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The Determinants of Pharmaceutical Research and Development Investments

Abstract Our maintained hypothesis is that drug development responds to the intensity of consumer demand. We look at the distribution of drug development by disease and link this to the economic harm caused by disease as measured by mortality. Mortality data represent the net effect of human frailty and the efficacy of the existing drugs on the market. If people continue to die from a given condition then existing drugs are not perfect and there are potential profits from developing a more effective compound. We aggregate economic harm worldwide and into three broad regions: the United States, other developed countries, and underdeveloped countries. We find that economic harm motivates the distribution of drug development across diseases, but it is economic harm in the United States alone that matters.