Real-Life Lessons for the Developing World
Chapter 3: Innovation and the pharmaceutical industry
Innovation in development of drugs is critical to the survival of a big pharmaceutical business model. It follows that innovation in drug development is a fundamental requirement for a company to establish and maintain a competitive advantage in an increasingly complex world. Pharmaceutical innovation has numerous features and is an ongoing process. The scope of innovation generally ranges from developing, manufacturing and marketing new drugs about which relatively little is known at the time of their discovery, to enhancing existing drugs that have been on the market for some time by making minor changes to them. Between these activities, manufacturers also try to find new ways to increase the safety, effectiveness, and convenience of their products. Given the relationship between research and development (R & D), industrial innovation and growth, the analysis of the pharmaceutical industry undertaken here demonstrates an extremely important part of development economics. Co-operation across government, universities and industry often combines to provide a high level of expertise, which accelerates the process of bringing new products to the market. The industry maintains a number of patterns, which are linked to two main factors. The first factor can be identified as the nature of the drug discovery process; these are characterised by a low degree of cumulativeness and by quasi-random search procedures. The fragmented nature of the relevant markets is the second factor that shapes pharmaceutical innovation.
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