Pharmaceutical companies' decisions to pursue new products are based largely on financial considerations inherent in risk-reward tradeoffs. Despite their diversity, most market barriers can be interpreted as having a direct effect on one or more financial parameters that are factored into these decisions. Similarly, most policy options that exist or that could be implemented to lower market barriers can be interpreted as having a direct effect on these financial parameters.
This report portrays relationships between market barriers and policy options, including those identified in the 1995 Institute of Medicine (IOM) report, Development of Medications for the Treatment of Opiate and Cocaine Addictions, and six basic parameters relevant to decisions to pursue a new therapy: R&D costs, time to product launch, marketing and distribution costs, market size/penetration, price, and duration of market life. These basic relationships were used in part to develop the scenarios for this study, and can be represented in quantitative modeling that generates such financial indicators as NPV and PAR.