sector scientists meet as scientific equals, solve problems together, and regard each other as scientific peers, which is reflected in extensive coauthoring of research papers between the public and private sectors. We also find some evidence that this coauthoring activity is correlated with private sector productivity. Publication of results makes the output of public sector research effort freely available, but the ability of the private sectors to access and use this knowledge appears to require a substantial investment in doing “basic science.” To take from the industry’s knowledge base, the private sector must also contribute to it.

Taken together, our results suggest that the conventional picture of public research as providing a straightforward “input” of basic knowledge to downstream, applied private research may be quite misleading, and that any estimation of the returns to publicly funded research must take account of this complexity.

Data and Methods

We gathered both qualitative and quantitative data to examine public-private interaction. We used two sources of data for our qualitative analysis. The first source is narrative histories of the discovery and development of 25 drugs introduced between 1970 and 1995, which were identified as having had the most significant impact on medical treatment by two leading industry experts. Each history was constructed from both primary and secondary sources, and aimed in each case to identify both the critical events and the key players in the discovery of each drug. (We are indebted to Richard Wurtman and Robert Bettiker for their help in constructing these histories.) Our second source of data is a series of detailed field interviews conducted with a number of eminent public sector researchers and with researchers employed at 10 major pharmaceutical firms.

Our primary source of quantitative data is bibliographic information on every paper published in the public literature between 1980 and 1994 by researchers listing their address as 1 of 10 major research-oriented pharmaceutical firms, or 1 of the NIH. This data base was constructed by searching address fields in Institute for Scientific Information’s Science Citation Index. It is important to note that Science Citation Index lists up to six addresses given for each paper, which may not correspond exactly to the number of authors. For these 10 sample firms alone, our working data set contains 35,813 papers, with over 160,000 instances of individual authorship, for which Science Citation Index records 69,329 different addresses. Our focus here is on coauthorship by researchers at different institutions. Clearly, much knowledge is exchanged at arm’s length through reading of the open literature, and in some instances coauthorship may simply be offered as a quid pro quo for supplying reagents or resources, or as a means of settling disputes about priority. Nonetheless, we believe that coauthorship of papers primarily represents evidence of a significant, sustained, and productive interaction between researchers. There are also very substantial practical problems in analyzing citation patterns. We define a “coauthorship” as a listing of more than one address for a paper: a paper with six authors listing Pharmacorp, Pharmacorp, NIH, and Massachusetts Institute of Technology as addresses would generate three such coauthorships. We classified each address according to its type: SELF, university, NIH, public, private, nonprofit, hospital, and a residual category of miscellaneous, so that we were able to develop a complete picture of the coauthoring activity of each firm. Table 1 gives a brief definition of each type.

These data on publications and coauthorship are supplemented by an extensive data set collected on R&D activity from the internal records of these 10 firms. This data set extends from 1965 to 1990 and includes discovery and development expenditures matched to a variety of measures of

Table 1. Definitions of institutional type




“COMPANY X” in file obtained by searching SCI for “COMPANY X”


Hospitals, clinics, treatment centers


Any of National Institutes of Health


Government-affiliated organizations, excluding NIH; e.g., National Labs, European Molecular Biology Lab


Universities and medical schools


For profit organizations, principally pharmaceutical and biomedical firms


Nonprofit nongovernment organizations, e.g., Imperial Cancer Research Fund



SCI, Science Citation Index.

output including important patents, Investigational New Drugs, New Drug Approvals, sales, and market share. These data are described in more detail in previous work (1618). Although for reasons of confidentiality we cannot describe the overall size or nature of the firms, we can say that they cover the range of major R&D-performing pharmaceutical manufacturers and that they include both American and European manufacturers. In aggregate, the firms in our sample account for approximately 28% of United States R&D and sales, and we believe that they are not markedly unrepresentative of the industry in terms of size or of technical and commercial performance.

Qualitative Evidence: Field Interviews and Case Studies

Case Studies. Table 2 presents a preliminary summary of 15 of our 25 case histories of drug discovery. It should be noted immediately that this is a highly selective and not necessarily representative sample of new drugs introduced since 1970. There is also significant selection induced by the fact that many potentially important drugs arising from more recent discoveries are still in development. Bearing in mind these caveats, a number of conclusions can be drawn from Table 2. First, there is some support for the “linear” model. Publicly funded research appears to have been a critical contributor to the discovery of nearly all of these drugs, in the sense that publicly funded researchers made a majority of the upstream “enabling” breakthroughs, such as identifying the biological activity of new classes of compounds or elucidating fundamental metabolic processes that laid the foundation for the discovery of the new drug. On the other hand, publicly funded research appears to be directly responsible—in the sense that publicly funded researchers isolated, synthesized, or formulated the clinically effective compound, and obtained a patent on it—for the introduction into the marketplace of only 2 of these 15 drugs.

Second, there are very long lags between upstream “enabling discoveries” and downstream applied research. At least for these drugs, the average lag between the discovery of a specific piece of knowledge discovered by the public sector and the identification and clinical development of a new drug appears to be quite long—in the neighborhood of 10–15 years. It seems clear that the returns to public sector research may only be realized after considerable delay, and that much modern publicly funded research has yet to have an impact in the form of new therapeutic agents.

Note also that though this very stark presentation of these case histories lends some support to a linear dichotomized view of the relationship between the public and private sectors, it was also very clear from the (unreported) details of these case histories that the private sector does a considerable amount of basic science and that applied clinical research conducted by

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