Beruflich Dokumente
Kultur Dokumente
535588
www.elsevier.nlrlocatereconbase
a
39, Ionias Street, Kifissia, Athens 14563, Greece
Ministry of Deelopment and Uniersity of Athens, Athens Greece
Received 9 April 1999; received in revised form 7 October 1999; accepted 18 January 2000
Abstract
This is an empirical and historical study of the dynamics of technological innovation TI. in the pharmaceutical industry
from its establishment at the beginning of the 19th century to 1990. It is based on the identification and evaluation of the
originality and commercial significance of 1736 product innovations new medicines. commercialized between 1800 and
1990, and on company economic data for the period 19501990. The study is presented in the framework of established
macroeconomic theory of technical change.
Applying both empirical and historical evidence, the study: a. identifies the technological, social and economic driving
forces for TI; b. examines the relation between originality and market performance of medicinal innovations; c. studies the
mechanisms of the diffusion of medicinal technologies that led to the formation of five successive generations of drugs long
waves.; d. describes the structural changes forced on the pharmaceutical industry by the introduction and development of
each successive generation of drugs; e. provides evidence of the concentration of the innovative segment of the
pharmaceutical industry among few large companies, which sustained high levels of growth and R & D expenditures by
means of inhouse innovation, technological and therapeutic market specialization, and mergers and acquisitions of
companies within and outside the pharmaceutical industry; and f. shows that the localization of the innovative segment of
the pharmaceutical industry in the USA, UK, Germany, Switzerland and France was caused by the influence of national
environments on the intensities of the driving forces for TI. q 2001 Elsevier Science B.V. All rights reserved.
Keywords: Dynamics of technological innovation; Pharmaceutical industry; Long waves of technical change
1. Introduction
Technological innovation TI. is a dynamic process, perhaps the most dynamic of all industrial
activities. Schumpeter 1943. with his Agales of creative destructionB gave a vivid description of the
effects of the introduction and diffusion of major
)
0048-7333r01r$ - see front matter q 2001 Elsevier Science B.V. All rights reserved.
PII: S 0 0 4 8 - 7 3 3 3 0 0 . 0 0 0 9 3 - 7
536
537
2.2.1. Originality
The evaluation of the originality of innovations
was based on their chemical composition, therapeutic
action and effectiveness, timing of their commercialization and the extent to which they were imitated.
2.2.2. Market performance
The measurement of commercial success of pharmaceutical innovations is easier than it is in other
sectors of manufacturing because of governmental
agencies reports on the subject, particularly since
the 1970s when annual reports of the International
538
Table 1
Therapeutic subsectors and number of innovations included in the study
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
295 drugs
283 drugs
216 drugs
147 drugs
132 drugs
120 drugs
86 drugs
75 drugs
74 drugs
47 drugs
39 drugs
35 drugs
30 drugs
25 drugs
23 drugs
22 drugs
20 drugs
17 drugs
50 drugs
1736 drugs
539
540
The intensities of driving forces are time dependent as are the synergies among them. Their fluctuations determine to a considerable extent the rate of
technical change and the quantity and quality of TI.
They also vary among individual countries as they
depend on national endowment, culture and legislation and, hence, strongly affect the geography of TI.
3.2. Originality of innoations
The origins of new products and new processes
are frequently discoveries revelations of new knowledge. or inventions devices, contrivances or processes originated after study and experimentation.
hence the contributions to individual innovations of
both luck, serendipity and of systematic R & D and
meticulous development. The classification of TIs
according to their originality is not a straightforward
process because of the absence of easily defined
discontinuities in the space separating the inspired
from the trivial. The term RI is sometimes applied
only for innovations that made history by giving rise
to new sectors of industry, e.g., the steam engine, the
railroad, the dynamo, mauveine the first synthetic
dye. bakelite the first plastic material., the DC3
aircraft, nylon, DDT, the jet engine, the transistor,
the electronic computer, etc. Among pharmaceuti-
541
542
Table 2 continued .
M
OR
1
OR
1
543
Total
27%.
44
14%.
Cardioascular
57%.
A
40
59%.
23%.
B
12
18%.
10%.
C
16
24%.
25%.
Total
68
100%.
Total
27%.
44
22%.
46%.
74
64%.
100%.
162
100%.
17%.
12
20%.
36%.
19
31%.
20%.
30
49%.
22%.
61
100%.
26%.
18
12%.
42%.
22
16%.
70%.
105
72%.
53%.
145
100%.
100%.
70
26%.
100%.
53
19%.
100%.
151
55%.
100%.
274
100%.
32%.
20
27%.
40%.
19
26%.
25%.
34
47%.
30%.
73
100%.
25%.
16
13%.
40%.
19
15%.
67%.
90
72%.
15%.
125
100%.
100%.
63
26%.
100%.
47
19%.
100%.
134
55%.
100%.
244
100%.
Total
36%.
31
22%.
39%.
42
30%.
15%.
68
48%.
24%.
21
5%.
44%.
48
12%.
76%.
338
83%.
140
22%.
405
64%.
100%.
85
13%.
100%.
105
17%.
100%.
445
70%.
100%.
634
100%.
Organic intermediates
66%.
A
118
70%.
18%.
B
31
19%.
4%.
C
20
12%.
21%.
Total
169
100%.
28%.
50
25%.
53%.
90
45%.
12%.
58
30%.
24%.
198
100%.
6%.
11
2%.
29%.
50
11%.
84%.
393
87%.
55%.
454
100%.
100%.
179
22%.
100%.
171
12%.
100%.
471
57%.
100%.
821
100%.
Antibacterials
61%.
A
27
64%.
22%.
B
8
19%.
6%.
C
7
17%.
20%.
Total
42
100%.
18%.
8
25%.
28%.
10
31%.
11%.
14
44%.
16%.
32
100%.
21%.
9
7%.
50%.
18
14%.
83%.
103
79%.
64%.
130
100%.
100%.
44
21%.
100%.
36
18%.
100%.
124
61%.
100%.
204
100%.
Corticosteroids
56%.
A
29
66%.
25%.
B
8
18%.
9%.
C
7
16%.
23%.
12
27%.
41%.
13
30%.
24%.
19
43%.
21%.
11
15%.
34%.
11
15%.
67%.
52
70%.
100%.
52
32%.
100%.
32
20%.
100%.
78
48%.
Pesticides
40%.
A
34
37%.
17%.
B
18
20%.
9%.
C
39
43%.
Total
89
14%.
544
545
Table 3
Generations, clusters of technologies, and radical innovations in the pharmaceutical industry 18001995.
Generations
Technologies
First radical
innovations
Year
Company
Country
First
18021880.
