The Pharmaceutical Industry

Each year, patients are diagnosed with illnesses and diseases. At some point, these diseases are incurable, or are sometimes at the latter stages. Fortunately, scientists and researches have never stopped discovering treatments for various diseases. They have never stopped conducting experiments to test the efficacy of medical innovations. Thus, the pharmaceutical industry is an important industry because it is the source of medical innovations that aid people in preventing or treating diseases and it spearheads research and development that provide information on new drugs and diseases.

About the Industry For many years, the United States recognized how important the pharmaceutical industry is as it is the source of medical innovations. As the American government and other countries from around the world invest in the industry, it has become one among industries which are fastest growing. In fact, the pharmaceutical industry possesses the highest earnings among other manufacturing industries. According to the Bureau of Labor Statistics, pharmaceutical establishments employ over 1000 workers (2007).

In 1997, pharmaceutical products sales amounted to $291 trillion, with the United States having the highest shares (33. 2%). Europe ranks second, with 29. 4% of the sales, while Australasia has the lowest, with 1. 2% of sales. Sales of the pharmaceutical companies in the United States were $105. 9 trillion in the same year, 62% of which came from sales to domestic customers and 38% to foreign customers (Northeastern Illinois University, n. d. ). Advances made possible the discovery of medications for “diagnostic, preventive, and therapeutic uses.

” Diseases that used to be untreatable, such as pneumonia, sexually transmitted diseases, cardiovascular diseases, and cancer, have now medications. Although there are still diseases whose medications do not completely treat them, the drugs reduce the severity of their illnesses. Furthermore, scientists and researchers have come up with vaccines that fight diseases incluing coughs and diphtheria. Additionally, there were veterinary drugs that prevent diseases from being transmitted to humans (Bureau of Labor Statistics, 2007). The pharmaceutical industry is a strictly-regulated industry.

Before drugs are exported, or distributed for sales, their safety, quality, and efficiency must be evaluated first. Furthermore, any promotional message for drugs must be attuned to the approved characteristics of the products. Also, drug prices are regulated in countries with health insurance systems (Danzon, 2006). The American pharmaceutical industry, in particular, is among the prominent industries in the world, mainly due to the progress in its research and development (R&D) programs for new drugs. In addition, the government spends a significantly high investment for R&D than for other industries.

The industry undertakes testing of thousands of new substances despite the fact that less than 100 prescription medicines would come up from the testing (Bureau of Labor Statistics, 2007). However, it is not surprising that the pharmaceutical industry “has great expertise in clinical research. ” Most of the medical breakthroughs were a result of the trials that were funded. In addition to this, developments were in store that would lead to lifesaving interventions. These include medications and treatments for diseases that used to be the incurable (The PLoS Medicine Editors, 2006).

R&D In the pharmaceutical industry, the manufacturing of drugs comes from a lengthy process which begins with scientific research which aims either of the following: discover new drugs or improve the existing ones. The first stage involves R&D departments which seek and test countless new chemical compounds, most of which would prevent or alleviate the symptoms of diseases. With government and private funding, scientists are able to make use of techniques and advanced technologies to be able to come up with useful compounds in a short time (Bureau of Labor Statistics, 2007).

With the potential of these discoveries, a substantial portion of budget is spent on applied research in order to discover new drugs for specific uses. For instance, for years scientists have tried to seek treatments for the slowing down of breast cancer. If the new compound proved to be effective, then scientists will develop a safe medication mainly based on their initial discoveries. The second stage involves testing the new products, wherein ‘screening’ is used. Screening involves many other tests. After a compound is screened and is proven to be effective, it will then tested on laboratory animals infected with the disease.

Through testing on these animals, scientists can determine whether the compound is effective and safe. There will only be testing on humans once the new drug overrides the therapeutic advantages of existing drugs. In some cases, testing on humans is carried out once the new drug proves to be much safer or better (Bureau of Labor Statistics, 2007). Screening new drugs is a very risky and costly process, thus presenting a weakness in the industry. In fact, out of 5,000 to 10,000 compounds tested, only one will be approved and will reach the pharmacist’s shelf.

On the other hand, the profit margins of the industry can go higher once a new drug is widely accepted in the market (Northeastern Illinois University, n. d. ). After this process, firms oversee clinical investigations of drugs used by humans. These trials are first conducted on a small group of healthy people with the primary objective of determining the right dosage levels and finding out if there are side effects. Once the drug proves to be safe, the same trial will be conducted under two similar phases, this time on a larger group of people (Bureau of Labor Statistics, 2007).

