The Impact of R & D Cooperation on Drug Variety

This study shows that R&D cooperations can be used as an instrument to coordinate drug development portfolios among participating firms, which has crucial implications on the number of drugs offered on the market. Our study puts special attention to the fact that R&D cooperations, formed at different stages throughout the drug development process, have different impacts on the technology and product markets. Using a comprehensive dataset on the pharmaceutical industry, our results show that R&D cooperations formed at the early stages increase the number of R&D projects and the number of drugs launched on the product market. Late stage R&D cooperations, however, have a positive impact on the drug development process and drug variety only in the short run. In the long run, late stage cooperations provoke that firms re-optimize their drug development portfolios which reduces the number of drugs offered on the market. JEL: L24, L25, L65, D22.