1. Alkaloids
Morphine
Quinine
Ether
Phenazone
Acetanilide
Sulfonmethane
Barbital
Anthrax vaccine
Diphtheria serum
Cocaine
Orthocaine
Arsphenamine
Ergosterol
Retinol
Ascorbic acid
Estrone
ORTHOFORM
SALVARSAN
PRO-VITAMIN D
VITAMIN A
VITAMIN C
1806
1820
1842
1884
1886
1888
1903
1881
1890
1860
1896
1911
1927
1931
1934
1931
GE
FR
USA
GE
GE
GE
GE
FR
GE
GErAUS
GE
GE
GE
SW
SW
USrGE
Testosterone
1935
Sulphamidochrysoidine
Phenbenzamine
Penicillin
Cortisone
Chlorothiazide
Propranolol
Chlorpromazine
Haloperidol
Imipramine
Chlordiazepoxide
Phenethicillin
Cephalothin
Cephaloridine
Phenyl butazone
Ibuprofen
Indomethacin
Mestranolr
norethynodrel
Nifedipine
Captopril
Lovastatin
Methysergide
Carbidopa
Bromocryptine
Domperidone
Cimetidine
Acyclovir
Human insulin
PRONTOSIL
1935
HOECHST
KALLE
BAYER
BAYER
HOECHST
HOECHST
HOECHST
ROCHE
ROCHE
PARKE-DAVIS,
SCHERING
PARKE-DAVIS,
SCHERING,
ORGANON
BAYER
ANTEGRAN
PENALEN
CORTONE
DIURIL
INDERAL
LARGACTIL
HALDOL
TOFRANIL
LIBRIUM
BROXIL
KEFLIN
CEPORIN
BUTAZOLIDIN
BRUFEN
INDOCID
ENOVID
1942
1943
1948
1958
1964
1952
1958
1959
1960
1959
1964
1964
1952
1964
1964
1961
RHONE
MERCK, PFIZER
MERCK
MERCK
ICI
RHONE
JANSSEN
GEIGY
ROCHE
BEECHAM
LILLY
GLAXO
GEIGY
BOOTS
MERCK
SEARLE
FR
US
US
US
UK
FR
BE
SW
SW
UK
US
UK
SW
UK
US
US
ADALAT
CAPOTEN
MEVACOR
SANSERT
SINEMET
PARLODEL
MOTILIUM
TAGAMET
ZOVIRAX
HUMULIN
1974
1977
1987
1962
1967
1978
1979
1976
1982
1983
GE
US
US
SW
US
SW
BE
US
UK
US
PROTROPIN
1985
BAYER
SQUIBB
MERCK
SANDOZ
MERCK
SANDOZ
JANSSEN
SKF
WELLCOME
GENENTECHr
LILLY
GENENTECH
Second
18801930.
2. Organic chemicals
1. AnalgesicsrAntipyretics
2. Hypnotics
3. Biologicals
4. Local anesthetics
Third
19301960.
5. Antiprotozoal
1. Vitamins
2. Sex hormones
3. Sulphonamides
Fourth
19601980.
4. Antihistamines
5. Antibiotics
6. Corticosteroids
1. Antihypertensiverdiuretics
2. Antihypertensive B-blockers
3. CNS drugs
4. Tranquilizers
5. Antidepressants
6. Anxiolytics
7. Semisynthetic antibiotics
8. Non-steroid antiinflammatory
drugs NSAIDS.
9. Oral contraceptives
Fifth
19801993.
Somatrem
ANTIPYRIN
ANTIFEBRIN
SULFONAL
VERONAL
USrGEr
NErSW
GE
US
546
knowledge accumulated by researchers and companies is embodied in the innovations, while this is not
the case when using other R & D output indicators,
such as scientific papers or patents.
Figs. 26 present the most important TTs of the
pharmaceutical industry traced by the distribution
over time of the RIs and IIs related to each TP. They
are arranged chronologically in the order of the five
consecutive generations of drugs, which are profiled
by integrating the corresponding TTs. Fig. 7 shows
the overlap of the last three generations of drugs
19301990.. Lastly, Fig. 8 shows the distribution
over time of all RIs and IIs whether they belong to
TTs or not. All TTs are roughly bell-shaped but
show important differences among them caused by
the changing intensities of the driving forces. For
example, the time span varies from nearly 80 years
for the TTs of the first two generations to about 50
years for the TTs of the next two generations, while
those of the last generation have not yet run their full
course. However, even among contemporary TTs,
some have a shorter span either because of very fast
diffusion of the technology due to inadequate patent
protection, e.g., antihistamines and corticosteroids,
547
548
decades rather than years. Thus, the stages of maturity and decline of the second generation of drugs
was located in the 1940s and beyond, i.e., when
competition sharpened by the entry of many R & Dintensive companies. On the contrary, the span of the
TTs of the third and fourth generations was much
shorter because of the presence at the time of their
introduction of many R & D-intensive companies
Section 4..
c. The stage of maturity is represented by the
rather flat segment of the TT during which the
number of innovations introduced annually reaches
and passes its peak. Most innovations were incremental as the potential of the technology was by then
largely exhausted. The numerous IIs represent the
efforts of latecomer, less expert, companies, which
strived to gain entry in a vigorous market which by
then was reaching its peak. Depending on the size of
the market, some of these IIs became commercially
successful. In many cases, the patents of the original
innovations expired at that stage facilitating the entry
549
550
551
Fig. 7. Overlap of successive Along wavesB third, fourth, and fifth generations of drugs up to 1990..
3.3.4.3. The clustering of TTs: successie generations ( A long waesB ) in the pharmaceutical industry. The trajectories that technologies follow beyond
their stage of youth are determined by the qualities
of the TPs, the inherent properties of each technology and by the driving forces for TI, which exert
Fig. 8. Distribution of innovations, radical innovations, and innovations related to technological trajectories over time 3-year moving
average..
552
Fig. 9. ABandwagon effectB: technological trajectories and first entry of companies by an own innovation.
553
554
specialization of company marketingrsales departments, a feature particularly important in the pharmaceutical industry whose markets are global and
the investments required for that purpose immense.
Feedback from users and the medical profession
leads to market expansion by the design of IIs with
improved properties.
Table 4
Top innovating companies 18801992. winnovations, radical innovations RIs., market successes MSs. and the contribution of corporate technology traditions CTTs.x
No. Company
Country 18801930
19301960
19601980
19801992
Total
CTTs
SW
SW
US
GE
GE
US
US
UK
US
FR
US
BE
US
US
SW
US
US
US
UK
US
UK
US
US
GE
US
GE
US
UK
US
NE
2
3
19
25
5
6
8
1
8
0 2
0 1
8 8
11 11
4 4
3 3
3 3
1 1
1 1
0 2
4 0
0
48
30
33
12
19
15
21
20
18
27
19
4
27
7
8
12
13
14
11
9
13
13
13
10
9
6
8
2
8
6
19
12
17
3
6
8
6
8
4
11
5
1
14
2
2
3
0
4
3
0
3
3
6
7
0
1
3
1
3
3
14
8
18
5
11
6
7
6
7
10
5
1
12
1
0
3
4
8
2
1
4
9
7
4
0
2
2
0
4
3
23
25
30
24
16
28
22
9
22
14
18
28
11
19
17
13
15
9
13
15
12
14
9
11
8
13
8
11
8
7
8 8
4 7
14 15
4 6
6 4
8 10
3 6
3 3
5 7
2 0
5 4
4 5
1 2
6 4
1 2
6 0
1 3
2 2
4 4
0 3
6 4
3 4
4 3
0 0
1 0
2 6
0 4
2 2
1 4
0 1
9
24
16
18
6
10
8
14
7
2
7
12
3
13
12
3
6
10
8
7
5
1
4
1
6
2
6
8
1
1
1
4
7
2
2
5
0
2
3
0
3
0
0
2
3
0
0
3
2
1
0
0
2
1
1
0
0
2
0
0
1
4
10
2
1
4
2
2
1
0
1
3
1
3
4
0
0
0
4
1
2
0
2
0
1
0
0
1
0
0
82
82
79
73
66
58
57
51
47
46
44
44
41
39
38
36
34
33
32
31
30
28
26
26
23
22
22
21
17
14
28
20
38
17
25
25
12
16
12
14
13
5
15
10
7
9
1
9
9
1
9
6
12
12
2
3
3
5
4
3
25
20
43
21
27
24
18
14
15
11
10
9
15
8
7
5
7
10
10
5
10
13
12
4
1
8
6
3
8
4
5
5
7
3
3
2
1
3
2
2
1
3
3
2
1
1
2
1
1
1
1
61
50
60
31
39
18
12
19
24
23
14
34
26
29
13
14
16
16
16
15
9
11
74.
