The Future of Drug Development: The Economics of Pharmacogenomics

48 Pages Posted: 22 Jan 2006 Last revised: 20 Sep 2014

See all articles by John A. Vernon

John A. Vernon

University of North Carolina (UNC) at Chapel Hill; National Bureau of Economic Research (NBER)

W. Keener Hughen

Sacred Heart University

John A. Vernon

University of Connecticut - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: December 2005

Abstract

This paper models how the evolving field of pharmacogenomics (PG), which is the science of using genomic markers to predict drug response, may impact drug development times, attrition rates, costs, and the future returns to research and development (R&D). While there still remains an abundance of uncertainty around how PG will impact the future landscape of pharmaceutical and biological R&D, we identify several likely outcomes. We conclude PG has the potential to significantly reduce both expected drug development costs (via higher probabilities of technical success, shorter clinical development times, and smaller clinical trials) and returns. The impact PG has on expected returns is partially mitigated by higher equilibrium prices, expedited product launches, and longer effective patent lives. Our conclusions are, of course, accompanied by numerous caveats.

Suggested Citation

Vernon, John A. and Hughen, W. Keener and Vernon, John A., The Future of Drug Development: The Economics of Pharmacogenomics (December 2005). NBER Working Paper No. w11875, Available at SSRN: https://ssrn.com/abstract=875726

John A. Vernon (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

W. Keener Hughen

Sacred Heart University ( email )

5151 Park Ave
Fairfield, CT 06432
United States

John A. Vernon (Contact Author)

University of Connecticut - Department of Finance ( email )

National Bureau of Economic Research (NBER)

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