Healthcare Economist March 18, 2025
That is the title of a new USC white paper by Darren Filson, Karen Van Nuys, Darius Lakdawalla and Dana Goldman with the subtitle “How Much Does Revenue Drive New Drug Development?”
What is the elasticity of innovation?
It measures the percentage change in innovation—using the flow of new drugs approvals, or Phase 1, 2, or 3 starts— caused by a percentage change in revenues, typically expected
future revenues.
In practice, it is change in profits that matters, but future revenues are much more observable and predictable than future profits. Thus, the authors focus on the elasticity of innovation with respect to revenue rather than profits.
How much do future revenues impact the likelihood of new drug development?
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