By Matthew Murray

A new analysis from HKS researchers of United States Food and Drug Administration–approved drugs shows that the money they earn over time is very uneven. A small group of medicines generates most industry revenue, while many others bring in modest amounts and do so on different timelines. These patterns differ by drug type and by disease area. In a newly released Nature Biotechnology article, Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government Research Fellow Matthew Vogel, Zander Cowan HKS MPA/ID 2026, and Amitabh Chandra, faculty director of the Malcolm Wiener Center and head of M-RCBG’s Healthcare Policy Program, explore the uneven timing and concentration of revenue life cycles, giving investors and policymakers evidence to help make decisions in the wake of the Inflation Reduction Act. 

Revenue life cycles are critical to biotechnology firms as drug development is expensive and risky. Most projects never reach the market. A few succeed and must cover the cost of many failures. Investors and pharmaceutical companies try to decide early on whether a new medicine can produce enough revenue to justify research and long, costly clinical trials.

Past studies have shown that sales in this sector are skewed. A small share of products earn an exceptionally large share of total revenue. There has been far less work that traces revenues over time and compares patterns across therapeutic areas and across different kinds of drugs.

This gap matters more now. The 2022 Inflation Reduction Act created a Medicare drug price negotiation program that uses the time since approval as a stand-in for financial value. Small molecule drugs may face negotiated prices nine years after approval. Biologic drugs may face negotiated prices thirteen years after approval. The rule the IRA uses is simple, but it assumes that time on the market closely tracks a drug’s economic maturity. 

The authors studied 622 new molecular entities that the FDA approved between 1995 and 2015, including 464 small molecule drugs and 158 biologic drugs. They assembled global sales data from EvaluatePharma, which is widely used by industry analysts. By combining reported sales across manufacturers, they were able to look for inconsistencies that can arise when products change ownership or names and used other sources, such as securities filings, to correct the records. For each medicine, they tracked revenue over the first 15 years after launch (adjusting figures to 2024 dollars and applying the same discount rate to each product). They then ranked the drugs and compared them in terms of revenue. 

And what they found was an extreme concentration of revenue in a small number of products. For small molecule drugs, the top group averaged about 27 billion dollars and for biologic drugs 39 billion dollars, per product over 15 years with adjustment. The authors note that the top group earned around two and a half times as much as the second group. The contrast with the bottom group was even greater, as top products earned roughly 700 times more than the lowest group.

These findings confirm that the sector still depends on a narrow group of blockbusters. This is true even as research spreads into new scientific approaches and new modalities.

The authors also examined where revenue comes from. Top group products reached patients in many countries and did not rely only on the United States market. Lower-performing products showed a very different mix. Close to 90% of their revenue came from United States sales and had much weaker international reach.

This pattern shows that strong uptake outside the United States can extend a drug’s revenue life cycle. Products that spread widely across markets can keep earning even after domestic sales flatten. Policies that focus only on time since approval and on the United States spending may miss this part of the value story.

Biologics and small molecular drugs also do not produce revenue in the same timescales, the authors found. Top small molecule drugs tend to mature faster. Within nine years they had already captured about two thirds of their 15-year revenue. Top biologic drugs had captured just over half of their 15-year revenue by that point. Lower-performing drugs in both groups were more front-loaded. They realized more than 80% of their total 15-year revenue within the first nine years. After that, their sales fell sharply.

Annual revenue curves reinforce this picture. Top products keep growing for several years after launch. They often peak around years six to eight and then maintain high sales for a long period. Biologic leaders show especially high peaks, whereas lower-group products often peak early and then decline. Many treat narrow patient groups or face rapid competition from similar products, making their revenue arc shorter and steeper.

These differences show that time since approval is not a reliable stand-in for economic maturity across all products.

The authors also compared life cycles across therapeutic areas. Results again show wide variation. For example, oncology drugs and central nervous system drugs produced the most durable value. Their revenues often peak between years five and ten. They then decline slowly and maintain meaningful sales well into the second decade. Systemic anti-infective drugs follow a much shorter pattern. These medicines usually reach peak sales within two years of launch. By year six, their sales fall by about two thirds. Other areas land between these extremes. Immunomodulators and musculoskeletal drugs often peak near the middle of the fifteen-year window. Cardiovascular and endocrine and blood therapies tend to fall more steadily over time.

In short, there is no single typical drug revenue life cycle. Each therapeutic area reflects its own science and patient needs and market turnover.

The findings confirm that the financial base of the industry rests on a small number of medicines with long, strong revenue streams. These products matter because they fund many other projects that never reach patients. At the same time, the research shows that revenue timing is very uneven. Investors who now must factor in Medicare negotiation timelines may rethink which projects are attractive.

Drug classes that need long adoption periods may be especially exposed. Complex oncology agents are a key example as they often take years to reach full use. If price negotiation begins while use is still climbing, the total value of these projects shrinks. That may reduce investment in areas where society still needs better treatments.

Therapies whose sales spike early and fade quickly may see less direct impact from negotiation timing. Yet, many of these same areas already attract limited funding because they rarely deliver blockbuster returns. Systemic anti-infective drugs fit this pattern.

If later-stage revenues fall, then companies may shift resources toward products that promise rapid uptake and an early peak. That shift could deepen the focus on a few potential blockbusters instead of promoting a broad mix of treatments that serve many kinds of patients.

So what is the policy take-away?

For policymakers the message is that practical, time-based thresholds are a blunt tool. They do not reflect how drugs in different therapeutic areas and modalities actually earn revenue. As a result, the design of price negotiation programs should draw on observed revenue distributions. Policies should recognize that large revenues from a small share of successful medicines serve to support a research system in which many efforts fail. Policies that overlook these facts risk discouraging innovation in areas with slow adoption or long development cycles, which include some of the most complex and socially valuable fields.

By mapping how revenues flow across hundreds of FDA-approved medicines, this work offers a clear factual base. It can help investors judge which projects can sustain high-risk portfolios and can help policymakers manage spending while preserving the engine of drug discovery.

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Photo by Spencer Platt/Getty Images

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