61.
75.
42.
60.
31.
21.
38.
51.
50.
32.
77.
63.
74.
34.
39.
25.
23.
61.
73.
72.
71.
53.
78.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
a
Burroughs-Wellcome.
American Home Products.
c
Imperial Chemical Industries, Zeneca since the 1980s.
d
Smith Kline French.
b
555
556
Table 5
Corporate technology traditions CTTs. by therapeutic sector
ANALGESICSrANTIPYRETICS
ANTIBACTERIALS Sulphonamides,
Antibiotics, Synthetics.
VITAMINS
SEX HORMONESrCORTICOSTEROIDS
Company
Innovations
Commitment
Period
Years
1.1 HOECHST
1.2 MERCK
1.3 CIBA
1.4 ROCHE
1.5 JANSSEN
2.1 BAYER
2.2 MERCK
2.3 LEDERLE
2.4 PFIZER
2.5 LILLY
2.6 GLAXO
2.7 BRISTOL
2.8 BEECHAM
3.1 ROCHE
3.2 MERCK
4.1 CIBA
4.2 SCHERING AG
4.3 ORGANON
4.4 SYNTEX
12
6
6
8
7
11
13
12
15
14
8
15
15
5
4
14
16
11
16
3r5
2r5
1r1
1r1
1r2
4r5
9r5
4r5
5r6
8r7
4r5
2r1
4r3
4r4
4r4
8r4
7r4
3r4
3r5
16.
7.
7.
10.
16.
16.
16.
30.
32.
24.
25.
38.
70.
5.
5.
17.
61.
78.
73.
9.
4.5.
4.5.
6.
5.
5.
6.
6.
7.
7.
4.
7.
7.
35.
25.
10.
11.
8.
11.
18821981
19451979
19501976
19461982
19581984
19351985
19391986
19401987
19431986
19521983
19551987
19561987
19591985
19341978
19371949
19341973
19311977
19201975
19441981
99
34
26
36
26
50
47
47
43
31
32
31
26
44
12
39
46
55
37
4.5 SEARLE
4.6 UPJOHN
9
14
3r5
3r4
53.
32.
6.
10.
19511965 14
19351979 44
5.1 BAYER
5.2 ABBOTT
5.3 CIBA-GEIGY
5.4 ROCHE
5.5 SANDOZ
5.6 JANSSEN
13
14
11
24
13
20
3r5
1r3
5r4
4r5
2r2
3r3
20.
40.
13.
30.
34.
45.
4.
5.
4.
8.
4.
7.
18881996
19221977
19451977
19481989
19521992
19581988
78
55
32
41
40
30
First RIrMS
ANTIPYRIN 1884.
MYOCRISIN 1945.
BUTAZOLIDIN 1952.
DROMORAN 1946.
PALFIUM 1958.
PRONTOSIL 1935.
PENICILLIN 1943.
AUREOMYCIN 1948.
PENICILLIN 1943.
ILOTICIN 1952.
SEPORAN 1964.
TETREX 1956.
BROXIL 1959.
VITAMIN C 1934.
VITAMIN B1 1937.
PROGESTERONE 1934.
PROGYNON 1931.
OVARIAN EXTRACT 1920.
PROGESTERONE FROM
DIOSGENIN 1944.
NILEVAR 1955.
CORTISONE FROM
PROGESTERONE 1952.
SULPHONAL 1888.
NEONAL 1922.
RESERPINE 1953.
MARSILID 1957.
SANSERT 1962.
HALDOL 1958.
No. Sector
6.1 LEDERLE
6.2 B-W
6.3 ROCHE
6.4 BRISTOL
CARDIOVASCULAR diuretics,
7.1 PARKE-DAVIS
antihypertensives, anticoagulants, anti7.2 CIBA
thrombotics, cholesterol reducers, congestive 7.3 BOEHRINGER
heart failure, pressors, coronary dilators.
7.4 HOECHST
7.5 MERCK
7.6 ICI
7.7 PFIZER
ANTIPROTOZOAL
8.1 BAYER
8.2 HOECHST
8.3 RHONE
8.4 MERCK
ANTIHISTAMINES
9.1 RHONE
ANTIASTHMATICS
10.1 BOEHRINGER
FUNGICIDES
11.1 JANSSEN
ANTIVIRAL
12.1 B-W
PEPTIDE HORMONES
13.1 LILLY
VACCINESrSERA
14.1 B-W
14.2 LEDERLE
14.3 MERCK
14.4 MERRIEUX
14.5 BEHRINGWERKE
6
6
8
14
12
17
11
11
15
7
9
12
8
12
8
11
5
7
5
4
8
8
14
13
10
3r2
3r3
3r1
8r6
3r5
5r4
2r4
4r3
7r9
3r4
1r2
7r8
2r2
2r2
2r4
3r3
1r3
1r3
1r2
4r3
3r2
3r3
6r7
4r4
3r2
7.
11.
10.
36.
21.
21.
50.
15.
19.
23.
19.
18.
11.
26.
10.
23.
22.
16.
10.
7.
20.
20.
17.
100.
100.
7.
7.
9.
16.
4.
6.
4.
4.
5.
2.
3.
10.
7.
10.
7.
15.
14.
19.
20.
18.
10.
10.
18.
17.
13.
19471987
19481968
19621991
19731995
18961986
19241990
19311970
19421990
19521988
19621983
19591989
18901976
19111983
19221974
19381988
19371967
19401977
19721989
19641986
19231983
18961986
19451989
19601996
19581997
19721987
40
20
29
22
90
66
39
48
36
21
30
86
72
52
50
30
37
17
22
60
90
44
36
39
15
TEROPTERIN 1947.
PURINETHOL 1953.
EFUDIX 1962.
BLENOXANE 1973.
ADRENALIN 1902.
CORAMIN 1924.
PERSANTIN 1961.
ASPARSAN 1942.
DIURIL 1958.
INDERAL 1964.
MINIPRESS 1973.
GERMANIN 1920.
SALVARSAN 1911.
STOVARSOL 1922.
SULPHAQUINOXALINE 1938.
ANTEGRAN 1942.
ISOPRENALINE 1940.
DAKTARIN 1972.
ZOVIRAX 1982.
INSULIN 1923.
DIPHTHERIA TOXOID 1923.
DPT VACCINE 1945.
MUMPS VACCINE 1967.
IPOL VACCINE 1958.
VARICELLA-ZOSTER
VACCINE 1982.