After these trials, the drug has yet to undergo investigations by the United States Food and Drug Administration (FDA) Center for Drug Evaluation and Research (CDER). FDA-CDER is assigned to review the performance of drugs on humans before the approval for commercial use. The whole process may seem simple. However, from the discovery of a new compound to trials conducted by FDA-CDER, the phases usually take time and money (Bureau of Labor Statistics, 2007). Some of the most important things in manufacturing new drugs in the pharmaceutical industry are quality control and quality assurance.

Thus, workers are assigned “full time to quality control and quality assurance functions” (Bureau of Labor Statistics, 2007). The industry is also threatened by FDA approval, as FDA is strict in requiring companies to undergo an extensive testing of the product before being distributed for public use. This indicates that manufacturers have to spend millions and a lot of time to make sure that their new product are safe and effective. In 1995, it showed that between the years 1976-1986, out-of-pocket costs for developing a new drug were higher than capital costs.

From 1987 until 1990, capital costs were higher than out-of-pocket costs. Aside from these, companies also face economic, legal and regulatory barriers (Northeastern Illinois University, n. d. ). Recently, there have been improvements in the discovery of new drugs. For one thing, the biotechnology revolution changed the structure of the pharmaceutical industry. In additiona, small firms were leading in discovering new drugs. However, the usual case is that these small firms out-license the new drugs to larger firms during the end stages of drug development and commercialization.

Also, the vast number of firms combrising the pharmaceutical industry change their identity due to cases of mergers and growth. At times, some smaller firms are bought by larger ones. However, it is interesting to note that the economic performance of larger firms lagged behind the performance of smaller ones. This is because these larger firms depend on smaller ones for new products (Danzon, 2006). Past researches showed that when firms form an alliance, the new products that they discover “have a higher probability of success” while in the late stage of development.

This is especially true when the larger firm is the licensee. It is an indication that smaller firms can gain so much from the licensing agreements they have with larger firms. This shows the responsibilities shared between the companies. Small firms are given cash and other royalties for their development of new products. They also have the right to be involved in the late stage development of the products and may also participate in marketing. Their involvement can give them a first-hand experience.

On the other hand, large firms gain the rights over the development and marketing of the product while at the same time holding the majority of the revenues (Danzon, 2006). Further developments have been uncovered in the pharmaceutical industry. With the biotechnology revolution and a number of advances in technology, the discovery and development of new drugs were revolutionized. Scientists are able to learn a great deal of information and used it for the discovery of new drugs for diseases. The result is that people were able to benefit from medicines and treatments.

Additionally, new medicines are being tested and developed among companies. These medicines have promising future for the treatment and prevention of diseases such as neurologic disorders, HIV and other infectious diseases (Bureau of Labor Statistics, 2007). The pharmaceutical industry will continue to flourish because scientists will never stop on discovering and testing medications for diseases that afflict millions of people. Its sales and the number of people it employs will increase. The future for the industry is also promising, and a day will come when new drugs will prevent or totally treat stubborn diseases such as cancer and HIV.

However, there will always be challenges to the process of developing new drugs, mainly brought about by the need to assure the efficacy and safety of drugs on humans. Aside from all these, R&D programs of the pharmaceutical industry will bloom, and evidences point to R&D centers established locally and abroad to meet the demands of the public on effective drugs. There will also be more mergers and alliances between firms to take advantage of a more advanced discovery and development of drugs. References Bureau of Labor Statistics. (2007). Pharmaceutical and medicine manufacturing. United States Department of Labor.

Retrieved May 19, 2009, from http://www. bls. gov/oco/cg/cgs009. htm Danzon, P. M. (2006). Economics of the pharmaceutical industry. National Bureau of Economic Research. Retrieved May 19, 2009, from http://www. nber. org/reporter/fall06/danzon. html Northeastern Illinois University. (n. d. ). Pharmaceutical industry. Retrieved May 19, 2009, from http://www. neiu. edu/~agkanali/ACTG450/Pharma. html#Table The PloS Medicine Editors. (2006). PloS Medicine and the pharmaceutical industry. Retrieved May 19, 2009, from http://www. pubmedcentral. nih. gov/articlerender. fcgi? artid=1518677

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