A CBO Study on R&D in the Pharmaceutical Industry was released in October 2006. It’s a very good report and it has a number of informative figures. Worth reading. It sheds lights on the peculiar characteristics of drug industry. It also tends to defend the drug industry by saying the profitability of drug industry isn’t as good as people usually think. (people think drug industry makes 2 to 3 times the money other industries make.)
One of the interesting point is that the completion of the human genome project temporarily reduced the development of innovative drugs. The report tried to explain it:
One explanation for the slowdown may be that new research technologies and capabilities-such as the industry’s shift from traditional chemical methods in randomly screening for new drug compounds to computer-automated screening-have imposed learning costs that temporarily damped research output and raised firms’ R&D costs.
If the slowdown of new drug development is a transient phenomena, it’s gonna be very interesting to see what will happen after that.