The economics of drug discovery and the ultimate valuation of pharmacotherapies in the marketplace.

Although it is commonly believed that the innovation of new medicines is of paramount importance for improving the health and quality of life of patients, there is also a keen recognition regarding upward-spiraling costs of innovation, drug discovery, and drug development against a backdrop of dwindling successes in research and development (R&D) efforts. We propose a new model of valuation of pharmacotherapies that attempts to secure an adequate return on investment in innovation by ensuring optimal pricing and reimbursement.