Hg. Grabowski et Jm. Vernon, RETURNS TO RESEARCH-AND-DEVELOPMENT ON NEW DRUG INTRODUCTIONS IN THE 1980S, Journal of health economics, 13(4), 1994, pp. 383-406
This study finds that the mean IRR for 1980-84 U. S. new drug introduc
tions is 11.1%, and the mean NPV is 22 million (1990 dollars). The dis
tribution of returns is highly skewed. The results are robust to plaus
ible changes in the baseline assumptions. Our work is also compared wi
th a 1993 study by the OTA. Despite some important differences in assu
mptions, both studies imply that returns for the average NCE are withi
n one percentage point of the industry's cost of capital. This is much
less than what is typically observed in analyses based on accounting
data.