MARKET OVERVIEW The global pharmaceutical market is a multibillion-dollar industry. The 10 largest drug companies control over one-third of the market, several with sales of more than $10B a year and profit margins of 30%. Six of these companies are based in the U.S. and four are in Europe. It is predicted that North and South America, Europe, and Japan will continue to dominate by accounting for 85% of the world’s pharmaceutical market. Companies currently spend one-third of all sales revenue on marketing, which is roughly twice of what they spent on R&D (“Pharmaceutical Industry”). The cost of innovation proves to be very high as the drug business is very risky; 1 out of 10,000 discovered compounds are approved for sale. Since 2001, the Center for Drug Evaluation and Research averaged 22.9 approvals per year. Only 3 out of 20 approved drugs bring in adequate revenue to cover the R&D costs and only 1 out of 3 approved drug generate enough revenue to cover previous failures. According to a study by Bain & Company, the cost of discovering, developing, and launching a new drug rose to approximately $1.7 billion in 2003, taking into account opportunity costs, marketing, and other business expenses (“Pharma Markets”). SUPPLY The major factor affecting supply is the advancement of technology. The development of simulation and data analysis tools condenses the drug’s process time from development to full-scale production. Process tomography and high frequency camera systems help hasten products from clinical trial stage to commercial availability. Integrated sensors are being used to monitor the performance and quality parameters of drug manufacturing processes on a real-time basis in order to ensure the quality of the medicine ... ... middle of paper ... ...http://www.who.int/trade/glossary/story073/en/index.html>. Prest, Richard. "Real Demand Forecasting." Pharmaceutical Industry. PharmaManufacturing.com, n.d. Web. 14 Mar. 2013. . Schacht, Wendy H., and John R. Thomas. Patent Law and Its Application to the Pharmaceutical Industry. Rep. no. RL30756. The Library of Congress, 10 Jan. 2005. Web. 14 Mar. 2013. . Silverman, Ed. "Global Drug Spending Is Forecast To Rebound." Pharmalot. PharmaLive.com, 12 July 2012. Web. 15 Mar. 2013. . Vogel, Ronald J. "The Demand for Pharmaceuticals." Pharmaceutical Economics and Public Policy. New York: Pharmaceutical Products, 2007. 90-108. Print.
Lyles, Adam. “Direct Marketing of Pharmaceuticals to Consumers.” Annual Review of Public Health, volume 23. 2002. Print.
As per WHO "The 10 largest drugs companies control over one-third of this market, several with sales of more than US$10 billion a year and profit margins of about 30%. Six are based in the United States and four in Europe. Companies currently spend one-third of all sales revenue on marketing their products - roughly twice what they spend on research and development."
Stan Frinkelstein and Peter Temin believes that one solution is to eliminate the link between drug prices and drug discovery. This will help ease the fear of losing research funding for new medicine and by doing so, drug prices should be a lot more reasonable. The next solution they have is to undo the blockbuster mentality and this is closely linked to eliminating the link between drug prices and drug discovery. Blockbuster refers to pharmaceutical companies that achieve an annual worldwide sale of $1 billion or more. They can achieve this because the drugs are used by many patients and/or used for a long period of time. This will solve the drug price crisis because by doing so, researchers can focus more on society’s needs instead of focusing on how to generate more revenue. Their solutions will help researchers develop drugs that society truly
For years, the price of drugs have been held in congress because the cost of pharmaceutical drugs is the most controversial aspect of this industry. Stuart Schweitzer, a professor of health policy and management at the University of California Los Angeles, author of Pharmaceutical Economics and Policy, comments on this topic. According to Schweitzer, consumers are more sensitive to drug prices more than the price other health services. Schweitzer states, “Consumers are more likely to complain about a $50 bottle of tablets than a $500 radiology procedure, or a $5000 hospital stay”. This may be due the fact that these procedure and hospital stays are less frequent than taking prescription medication that is needed continuous. Most patients are seeing multiple doctors and nurses, that is accounting for the cost. Whereas at a pharmacy, they only see the pharmacist for a consultation and then the patient goes home to take their medication. Consumers may expect this to be cheaper because they are not receiving extensive care. To bring a new drug onto the market in the 1990s, it costed $359 million compared to $1.7 billion in 2003. Pricing of most products is usually based on marginal cost, which is the change in the total cost that comes from producing one extra item. However, this is not the case with the pharmaceutical industry because if prices were based on marginal cost, drugs would be a lot more
The Indian pharmaceutical industry enjoys certain advantages, which include low cost of innovation and capital expenditure, and strong domestic support in production, from raw material requirements to finished goods. The competitive structure of the pharmaceutical industry was being redefined due to the threat of new entrants, intense price competition, entry of large players, and new regulations and rules as well as a shift in focus. In addition, the partnerships between pharmaceutical and biotechnology companies were growing rapidly. The global pharmaceutical market is undergoing rapid transformation. There has been a dramatic shift towards emerging markets as western markets slow down.
