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”).
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 ...
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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.
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