9
10
11
12
13
14
CANCER
557
558
technology when most of the companies that introduced and profited from it, doggedly pursue their
559
3.4.2.2. Horizontal diersification outside the pharmaceutical industry. Many pharmaceutical companies were established as branches of chemicalrdyestuffs companies Bayer, Hoechst, Rhone
Poulenc,
Ciba, Geigy, Sandoz, ICI, American Cyanamid. and
were from their beginnings members of multiproduct
companies benefiting in periods of turbulence caused
by the succession of Along wavesB from cash flows
generated by the chemical businesses of the parent
companies. This was possible until the mid 1970s
when the chemical industry began to decline and
companies concentrated on high value added chemicals and pharmaceuticals. Other pharmaceutical companies that began as manufacturing apothecariesas
was the case of most American companieshad
kept during the interwar and early postwar periods
some businesses in proprietary products, such as
over-the-counter OTC. medicines, toiletries and
cosmetics. However, these businesses were modest
compared to chemicals or pharmaceuticals and could
not extricate them during the slow down that accompanied the succession of drug generations. Thus, in
the early 1960s, when the pharmaceutical industry
could not attain rates of growth comparable to those
of many consumer product industries, the American
pharmaceutical companies diversified by merger and
acquisition into a host of sectors Table 6.. Most of
these businesses were less research-intensive and
less profitable than pharmaceuticals but they showed
very high rates of growth. The higher turnover thus
attained allowed the pharmaceutical companies to
sustain, even to increase, their expenditures for R & D
and innovation at a time when they had to overcome
important technological barriers. This diversification
helped the American pharmaceutical companies to
sail through the 19601980 period at the end of
which they divested these acquisitions as the technological and market conditions of the 1980s1990s
guaranteed for the pharmaceutical industry both
growth and profits.
3.4.2.3. Innoation in successie TTs. Companies
that have established a CTT in a therapeutic market
seldom introduce the TP that initiates the next TT.
The case of Lilly and Pfizer, which were protagonists in both natural and semisynthetic antibiotics,
two successive TTs, is one of the very few exceptions that prove the rule. Many companies dropped
560
affected by the succession of TTs so that the companies that introduced them are less susceptible to the
upheaval, which characterizes these periods.
Lastly, some drugs with outstanding therapeutic
properties withstood the challenge of time and of
many successive Along wavesB, e.g., ASPIRIN
Bayer, 1899., PREMARIN Ayerst, 1943. and INDERAL ICI, 1964.. Despite the expiration of their
patents and their manufacture and sale as generics by
many companies, the original innovating companies
still maintain a very considerable slice of the market
because of consumer familiarity with the company
and tradename and the long established goodwill of
the medical profession.
3.4.3. A Long waesB corporate growth, innoation
and R & D expenditures of major American pharmaceutical companies
The pharmaceutical industry is one of the most
profitable sectors of manufacturing. Inhouse R & D
and innovation is the route par excellence by which
pharmaceutical companies make profits and grow in
size. However, there were periods in the history of
the industry when innovation could not ensure for
most companies growth rates commensurate with
those of their more successful competitors or of
companies in other fast growing sectors of manufacturing industry putting their investors confidence in
jeopardy. To restore their rates of growth, companies
diversified by mergers and acquisitions either within
the pharmaceutical industrythus widening their
therapeutic marketsor into other manufacturing
sectors showing high rates of growth albeit with
lower profit margins. The adoption of these policies
provides support to the argument that growth maximization subject to a profit constraint is a more
realistic explanation of firm behaviour than profit
maximization Marris, 1964; Freeman, 1974..
Fig. 11a and b presents the trends of annual sales,
ethical drug sales, net profits and R & D expenditures
for major American pharmaceutical companies from
1950 to 1990. Table 7 presents for each company the
cumulative figures for the 40-year period of sales,
ethical drug sales, net profits, R & D expenditures,
employment, profitability net profit as percentage of
sales., R & D intensity R & D expenditure as percentage of sales., numbers of innovations and patents,
and average R & D cost of innovations and patents.
561
Table 6
Horizontal diversification of American pharmaceutical companies in the 1960s and 1970s major acquisitions only.
No.
Company
Acquired company
Business
Year
MERCK
LILLY
Calgon
Quinton
Baltimore Coil
Kelco
Hubbard Farms
Distillers
Elisabeth Arden
Ivac
Cardiac Pacemakers
Carwin
CPR International
C.K. Williams
Leeming & Pasquin
Coty
Quigley
Howmedica
M & R many companies.
1967
1967
1969
1922
1972
1963
1980
1978
1978
1962
1963
1962
1962
1963
1968
1972
1963
1960s
UPJOHN
PFIZER
ABBOTT
SKF
SCHERING
SEARLE
AHP
10
11
BRISTOL
W-L
12
J&J
13
STERLING
Norden Labs
Sea and Ski
Branson Instruments
Avocet
Clinical Labs
Hydron
Plough
Dr. Scholl
Nuclear Chicago
Fermo Labs
Buchler Instruments many.
Ecko Products
E.J. Brach
A.R. Lite
The Prestige Group
Corometric Medical
Clairol
Drackett
Mead & Johnson
Westwood
Zimmer
Unitek
American Chicklet
American Optical
Eversharp Schick
Parke-Davis
Entenmans
Janssen
Godman-Scritzef
Dr Karl Hahn
Hilton-Davis
Lehr & Fink
1960
1965
1965
1966
1970
1979
1970
1979
1960s
1960s
1960s
1970s
1965
1965
1968
1970
1973
1959
1965
1967
1968
1971
1979
1962
1966
1969
1969
1969
1961
1971
1974
1962
1966
Divested 1980s.
Divested 1980s.
Divested 1980s.
Divested 1980s.
Divested 1990s.
Divested 1990s.
Divested 1984.
Divested 1984.
Divested 1990s.
Divested 1990s.
Divested 1990s.
Divested 1983
Divested 1983
Partially divested
1980s.
Divested 1980s.
Divested 1981.
Divested 1981.
Divested 1983.
Divested 1982.
Divested 1986.
Divested 1982.
Divested 1982.
Divested 1992.
Divested 1987.
Divested 1982.
Divested 1982.
Divested 1980s.
562
Fig. 11. a and b. Trends of annual sales, ethical pharmaceutical sales net profits, and R & D expenditures of American Pharmaceutical
19501990. in constant 1990 US$.. Source: Company Annual Reports.
563
Fig. 11 continued ..
industry or a group of industries. This was undoubtedly the case of the pharmaceutical industry.
Empirical studies have shown Mansfield, 1968a;
Freeman, 1974. that in research-intensive sectors,
company growth is related to innovativeness and the
pharmaceutical industry provides ample support to
this hypothesis. Tables 4 and 9 show that todays
biggest companies were among the most innovative
at least since the 1930s, and some of them, e.g.,
564
Total sales a
ETH.PH.Sales a
% ETHrTotal
Employment b
Net profitsa
Profitability
R&D Exp.a
R&D Exp.rT. Sales
No. of innvs.
