The Opportunity Cost of Capital
Development of New Pharmaceuticals
Bibliographic Data
| ID | 13775940 |
|---|---|
| Authors | Ayman Chit (0000-0002-3040-9312, Sanofi Pasteur, Toronto, Ontario, Canada, corresponding author), Ahmad Chit (Deloitte Touche Tohmatsu Limited, Canada, corresponding author), Manny Papadimitropoulos (University of Toronto, Ontario, Canada), Murray Krahn (0000-0001-5836-397X, University of Toronto, Ontario, Canada), Jayson L Parker (0000-0002-5890-6169, University of Toronto), Jayson Parker (University of Toronto, Ontario, Canada), Paul Grootendorst (0000-0003-1978-2834, University of Toronto, Ontario, Canada) |
| Year | 2015 |
| Volume | 52 |
| Publication date | 2015-01-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | INQUIRY The Journal of Health Care Organization Provision and Financing (JOURNAL) |
| Journal identifiers | ISSN: 0046-9580 • E-ISSN: 1945-7243 |
| Publisher | SAGE Publishing (PUBLISHER • US) |
| DOI | 10.1177/0046958015584641 |
| PMID | 25933615 |
| OpenAlex | W2055400723 |
| Language | EN |
| References cited | 18 |
The opportunity cost of the capital invested in pharmaceutical research and development (R&D) to bring a new drug to market makes up as much as half the total cost. However, the literature on the cost of pharmaceutical R&D is mixed on how, exactly, one should calculate this "hidden" cost. Some authors attempt to adopt models from the field of finance, whereas other prominent authors dismiss this practice as biased, arguing that it artificially inflates the R&D cost to justify higher prices for pharmaceuticals. In this article, we examine the arguments made by both sides of the debate and then explain the cost of capital concept and describe in detail how this value is calculated. Given the significant contribution of the cost of capital to the overall cost of new drug R&D, a clear understanding of the concept is critical for policy makers, investors, and those involved directly in the R&D
Business · Capital (architecture · Capital cost · Cost of capital · Economic capital · Economics · Field (mathematics · Implicit cost · Incentive · Individual capital · Macroeconomics · Microeconomics · Neoclassical economics · Opportunity cost · Relevant cost · Total cost · Value (mathematics · Weighted average cost of capital · Computer Science · Innovation Policy and RD · Intellectual Property and Patents · Mathematics · Pharmaceutical Economics and Policy
| Highly cited | No |
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