Adistinguishing feature of the best academic research is how well it relates theory to practice: Does it shape our collective
perception of behavior in the real world of commerce? No other sector can make a better case for that "real world" impact
than pharmaceuticals, and if one were asked, "Who is the academic economist who has contributed most to understanding this
industry?" I believe the answer would be obvious: Professor Henry Grabowski of Duke University. Grabowski's scholarly contributions
have had enormous impact outside the academy, on public policy, as well as industry decision making. Much legislation affecting
pharmaceuticals, vaccines, and biotechnology products has been enacted based on his insights.
Since receiving his PhD in economics from Princeton University in 1967, Grabowski, along with numerous collaborators, has
made wide-ranging contributions in the economics of R&D and innovation and regulatory policy. Although best known for his
work in the biopharmaceutical sector, he has also published in other areas, such as cost-effectiveness analyses, auto insurance
and safety regulation, and the life cycle and managerial models of the firm.
Over the years he has made numerous other professional contributions—testifying before Congress, presenting at innumerable
public policy forums, serving on the American Enterprise Institute Health Advisory Board, providing leadership on journal
editorial boards, and rendering consulting services (often pro bono) to the National Academy of Sciences, the Institutes of
Medicine, the Federal Trade Commission, and the General Accounting Office, to name just a few.
Grabowski's research on pharmaceuticals evolved gradually after he arrived at Duke University in 1972. First was the award
of an NSF grant to study the effects of the 1962 Amendments to the Food and Drug Act on drug innovation incentives. This was
followed by an NSF grant to study market competition in pharmaceuticals more broadly, including the role of patents, generic
competition, and government regulatory and reimbursement policies. In the early 1980s Professors Grabowski and John Vernon
also decided to establish the program in Pharmaceuticals and Health Economics at Duke at a time when few other economists
were studying the industry on a consistent basis.
Several important articles by Grabowski and Vernon on the impact of the 1984 Hatch-Waxman Act appeared in the mid '80s, followed
by a simulation model of the R&D process in pharmaceuticals and an analysis of Medicaid patients' access to new drug approvals.
But it was in the 1990s that he coauthored five articles that are legitimately characterized as "grand slams"—articles that
continued his collaboration with Vernon, and initiated new collaborations with Joseph A. DiMasi, Ronald W. Hansen, and Louis
C. Lasagna. Three of these now-classic articles quantified the risks, returns, and costs of innovation in the pharmaceutical
industry, while two quantified the impact of the Hatch-Waxman legislation on brand loyalty and generic entry and pricing.