No. of patents
R&D exp.rinnv.c
R&D exp.rpat.c
MERCK
LILLY
UPJOHN
PFIZER
ABBOTT
SKF
STERLING
SEARLE
SCHERING
BRISTOL
J&J
AHP
W-L
133.5
104.5
75
820
21.5
16.2
13.0
9.7
79
5066
32.9
0.5
111.0
70.5
64
743
16.0
14.6
10.5
9.5
58
2316
36.2
0.9
79.0
59.5
75
486
8.5
10.6
8.5
10.7
44
4047
38.6
0.4
146.5
76.0
52
1150
15.5
10.4
7.5
5.1
47
2562
31.9
0.6
94.5
27.0
30
778
10.5
11.0
6.5
6.9
36
1365
36.1
0.9
90.0
55.0
61
546
12.5
13.7
7.5
8.3
28
1487
53.6
1.0
83.5
26.5
32
732
7.0
8.4
2.7
3.2
34
1440
15.8
0.4
34.0
19.5
57
278
4.0
11.8
2.9
8.5
17
1656
34.2
0.4
68.5
43.0
62
474
8.5
12.4
5.0
7.3
33
530
30.8
1.9
145.0
52.5
36
807
15.5
10.7
7.5
5.2
39
1141
38.4
1.1
213.5
42.5
20
1612
17.5
8.2
11.0
5.2
NAd
1206
NAd
1.8
206.0
87.0
42
1340
24.5
11.9
6.0
2.9
31
1464 NAd.
38.7
0.8
143.5
50.0
34
1200
9.5
6.6
6.0
4.2
NAd
1369
NAd
0.9
Source: Calculated from Company Annual Reports; Chemical Abstracts; Survey of innovations.
a
In billion constant 1990 US$.
b
In thousand man years.
c
In million constant 1990 US$.
d
NA: not available because of major mergers.
Table 7
Cumulative economic and technological data of American pharmaceutical companies 19501990.
565
566
nalities in the research function, namely contributions made by academic and public research institutions and by competitors. Empirical studies have
shown that there is no strong association between
high growth and research intensity Freeman, 1974..
Positive but weak correlations were found only at the
extremes, i.e., companies with very high R & D investments showed considerable growth and those
with very low investments stagnated or disappeared,
but in the middle zone uncertainty predominated.
Our data Table 7. provide some support to this
hypothesis: Merck and Lilly, among the most research-intensive companies in terms of the dollar
value of their investments, are among the largest
companies of today while Sterling and Searle, among
the least research-intensive, showed the weakest
growth rates and were taken over in the 1980s.
However, Upjohn, one of the most research-intensive
companies, showed a modest rate of growth while
AHP, J & J, Pfizer, Bristol and W-L with average
R & D investments showed very high rates of growth.
Studies of the financing of company R & D suggest that most large companies allocate annual R & D
funds on a rule of thumb basis, such as percentage of
sales and that most companies in the same sector
spend about the same percentage Mansfield, 1968b;
Freeman, 1974; Kay, 1979..
Our data show that R & D expenditures expressed
as percentage of sales ranged between 7.3 and 10.7
for companies with ethical drug sales exceeding 50%
of the total, and between 2.9 and 6.9 for more
diversified companies. When R & D expenditures
were expressed as percentage of ethical drug sales,
variations among companies became smoother but
are still important: with the exception of Abbott,
J & J and AHP, they range between 9.9% and 14.9%.
It seems, therefore, that even if some companies
desired to spend on R & D as much as their competitors, there were important structural or financial
constraints that did not allow that.
R & D expenditure and innoation. The long time
horizon of our data allowed us to search for some
relation between R & D expenditure and innovation.
Assuming that the ultimate goal of research in the
pharmaceutical industry is to develop and commercialize new drugs, we calculated the average R & D
cost of innovation for each company by dividing
total R & D expenditures by the number of innova-
yj,t s a o q
k s1 is0
567
expectations. Besides, however, the lagged dependent variables presence results from a number of
economometric models distributed lags, partial adjustment, etc.. Wallis, 1979., which provided extra
justification for its inclusion.
Due to sample size limitations, two lags were
introduced in each of the dependent and the explanatory variables. Nonsignificant lags were excluded on
the basis of the F-test and the Likelihood Ratio test
for the validity of exclusion restrictions. After an
efficient specification search, the more parsimonious
representations were the following:
Abbott.
)))
))
y0.837 .
2.112 .
5.353 .
))
q 0.020 St y Sty2 . ,
2.757 .
1.906 .
)))
1.962 .
y 0.141 Pty1 ,
y1.980 .
)))
20.808 .
)))
))
y 0.119 Pty1 ,
y3.979 .
y2.565 .
568
)))
)))
11.539 .
)))
3.180 .
))
y 2.409 .
y1.052 .
)))
y0.604 .
)))
q 0.273 Pt y Pty1 . ,
5.350 .
y0.518 .
)))
)))
9.684 .
)))
)))
)))
y5.842 .
2.924 .
4.866 .
))
)))
3.403 .
)))
5.450 .
)))
1.874 .
)))
y 0.179 Pty1 ,
y3.920 .
569
Table 8
The competive advantage of national pharmaceutical industries 1988.
No.
1
2
3
4
5
6
7
8
9
10
11
12
Industry
USA
GERMANY
SWITZERLAND
UK
FRANCE
ITALY
NETHERLANDS
BELGIUM
DENMARK
SWEDEN
HUNGARY
JAPAN
Value of exports
in million US$.
Exports % of
world exports
Medicines
Of which
Active ingredients
3540
4000
3172
2800
2345
1282
1040
1026
840
830
740
721
13.4
15.1
12.0
10.5
8.8
4.8
4.0
3.9
3.2
3.1
2.8
2.7
47.5
66.0
67.3
78.6
80.0
48.5
89.0
70.5
78.0
94.0
62.0
22.3
52.5
34.0
32.7
21.4
20.0
51.5
11.0
29.5
22.0
6.0
37.0
77.7
Source: R. Ballance, J. Pegany, H. Forstner, The Worlds Pharmaceutical Industries Edward Elgar, Aldershot, 1992..
570
Table 9
The largest pharmaceutical companies 1990.
No.
Company
Country
Drug sales
Market share
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
MERCK
BRISTOLrSQUIBB
GLAXO
JOHNSON & JOHNSON
SMITH KLINE BEECHAM
CIBA-GEIGY
AMERICAN HOME PRODUCTS
HOECHST
LILLY
BAYER
ROCHE
PFIZER
SANDOZ
RHONE POULENC
UPJOHN
SCHERING-PLOUGH
BOEHRINGER
MARION MERRELL-DOW
ICI-STUART
WARNER-LAMBERT
LEDERLE
BURROUGHS-WELLCOME
TAKEDA
SCHERING
US
US
UK
US
UK
SW
US
GE
US
GE
SW
US
SW
FRA
US
US
GE
US
UK
US
US
UK
JP
GE
5700
5260
5180
4455
4322
4224
3912
3845
3680
3260
3240
3234
3230
3160
2400
2330
2310
2260
2150
2080
2000
1880
1700
1530
3.8
3.5
3.3
3.0
2.9
2.8
2.6
2.6
2.5
2.2
2.2
2.2
2.2
2.1
1.6
1.6
1.5
1.5
1.4
1.4
1.3
1.3
1.1
1.0
research-intensive companies and supportive industries, a strong home market demand and the relative
price of factor inputs.
3.5.1. Driing forces for TI and the competitie
adantage of national pharmaceutical industries
Although some of these factors have contributed
to the concentration of the pharmaceutical industry
in very few countries, we shall argue that for research-intensive industries, which have depended on
technological advance throughout their history, the
geography of technological advance and the competitive advantage of national industries were determined to a considerable extent by the intensities and
synergies of the driving forces for TI, which, apart
from their fluctuations over time, are strongly influenced by national environments.
