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Abstract

Some recent analysis has suggested that drug discovery efforts have been less successful lately, although it has generally focused only on approvals, the end of the lengthy development process. In this paper, we argue that understanding the impact of technological change on drug discovery over time requires estimation of the joint Markov process governing the trajectory of a new discovery through the various stages of development, and analysis of the long run total pipeline success rates implied by the observed transitions between all states. We use recent trial data to estimate that process, and find that success rates of different stages of development have changed significantly over time. In particular, success rates fell from 1996 to 2001 but have since improved. The trends for preclinical drugs are particularly encouraging, and the latest data suggest that pipeline output over the next decade may increase.

Kevin A. Hassett is a resident scholar and director of economic policy studies at AEI. Kathryn G. Newmark is a research assistant at AEI.

The full text of this paper is available here as an Adobe Acrobat PDF.