger CC, Munos BH, Lindborg SR, Schacht AL (2010) How to improve R&D productivity: The pharmaceutical industry’s grand challenge. Nature Rev. Drug Discovery 9(3):203–214.CrossrefGoogle Scholar
  • Pfizer Inc. (2006) In interests of patient safety, Pfizer stops all torcetrapib clinical trials. Press release, Pfizer, New York. Accessed November 19, 2019, https://www.businesswire.com/news/home/20070226005663/en/Interests-Patient-Safety-Pfizer-Stops-Torcetrapib-Clinical.Google Scholar
  • Pfizer Inc. (2007) Bristol-Myers Squibb and Pfizer announce worldwide collaboration to develop and commercialize anticoagulant and metabolic compounds. Press release, Pfizer, New York. Accessed November 19, 2019, https://www.pfizer.com/news/press-release/press-release-detail/bristol_myers_squibb_and_pfizer_announce_worldwide_collaboration_to_develop_and_commercialize_anticoagulant_and_metabolic_compounds.Google Scholar
  • Pisano G (1997) R&D performance, collaborative arrangements and the market for know-how: A test of the “lemons” hypothesis in biotechnology. Working paper, Harvard Business School, Boston.Google Scholar
  • Pisano GP (2006) Science Business: The Promise, the Reality, and the Future of Biotech (Harvard Business Press, Cambridge, MA).Google Scholar
  • Powell WW (1996) Interorganizational collaboration in the biotechnology industry. J. Institutional Theoret. Econom. 152(1):197–215.Google Scholar
  • Prudhome A (2013) Investigating imclone: Why did the FDA give a thumbs down to the $2 billion breakthrough? Vanity Fair (December 3), https://www.pfizer.com/news/press-release/press-release-detail/bristol_myers_squibb_and_pfizer_announce_worldwide_collaboration_to_develop_and_commercialize_anticoagulant_and_metabolic_compounds.Google Scholar
  • Rhodes I, Nelson C, Berman G (2003) The key to successful collaborations: Rigorous and independent due diligence. J. Commercial Biotechnology 9(4):297–304.CrossrefGoogle Scholar
  • Robertson TS, Eliashberg J, Rymon T (1995) New product announcement signals and incumbent reactions. J. Marketing 59(3):1–15.CrossrefGoogle Scholar
  • Rosenbaum PR, Rubin DB (1983) The central role of the propensity score in observational studies for causal effects. Biometrika 70(1):41–55.CrossrefGoogle Scholar
  • Rosenbaum PR, Rubin DB (1985) Constructing a control group using multivariate matched sampling methods that incorporate the propensity score. Amer. Statist. 39(1):33–38.CrossrefGoogle Scholar
  • Sarnet M, Lachman R (2005) The art and process of successful in-licensing. Biopharmaceuticals Internat. 18(6).Google Scholar
  • Sharma A, Lacey N (2004) Linking product development outcomes to market valuation of the firm: The case of the us pharmaceutical industry. J. Product Innovation Management 21(5):297–308.CrossrefGoogle Scholar
  • Smietana K, Siatkowski M, Moller M (2016) Trends in clinical success rates. Nature Rev. Drug Discovery 15(6):379–381.CrossrefGoogle Scholar
  • Srinivasan S, Hanssens DM (2009) Marketing and firm value: Metrics, methods, findings, and future directions. J. Marketing Res. 46(3):293–312.CrossrefGoogle Scholar
  • Teece D (1986) Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Res. Policy 15(6):285–305.CrossrefGoogle Scholar
  • Truex S (2018) Just a little patience: In-licensing from biopharma. Life Sci. VC (March 20), https://lifescivc.com/2018/03/just-a-little-patience-in-licensing-from-biopharma/.Google Scholar
  • Wager S, Athey S (2018) Estimation and inference of heterogeneous treatment effects using random forests. J. Amer. Statist. Assoc. 113(523):1228–1242.CrossrefGoogle Scholar
  • Waring MJ, Arrowsmith J, Leach AR, Leeson PD, Mandrell S, Owen RM, Pairaudeau G, et al.. (2015) An analysis of the attrition of drug candidates from four major pharmaceutical companies. Nature Rev. Drug Discovery 14(7):475–486.CrossrefGoogle Scholar
  • Wong CH, Siah KW, Lo AW (2019) Estimation of clinical trial success rates and related parameters. Biostatistics 20(2):273–286.CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.