Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

  • From the Analyst's Couch
  • Published:

The 'big pharma' dilemma: develop new drugs or promote existing ones?

Nature Reviews Drug Discovery volume 8, pages 533–534 (2009)Cite this article

Investment trends

Pharmaceutical companies allocate their resources between three primary domains (Box 1): manufacturing activities, R&D of new compounds, and expanding sales and market share of existing products (through sales, general and administrative costs (SG&A)). Manufacturing costs depend on the product portfolio and products' technological attributes. The cost of compound development is high2 because it is a lengthy and risky process that yields a small number of profitable products3. Consequently, companies invest extensively in boosting profits from marketed products through spending on promotions to caregivers and consumers4,5.

This is a preview of subscription content, access via your institution

Relevant articles

Open Access articles citing this article.

Access options

Buy this article

  • Purchase on Springer Link
  • Instant access to full article PDF
Buy now

Prices may be subject to local taxes which are calculated during checkout

Figure 1: Trends in resource allocation to SG&Amp;A, R&D and COGS in the pharmaceutical industry: 1975–2007.

References

  1. Loscalzo, J. The NIH budget and the future of biomedical research. N. Engl. J. Med. 354, 1665–1667 (2006).

    Article  CAS  PubMed  Google Scholar 

  2. DiMasi, J. A., Hansen, R. W. & Grabowski, H. G. The price of innovation: new estimates of drug development costs. J. Health Econ. 22, 151–185 (2003).

    Article  PubMed  Google Scholar 

  3. Sewing, A. et al. Helping science to succeed: improving processes in R&D. Drug Discov. Today 13, 227–233 (2008).

    Article  PubMed  Google Scholar 

  4. Gagnon, M. A. & Lexchin, J. The cost of pushing pills: a new estimate of pharmaceutical promotion expenditures in the United States. PLoS Med. 5, e1 (2008).

    Article  PubMed  PubMed Central  Google Scholar 

  5. Donohue, J.M., Cevasco, M. & Rosenthal, M. B. A decade of direct-to-consumer advertising of prescription drugs. N. Engl. J. Med. 357, 673–681 (2007).

    Article  CAS  PubMed  Google Scholar 

  6. Wharton Research Data Services (WRDS) [online], (2009).

  7. Lev, B. Intangibles: Management, Measurement, and Reporting (Brookings Institution Press, Washington D.C., 2001).

    Google Scholar 

  8. Chan, L.K.C., Lakonishok, J. & Sougiannis, T. The stock market valuation of research and development expenditures. J. Finance LVI(6), 2431–2456 (2001).

    Article  Google Scholar 

  9. Bebchuk, L .A. & Fried, J. M. Pay Without Performance (Harvard University Press, Massachusetts, 2006).

    Book  Google Scholar 

  10. Kothari, S.P., Laguerre, T.E. & Leone, A.J. Capitalization versus expensing: evidence on the uncertainty of future earnings from capital expenditures versus R&D outlays. Rev. Account Stud. 7, 355–382 (2002).

    Article  Google Scholar 

  11. Lev, B. & Sougiannis, T. The capitalization, amortization and value-relevance of R&D. J. Account Econ. 21, 107–138 (1996).

    Article  Google Scholar 

  12. Cuatrecasas, P. Drug discovery in jeopardy. J. Clin. Invest. 116, 2837–2842 (2006).

    Article  CAS  PubMed  PubMed Central  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Dan Weiss is at Leon Recanati Graduate School of Business Administration, Tel Aviv University, Tel Aviv, Israel.,

    Dan Weiss

  2. Prasad Naik is at the Graduate School of Management, University of California at Davis, California, USA.,

    Prasad Naik

  3. Ram Weiss is at the Department of Human Nutrition and Metabolism and Braun School of Public Health, Hebrew University School of Medicine, PO Box 12272 Jerusalem 91120, Israel.,

    Ram Weiss

Authors
  1. Dan Weiss
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Prasad Naik
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ram Weiss
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ram Weiss.

Supplementary information

Supplementary information S1 (box)

Basis of analysis (PDF 787 kb)

Rights and permissions

Reprints and permissions

About this article

Cite this article

Weiss, D., Naik, P. & Weiss, R. The 'big pharma' dilemma: develop new drugs or promote existing ones?. Nat Rev Drug Discov 8, 533–534 (2009). https://doi.org/10.1038/nrd2923

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1038/nrd2923

This article is cited by

Search

Advanced search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing