Some observers of drug development argue that the pace of pharmaceutical innovation is declining, but others deny that contention. This controversy may be due to different methods of defining and assessing innovation. We conducted a systematic review of the literature to develop a taxonomy of methods for measuring innovation in drug development. The 42 studies fell into four main categories: counts of new drugs approved, assessments of therapeutic value, economic outcomes, and patents issued. The definition determined whether a study found a positive or negative trend in innovative drug development. Of 21 studies that relied on counts, 9 (43%) concluded that the trend for drug discovery was favourable, 11 (52%) concluded that the trend was not favourable and 1 reached no conclusion. By contrast, of 21 studies that used other measures of innovation, 0 concluded that the trend was favourable, 8 (47%) concluded that the trend was not favourable, and 13 reached no conclusion (P = 0.03).