Working paper 16-1 v3 [updated October 2019]

Innovation and growth in the UK pharmaceuticals: the case of product and marketing introductions

AUTHORS: Bokhari F, Mariuzzo F & Bennato, AR

ABSTRACT: New drug introductions are a key to growth for pharmaceutical firms. However not all innovations are the same and they may have differential effects that vary by firm size. We use quarterly sales data on UK pharmaceuticals in a dynamic panel model to estimate the impact of product (new drugs) and marketing (additional pack varieties) innovations within a therapeutic class on a firm's business unit growth. We find that product innovations lead to substantial growth in both the short and long run, whereas a new pack variety only produces short-term effects. The strategies are substitutes but the marginal effects are larger for product innovations relative to additional packs, and the effects are larger for smaller business units. Nonetheless, pack introductions offer a viable short-term growth strategy, especially for small and medium sized businesses.

KEYWORDS: Pharmaceuticals, growth, product differentiation, non-linear pricing

CITATION: Bokhari, F, Mariuzzo, F & Bennato, AR,  (2016) "Innovation and growth in the UK pharmaceuticals: the case of product and marketing introductions", CCP Working Paper 16-1 v3

NOTE: An earlier version of this paper was distributed as “Growth and returns to new products and pack varieties: the case of UK pharmaceuticals"

Policy Brief 16-1

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