Lehman, Bruce. 2003. “The Pharmaceutical Industry and the Patent System”. International Intellectual Property Institute. Pages 1-14.
Over the past years, the U.S. pharmaceutical industry R&D spending has increased at a rapid rate. Costs have been relatively stable in the preclinical phase, but have risen dramatically in the clinical phase both in terms of direct costs incurred and in time required to complete the trials.2 DiMasi reasoning for the increase in costs is from the focused development for chronic and degenerative conditions that require more costly studies for efficacy and larger clinical trial sizes.2 Some pharmaceutical companies found ways to fill their pipelines through: 1. mergers and acquisitions, 2. in-licensing new compounds, and 3. form strategic alliances and partnerships with other companies. Forming a partnership does help developing a product or drug...
The United States spends more per capita on health care than any other country, with the percentage of gross domestic product dedicated to health care doubling from 9% in 1980 to 18% in 2011(Kesselheim,). One of the contributors to health care inflation is prescription drugs. Pharmaceuticals account for about 10% of total health care costs, spending on pharmaceuticals is poised to swell in upcoming years as a result of the increasing prices of complex specialty medicines (Kesselheim). Name brand drugs are going to have to be set at higher prices, in order for pharmaceutical companies to receive a profit. If the patient has full coverage on a medication, there is a greater chance that medication will be taken, although it may not be
Accounting for 35 percent of the global market, the United States has the largest pharmaceutical industry in the world (“Pharmaceutical and Biotech...”). Direct-to-consumer drug commercialization is one of the main contributing factors of this high percentage. In 2015, the United States $395 billion pharmaceutical corporation spent $5.2 billion on
Although monopolies appear damaging at times, there are arguments that they are an advantage to society. Monopolies in the pharmaceutical industry drive companies to pursue research and development (R&D) efforts to gain new patents. According to a 1992 study, among the 24 US. Industry groups, pharmaceuticals dedicated 16.6% of their amounts to basic research, while all other industries averaged at 5.3% (Sherer 1307). This fact validates the incentive pharmaceutical companies have to get a patent and acquire more power. Pfizer encourages R&D because of the incentives and a want to obtain patents to receive more profit. Pfizer has to promote itself to be successful, creating a good brand image that consumers will trust. If the company can advertise successfully, more consumers will purc...
Many patients discontinue with their drug treatments due to them being highly priced.1 Regulated drug price control may benefit the public but not so much for the economy. The revenues and profits that companies make are used mainly to advertise new drug treatments and fund clinical research. Pharmaceutical companies spend only 1.3% of their revenues on basic research.1 This make no sense that only a small portion is used for research while the rest is spent on marketing. Price controlling may reduce marketing and advertising on new drugs, which may in return produce low revenues and profits for the company. Then we ask ourselves, what matters most the people or
"Reducing Demand for Drugs." UN General Assembly Special Session on the World Drug Problem. May 1998. Web. 02 Mar. 2011. .
For a drug to get to market it must go through several stages of research and development (Abbott and Vernon). Starting with discovery research, preclinical testing on animals, three phases of clinical trials on humans, and finally FDA (Food and Drug Administration) approval (Abbott and Vernon). Out of several thousands of drugs only a few will make it to the FDA approval stage (Abbott and Vernon). Testing is a highly regulated, time consuming, and expensive process. From beginning to end the process can take fifteen years and less than one of five compounds will make it to market where it is still not guaranteed to succeed (Abbott and
Prices continue to increase with no end in sight. Although there are a number of reasons for this trend direct to consumer drug advertising is partially to blame. The American Medical Association has spoken out against drug advertising. Stating that the ads are driving up drug costs by convincing the consumer that the brand name drug is the one they need the most. Doctors feel pressured by patient into prescribing brand name drugs instead of their cheaper counterparts. Brand name drugs cost more than generic drugs. On average brand name drugs cost 80% more than their generic counterparts. Yet patients will often come in and request the band name drug. Insisting that the drug they saw on television is the one they need. Most doctors will give in to the patient’s requests. Patients are needlessly increasing their own medical costs because they incorrectly believe that the drug they saw on TV is safer and more effective. This is not the case. The United States Food and Drug Administration (FDA) require all generic drugs to prove they are identical to their brand name counterparts, even going as far as to have both generic and brand name drugs have the same active ingredients, strength, dosage form, and route of administration. Generic drugs are just as safe and effective as brand name drugs and cost considerably less. Yet patients continue to request overpriced brand name
In the business of drug production over the years, there have been astronomical gains in the technology of pharmaceutical drugs. More and more drugs are being made for diseases and viruses each day, and there are many more drugs still undergoing research and testing. These "miracle" drugs are expensive, however, and many Americans cannot afford these prices.