3.5.1.1. Scientific adance
Scientific knowledge is widely conceived as flowing freely across national boundaries because of the
speedy communication and publication of the findings of academic research. However, this is only part
of what happens in reality: the creation of knowledge
and its application are strongly influenced by national environments and its diffusion across borders
is tempered by the presence or absence in universities or companies of the skills required for its assimilation and also by barriers raised by industrial and
commercial interests.
A countrys academic institutions, however large
and wealthy she is, may excel in a few or many but
certainly not in all scientific disciplines. Universities
and research-intensive companies cooperate within
rather than across national frontiers. Indeed, some
studies have shown that this cooperation is even
stronger whenever universities and companies are in
close geographical proximity within the same country Cockburn and Henderson, 1995.. Thus, the specialization and scientific leadership of academic institutions are strongly related to the specialization
and excellence of a countrys research-intensive industries. Examples: chemistry and the German
571
572
new competitive environment based on both international agreements and national rules. R & D-intensive
companies became multinational but kept the operations they considered vitalincluding their R & D
departmentsin the home country. Transfer of technology accelerated because of the multinational character of the large companies, the easy movement of
researchers across national frontiers and the
widespread licensing of technologies. Thus, the competitive environment was shaped by both national
and international rules and practices, which also
affected the intensity of the driving forces for TI.
In the third phase 1980 ., the globalization of
financial markets and the expansion of international
trade led to the globalization of the large R & Dintensive companies by direct investments overseas
or by mergers and acquisitions of foreign companies.
Thus, the competitive setting of the pharmaceutical
industry is shaped today by large global companies
operating in the framework of international regulations aimed largely at liberalizing trade. Thus the
effects of national policies on the intensities of the
driving forces for TI became marginal. And yet, a
handful of national pharmaceutical industries still
enjoy substantial competitive advantages because of
their highly competent companies, which consolidated their position in the world markets by research
intensity, CTTs, and corporate growth by mergers
and acquisitions of foreign companies, rendering extremely difficult the entry of new competitors.
4. Historical development of innovation in the
pharmaceutical industry
In previous papers Achilladelis, 1993;
Achilladelis et al., 1987., we have stressed the significance of historical evidence in supporting or
negating findings and conclusions about the dynamics of TI arrived at by quantitative analysis of
inputroutput indicators. This is particularly important for a study that has a time horizon of two
centuries. This section describes the interplay and
synergies of the driving forces for TI that caused the
emergence of five successive generations of medicinal technologies and their role in influencing the rate
of technical change and in creating competitive advantages for some national industries. For a detailed
historical account, see Achilladelis 1999..
573
Table 10
Geographical distribution of innovations, 18001880 first generation.
No.
Country
1
2
3
4
5
6
7
FRANCE
UK
GERMANY
USA
SWITZERLAND
BRAZIL
NETHERLANDS
TOTAL
Innovations
Academic Industrial Total
14
13
10
3
2
2
1
46
28.
28.
26.
8.
4.
4.
2.
100.
0
1
3
1
0
0
0
4
14
14
13
4
2
2
1
50
574
theus, 1962., British and American physicians contributing to the early innovations as individuals
Haagensen et al., 1943..
4.2. The second generation of medicines (18801930)
The second Along waveB was formed by the
clustering of five TTs Table 3, Fig. 3..
4.2.1. Societal needs
Overcrowding, poverty, malnutrition, lack of running water and public sanitation facilities in the
expanding cities of the industrial revolution Porter,
1997. caused the spread of deadly contagious illnesses, such as smallpox, typhoid fever, tuberculosis,
cholera and diphtheria. Antiquated, filthy and overcrowded hospitals became sources of infections causing very high mortality rates among patients during
and after surgery. Endemic debilitating diseases in
colonial Africa, Asia and Latin America, such as
sleeping sickness, malaria, plague, schistosomatiosis,
spread among indigenous populations and European
settlers and impeded the exploitation of their natural
resources. These acute societal needs drew the attention of physicians, academic researchers, governments and industry to the discovery of medicines,
which could control and cure these diseases Boyd,
1950..
4.2.2. Scientific adance
Most of these societal needs existed at least since
the 1840s when European governments took measures for improving the environment by building
public sanitation facilities but scientific knowledge
was not available for the prevention or therapy of
these diseases. This became possible around the
1870s following the application for that purpose of
historical advances in scientific instruments the
achromatic microscope., organic chemistry synthesis and structure determination., pharmacology identification and evaluation of medicinal properties of
chemicals., physiology the theory of the cell., bacteriology identification of disease carrying microorganisms., and chemotherapy systematic tests of
chemicals on infected animals..
4.2.3. Innoating institutions, market demand and
competition
As in the first generation, most of the medicinal
discoveries were made by physicians and academic
No.
1
2
3
4
5
6
7
8
9
Country
GERMANY
USA
UK
FRANCE
SWITZERLAND
CANADA
SWEDEN
ITALY
INDIA
TOTAL
Innovations
RIs
MSs
Academic
Industrial
Total
Academic
Industrial
Total
Academic
Industrial
Total
20
6
4
5
2
2
1
1
1
42
62
24
8
3
6
0
0
0
0
103
82
30
12
8
8
2
1
1
1
145
56.
20.
8.
5.
5.
2.
1.
1.
1.
100.
8
0
0
4
0
1
1
0
1
15
27
8
3
5
1
1
1
0
1
40
35
8
3
5
1
1
1
0
1
55
64.
14.
6.
9.
2.
2.
2.
0.
2.
100.
4
3
0
3
0
2
0
1
0
13
21
9
3
1
4
0
0
0
0
38
25
12
3
4
4
2
0
1
0
51
50.
24.
6.
8.
8.
4.
0.
2.
0.
100.
Table 11
Innovative performance of national pharmaceutical industries in the period 18801930 second generation.
575
576
Table 12
Top twenty innovative pharmaceutical companies of each successive drug generation 18801990.
No. Second generation
Fourth generation
INNVS RIs
MSs
Company
INNVS RIs
MSs
Company
INNVS RIs
MSs
Company
INNVS RIs
MSs
BAYER GE .
HOECHST GE .
B-W UK .
ABBOTT US .
P-D US .
25
19
8
8
6
11
8
3
0
3
11
8
3
2
3
48
33
30
27
27
19
17
12
14
11
14
18
8
12
10
MERCK US .
LILLY US .
JANSSEN BE .
ROCHE SW .
HOECHST GE .
30
28
28
25
24
14
8
4
4
4
15
10
5
7
6
ROCHE SW .
HOECHST GE .
MERCK US .
B-W UK .
BRISTOL US .
24
18
16
14
13
4
2
7
2
2
4
2
10
2
3
25
62% .
4
4
1
1
1
36
90% .
0
0
1
0
0
1
1
0
1
0
40
100% .
27
69% .
4
0
0
1
1
85% .
CIBA-GEIGY SW .
MERCK US .
ROCHE SW .
LEDERLE US .
RHONErM and B
FR .
Subtotal top 5
73
47% .
6
8
6
5
4
102
66% .
8
4
6
3
3
0
3
3
3
7
142
91% .
62
36% .
7
6
11
5
7
98
57% .
6
8
7
9
4
4
5
3
2
4
150
88% .
Subtotal top 5
34
25% .
8
5
3
6
5
61
45% .
2
4
2
1
3
2
4
2
6
6
92
70% .
