Financing Biomedical Innovation

Author:

Lo Andrew W.1234,Thakor Richard T.25

Affiliation:

1. Sloan School of Management, Computer Science and Artificial Intelligence Laboratory, and Department of Electrical Engineering and Computer Science, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA;

2. Laboratory for Financial Engineering, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA

3. National Bureau of Economic Research, Cambridge, Massachusetts, USA

4. Santa Fe Institute, Santa Fe, New Mexico, USA

5. Carlson School of Management, University of Minnesota, Minneapolis, Minnesota, USA

Abstract

We review the recent literature on financing biomedical innovation, with a specific focus on the drug development process and how it may be enhanced to improve outcomes. We begin by laying out stylized facts about the structure of the drug development process and its associated costs and risks, and we present evidence that the rate of discovery for life-saving treatments has declined over time while costs have increased. We make the argument that these structural features require drug development (i.e., biopharmaceutical) firms to rely on external financing and at the same time amplify market frictions that may hinder the ability of these firms to obtain financing, especially for treatments that may have large societal value relative to the benefits going to the firms and their investors. We then provide an overview of the evidence for various types of market frictions to which these drug development firms are exposed and discuss how these frictions affect their incentive to invest in the development of new drugs, leading to underinvestment in valuable treatments. In light of this evidence, numerous studies have proposed ways to overcome this funding gap, including the use of financial innovation. We discuss the potential of these approaches to improve outcomes.

Publisher

Annual Reviews

Subject

Economics and Econometrics,Finance

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3