43
30% .
8
7
6
4
4
72
50% .
0
4
6
3
4
0
4
6
0
4
102
71% .
Subtotal top 5
17
21% .
3
0
5
3
3
31
38% .
8
3
2
2
0
3
3
1
2
1
56
68% .
21
31% .
4
3
4
0
2
34
51% .
6
2
1
4
2
1
1
1
1
1
54
81% .
Subtotal top 5
66
64% .
6 LILLY US .
5
7 SCHERING AG GE . 4
8 von HEYDEN GE . 4
9 RHONE FR .
3
10 E.MERCK GE .
3
Subtotal top 10
85
83% .
11 ROCHE SW .
3
12 KNOLL GE .
3
13 KALLE GE .
2
14 CIBA SW .
2
15 Dr.BYKE US .
2
16 ARMOUR US .
1
17 SANDOZ SW .
1
18 MULFORD US .
1
19 ZIMMER GE .
1
20 BOEHRINGER GE . 1
TOTAL TOP 20
102
99% .
165
33% .
P-D US .
21
B-W UK .
20
BAYER GE .
19
UPJOHN US .
19
PFIZER US .
18
Subtotal top 10
262
52% .
1
LILLY US.
15
0
SCHERING US .
14
1
SQUIBB US .
13
2
SKF US .
13
0
ICI UK .
13
1
STERLING US .
13
1
HOECHST GE .
12
1
ABBOTT US .
12
0
GLAXO UK .
11
0
SCHERING AG GE . 10
39
TOTAL TOP 20
388
100% .
78% .
135
20% .
CIBA-GEIGY SW . 23
PFIZER US.
22
P-D US .
22
BRISTOL US .
19
UPJOHN US .
18
Subtotal top 10
239
36% .
SANDOZ SW .
14
BAYER GE .
13
AHP US .
13
STERLING US .
15
SKF US .
14
RHONE FR .
14
GLAXO UK .
13
BOEHRINGER GE . 13
ABBOTT US .
13
ICI UK .
12
TOTAL TOP 20
381
57% .
85
22% .
SANDOZ SW .
12
JANSSEN BE .
12
LILLY US .
10
SCHERING US .
10
BEHRING GE .
9
Subtotal top 10
138
36% .
GENENTECH US . 8
MERRIEUX FR . 8
BEECHAM UK . 8
GLAXO UK .
8
P-D US .
8
UPJOHN US .
7
PFIZER US .
7
AHP US .
7
BAYER GE .
6
MERRELL
6
TOTAL TOP 20
211
56% .
1
2
3
4
5
Third generation
Company
577
578
trademark. giving medicines the character of proprietary products. To this end, they established large
specialized marketingrsales departments that developed elaborate, highly specialized marketing methods. The importanceand costof marketing grew
exponentially with the internationalization and, later,
the globalization of the markets and the entry of
European and Japanese companies, which also
adopted these practices.
4.3.4. CTTs, competition and geography of innoation
During the third Along waveB the structure of the
pharmaceutical industry took the shape that characterized it at least until the 1980s. The American
replaced the German industry as world leader Table
13.. Between 1930 and 1960, all the driving forces
for TI were exceptionally strong in the USA. With
the exception of the sulphonamides and antihistamines, American companies either introduced or
were major contributors in the TTs of this period.
Many of them created strong CTTs by which they
prolonged their competitive advantages up to the
1960s and beyond Table 5.. The German industry
declined because all driving forces were weakened:
as a consequence of the War, she lost many of her
overseas markets; research laboratories and manufacturing plants were destroyed; academic research
slowed down; her patents became common property
as they were included in the reparations to the Allies.
However, the decline started even before the War:
among the TTs of the third Along waveB, German
companies contributed only the sulphonamides because they were under the spell of their CTTs of the
previous generation. This is manifested by their major innovations of the 1930s1940s, which were
antiprotozoal drugs, hypnotics and analgesics, i.e.,
technologies initiated at the turn of the century.
The Swiss industry enjoyed advantages comparable to those of the American industry having escaped
from the destruction of the War and because of their
subsidiaries in the USA. CTTs were initiated by
Roche vitamins., Ciba corticosteroids, antihypertensives., Geigy antihistamines.. The British industry, which up to the 1930s was composed of many
manufacturing apothecaries and proprietary manufacturers unable to take advantage of the discoveries
made by British universities, began to change under
579
cooperation with the Pasteur Institute but by licensing them to American and Swiss companies failed to
fully exploit them commercially. They were protagonists in sulphonamides, discovered the antihistamines
Ennis and Lorenz, 1984., and, in 1952, introduced
chlorpromazine, the first neurolepticrsedative that
revolutionized the treatment of mental illness Thuillier, 1980..
Tables 12 and 13 show the dramatic changes in
innovation and the structure of the pharmaceutical
industry brought about by the third generation of
drugs in terms of numbers of competing companies,
innovations, RIs and MSs. The top five national
industries accounted for 76% of innovating companies and more than 90% of innovations, RIs and
MSs.
The Japanese pharmaceutical industry shows a
poor innovation record at least until the 1980s, which
can be attributed to the interplay of the driving
forces for innovation. In the 1950s, the Japanese
Government adopted measures to create a strong
national industry by strengthening the domestic drug
market and protecting it against foreign competition
Yoshikawa, 1989; Reich, 1990; Anonymous, 1996..
Prices of drugs were set at levels higher than those in
Europe, a universal health insurance system was
legislated, which required very small copayments on
the part of the insured 10%. that, coupled to a
tradition of Japanese physicians to overprescribe
drugs, led to the Japanese becoming second only to
the American drug market US$ 26 billion against
US$ 32 billion.. Barriers were raised against the
operation of foreign companies in Japan forcing
580
No.
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
USA
SWITZERLAND
GERMANY
UK
FRANCE
TOP FIVE
BELGIUM
NETHERLANDS
SWEDEN
AUSTRIA
JAPAN
DANEMARK
INDIA
ITALY
AUSTRALIA
EGYPT
SPAIN
TOTAL
32
3
8
9
4
56
3
2
4
2
1
2
0
2
0
0
1
73
%
44 .
4 .
11 .
12 .
5 .
76 .
100 .
RIs
Academic
Industrial
Total
3
1
2
2
1
9
0
0
0
0
2
1
2
0
1
1
0
16
267
86
54
52
30
489
8
7
6
3
1
2
0
2
0
0
1
519
270
87
56
54
31
498
8
7
6
3
3
3
2
2
1
1
1
535
%
50 .
16 .
10 .
10 .
6 .
92 .
100 .
MSs
Academic
Industrial
Total
1
1
0
1
0
3
0
0
0
0
1
1
1
0
1
1
0
8
82
33
19
15
11
160
1
3
2
0
0
0
0
0
0
0
0
166
83
34
19
16
11
163
1
3
2
0
1
1
1
0
1
1
0
174
%
48 .
20 .
11 .
9 .
6 .
94 .
100 .
Academic
Industrial
Total
1
0
0
1
0
2
0
0
0
0
0
0
0
0
1
0
0
3
99
22
23
13
11
168
1
3
2
0
0
0
0
0
0
0
0
174
100
22
23
14
11
170
1
3
2
0
0
0
0
0
1
0
0
177
%
56 .
12 .
12 .
8 .
6 .
94 .
100 .
Table 13
Innovative performance of national pharmaceutical industries in the period 19301960 third generation .
them to license their products to Japanese companies. As a result, 3540% of drugs in Japan were of
foreign origin including the most widely prescribed.
Furthermore, Japans patent law covered only manufacturing processes but not products encouraging
Japanese companies to develop processes for the
manufacture of existing or slightly modified products
rather than developing original drugs that could not
be adequately protected even in their home market.
Thus, the great majority of Japanese innovations
were imitative drugs developed for the lucrative
domestic market rather than for the world markets.
Under these conditions, both Government and companies underinvested in R & D and innovation and
the industry became highly fragmented: there were
more than 1700 companies with the biggest among
them, Takeda, listed 23rd in the world in 1990
Table 9..
4.4. The fourth generation of drugs
The fourth Along waveB was formed by the clustering of five TTs Table 3 and Fig. 5..
4.4.1. Scientific adance
Innovations of the fourthand fifthgenerations
resulted from a marked shift in the scientific basis of
the industry from chemistry and pharmacology to the
life sciences. This was essential because, in contrast
to medicines introduced that far, which consisted of
Amagic bulletsB that destroyed disease carrying intruders e.g., sera, vaccines, antiprotozoal drugs,
antibacterial sulphonamides and antibiotics. and of
physiological or natural products made synthetically
and used for the treatment of diseases caused by
abnormal deficiencies vitamins, hormones, some
corticosteroids., the most important drugs of the
1960s and beyond were used for the treatment of
chronic physiologicalrpathological diseases cardiovascular, central nervous system CNS., cancer..
Their development necessitated the understanding of
the mechanisms of biologicalrphysiological processes at the cellular level. Paramount among them
was the elucidation of the chemical transmission of
nervous impulses to diverse organs by the identification of chemical transmitters and receptors of the
peripheral autonomic system and the CNS Bacq,
1984.. This made possible the synthesis of hundreds
of new drugs and the understanding of the action of
581
582
Table 14
Innovation performance of national pharmaceutical industries in the period 19601980 fourth generation.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Country
USA
GERMANY
SWITZERLAND
UK
FRANCE
TOP FIVE
BELGIUM
JAPAN
ITALY
NETHERLANDS
SWEDEN
DANEMARK
HUNGARY
SPAIN
CHECHOSLOVAKIA
TOTAL
Innovating companies
Innovations
RIs
No.
No.
No.
No.
69
14
13
19
4
119
6
3
3
1
3
2
0
0
0
137
50.
10.
10.
14.
3.
87.
4.
2.
2.
1.
2.
2.
100.
79
17
17
15
2
130
7
1
1
2
2
0
0
0
0
143
31
22
3
14
18
88
4
13
9
3
2
3
2
1
1
126
%
24.
17.
3.
11.
14.
70.
100.
292
88
65
64
46
555
36
25
20
15
10
7
2
1
1
672
%
43.
13.
10.
10.
7.
82.
5.
4.
3.
2.
100.
MSs
%
55.
12.
12.
11.
1.
91.
5.
100.
583
584
industry while another showed revolutionary advance led companies, on one hand, to integrate vertically into generics and OTCs and, on the other hand,
to maintain a strong commitment to R & D and innovation.
The delocalization in the 1980s of many technologically mature, low profitability, manufacturing
sectors to third world countries, created a strong flow
of capital towards research-intensive sectors. Pharmaceutical companies, because of their strong innovative record, the promise held by the revolutionary
advances in the life sciences and their vastly improved profitability caused by the introduction of
AblockbusterB drugs, attracted the keen interest of
investors so that the prices of their stocks reached
unprecedented levels. As the manufacture of pharmaceuticals alone guaranteed both corporate growth and
high profitability, companies divested their nonpharmaceutical businesses and invested the proceeds in
mergers and acquisitions within the health care sector including generics manufactures and drug distributors James, 1990.. The formation of very large,
vertically integrated global companies led to an unprecedented concentration of the industry and the
reduction in the number of competing firms, a char-
Table 15
Innovation performance of national pharmaceutical industries in the period 1980 1993 fifth generation.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Country
USA
GERMANY
SWITZERLAND
UK
JAPAN
TOP FIVE
FRANCE
BELGIUM
ITALY
SWEDEN
DANEMARK
NETHERLANDS
SPAIN
HUNGARY
YUGOSLAVIA
AUSTRIA
TOTAL
Innovating companies
Innovations
No.
No.
34
14
3
10
20
81
11
3
7
5
3
2
2
1
1
1
117
%
29.
12.
3.
9.
17.
69.
9.
3.
6.
4.
3.
100.
147
44
45
43
31
310
22
15
12
11
3
2
2
1
1
1
380
RIs
%
39.
12.
12.
11.
8.
82.
6.
4.
3.
3.
100.
No.
52
8
8
6
1
75
3
0
2
1
0
0
0
0
1
0
82
MSs
%
63.
10.
10.
7.
91.
4.
100.
No.
36
5
9
9
1
60
2
3
0
2
0
0
0
0
0
0
67
%
54.
7.
13.
13.
90.
3.
100.
ceutical companies became truly global and comparisons among national industries became largely irrelevant.
5. Conclusions
From its establishment in the mid 19th century to
this day, the pharmaceutical industry was one of the
most research-intensive and innovative sectors of
manufacturing. It offers, therefore, an extremely interesting case for a long-term study of the dynamics
of TI.
Our analysis was based on both empirical and
historical evidence and was carried out in the light of
established macroeconomic theory of technical
change. Most of our findings agree with that theory
but there are also discrepancies, some of which may
be attributed to characteristics unique to the pharmaceutical industry. As it is inevitable that other research-intensive sectors have also their own special
characteristics, a set of similar empiricalrhistorical
studies of the handful of research-intensive sectors
will ascertain which factors are industry-specific and
which are innovation generic and will lead to a
deeper understanding of the dynamics of TI.
Our main findings may be summarized as follows.
5.1. Driing forces of TI
Historical and empirical evidence concerning the
timing of introduction of RIs, variations in the rate of
technical change, diffusion of technologies, innovative performance of individual companies, and the
competitive advantage of national pharmaceutical industries, showed that they did not depend only on
scientificrtechnological advances and market demand, but also on societal needs, government legislation, new raw materials, competition among firms,
and the creation of CTTs, all of which have acted as
driving forces for innovation. The intensities of these
driving forces and their synergies varied over time
and thus determined the rate of technical change. As
they were influenced also by national environment,
they were largely responsible for the competitive
advantages of national pharmaceutical industries.
585
586
iii. The consistent high levels of R & D expenditure. Company data show that the number of innovations and patents. is related to the level of R & D
expenditure. Econometric analysis proved that the
level of R & D expenditure is determined by cash
flow. Large, innovative companies applied strategies
by which they sustained strong cash flowsand
R & D expenditureswhen opportunities for innovation became scarce due to the decline of the technologies by which they had prospered in the past.
5.6. The geography of innoation
Despite the universal need for medicines and the
presence of pharmaceutical companies in most countries, the innovative segment of the industry was
highly concentrated in five countries, namely the
USA, Germany, Switzerland, the UK, and France;
their innovations accounting for about 80% of our
sample. This concentration was caused by the national environment of these countries, which, at least
up to the 1970s, strongly affected the intensities of
most driving forces for innovation, and by the creativity, business acumen and export orientation of
their major companies.
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