One of the largest contributors to the economy of the United States is the pharmaceutical industry by enforcing economic output and ensuring a large number of high-quality jobs. Pharmaceutical companies are responsible for developing the vast majority of drugs and medicines on which humankind relies, yet all this comes at a cost.
While the foremost goal of the medical and pharmaceutical industries should be the wellbeing of the patients found in their care, most of us know that there are a number of other goals which weigh at least as much (if not more). The handsome profit that pharmaceutical companies make is, of course, dependent on the swift development of cutting-edge pharmacological agents, but sometimes the means aren’t as ethical as one would expect.
Of course, a drug that doesn’t sell is a drug that doesn’t make a profit so aside from actually researching and developing the medication, pharmaceutical companies are also in charge of marketing their own products.
According to World Health Organization estimates, the top pharmaceutical companies spend approximately 35% of their entire sales revenue on marketing endeavors. The issue wouldn’t seem so curious were we not to compare other budgets with this 35% threshold.
The same companies only spend half as much on development and research, and with the continuous pressure of maintaining sales, even the World Health Organization is concerned about the possible conflict of interest that arises.
Can such companies efficiently and ethically care for the medical needs of the public by selecting and using drugs in a rational way while also respecting their legitimate business goals?
Current Pharmaceutical Industry Revenue
The immense importance of the pharmaceutical industry as a global sector of the economy is undisputable. In fact, according to global pharmaceutical companies, their revenue and sales statistics, the worldwide pharmaceutical revenue has peaked at close to one trillion US dollars.
North America is by far the global leader when it comes to pharmaceutical revenue, accounting for over 40 percent of this amount. But despite the United States’ clear position as the leader, there are other global sectors showing great promise.
The Chinese sector, for instance, has managed to experience the greatest growth rates over the last couple of years.
Global pharmaceutical revenue has been steadily increasing for the past 13 years. If in 2001, revenue reached $390.2 billion, nine years later, things had shifted massively as revenue had more than doubled (in 2010 global pharmaceutical revenue reached $891.3 billion).
And while such figures are difficult to imagine, the pharmaceutical industry’s growth is evident in almost all sectors (and markets).
In the United States alone, the total nominal spending on medicine reached $329 billion, almost doubling its 2002 value of $195 billion, while pharmacy and drug store sales accounted for $236.17 billion.
Government Health Expenditures
Clearly, this increasing trend reflects a variety of contributing factors. An aging population, for one, where life expectancy is continuously increasing (and with it, the number of chronic disease patients being treated). But apart from the increasing elderly population, such massive growth trends are also reflective of the United States’ increase in health expenditures.
Pharmaceutical companies have profited greatly from the US’s increase in health expenditures. As compared to 1960, when the national health expenditure only represented 5 percent of the GDP (gross domestic product), in 2014, the national health expenditure represented 17.4 percent of the GDP.
Research and Development Expenditures
Revenue is of course influenced by development and research budgets, and since these budgets are smaller compared to those of the pharmaceutical company’s marketing endeavors, they haven’t experienced massive increases since 2007.
PhRMA (Pharmaceutical Research and Manufacturers of America) members have had a nigh-constant research and development expenditure budget for the past decade. Since 2006, member pharmaceutical companies have been spending between $43 billion and $51.6 billion on research and development.
Top Pharmaceutical Companies Based on Revenue
Amid a volatile industry, Johnson & Johnson seems to be topping the list when it comes to both revenue and market value. Based on Forbes estimates, in 2014, Johnson & Johnson had a total revenue of $71.3 billion and a market value of $278 billion.
The Swiss company Novartis came in second according to the same statistics, with a total annual revenue just shy of $61 billion, followed by another Swiss competitor, Roche, which had a total revenue of $52.4 billion.
Pfizer came in fourth as another representative of the US pharmaceutical company market, with a total revenue of 51.6 $billion.
The only French representative among the top 10 pharmaceutical companies is Sanofi, with an overall revenue of $45.8 billion.
Merck, Eli Lilly and Abbott Laboratories were the remaining American pharmaceutical companies, which came in sixth, ninth respectively tenth with revenues of $44 billion, $23.1 billion and $21.8 billion while GlaxoSmithKline and AstraZeneca, UK companies, came in seventh and eighth with revenues of $43.9 and $27.2 billion.
Pharmaceutical Companies and their Economic Impact
One of the pharmaceutical industry’s foremost contributions is strengthening the US economy. Ripples of this specific sector’s activity and contribution spread across the entire economy.
Work Opportunities and Employment
Job creation, for one, is a massive component of this mechanism. Across the United States, the biopharmaceutical sector is responsible for having employed over 810,000 workers and supporting 3.4 million jobs.
From New York to San Francisco, Huston to Boston, Dallas to Philadelphia, Florida to California, Texas to NJ, countless Americans can support themselves and their families by working in a vibrant, rich environment. Diverse skills and educational levels are required to occupy the jobs created by the biopharmaceutical sector, from scientific positions to entry-level technicians.
Average annual salary levels are also eye-watering, considering that biopharmaceutical workers earn an average of $110,490 as compared to other USA workers, where the average yearly compensation amounts to $54,455.
Its research and development expenditures represent the single largest share of all national R&D spending, amounting to 23.4 percent of all American-business-founded R&D.
Since the beginning of the new millennium, PhRma members have been responsible for more than $500 billion in R&D expenditures, $51.6 billion of which being spent in 2013 alone.
Boosting State, Regional and National Economy
When considering the overall economic impact of the pharmaceutical industry, recent statistics show that it totals approximately $790 billion annually.
Nationwide, pharmaceutical companies collaborate with other research institutions so that universities, medical schools, hospitals and research centers are capable of conducting clinical trials in fields where medicine development is required.
Numerous research programs help communities access clinical trial grants so that they too can prosper.
But there is another, indirect effect of the pharmaceutical industry. Its potential of productivity improvement is unquestionable, especially since new treatments are now capable of better treating diseases that would have otherwise resulted in disability leave or absenteeism. Not only patients, but the economy as a whole, can benefit from the superior treatment options being made available.
Conspiracy Theories and Overall Displeasure with Large Pharmaceutical Companies
Despite massive profits, the pharmaceutical industry is losing friends while also handing out ammunition to potential enemies. While drug prices are increasing to astronomical values (with countless cancer treatments being accompanied by $100,000 dollar price tags), it seems that nothing will force drug companies to stop pushing the envelope.
Chemical innovation is, of course, cost-demanding and the public is aware of that. However, constantly invoking the same standard defense when being presented with the ever-increasing treatment process won’t suffice for much longer.
There are critics who believe that the pharmaceutical companies’ annual output of drugs cannot earnestly reflect the massive research and developing expenditure.
Especially since the industry generating some of the highest profit margins is the same industry being faced with a plethora of multi-billion dollar fines in connection to malpractice.
Profit margins are excellent: Pfizer, for instance, had a 42% profit margin in 2013, an eye-watering figure which exceeded other sector’s profit margins (including that of banks or oil and bank sectors).
But Pfizer isn’t the only company showcasing such profit margins. Roche, AbbVie, GlaxoSMithKline and Eli Lilly all made profit margins of at least 20% in 2013 and it isn’t hard to understand exactly why they managed to do so.
Cancer drug treatments, for instance, represent one of the main culprits, with complete courses costing more than $100,000. Leading oncologists from countless states across the world wrote open letters highlighting the unfairness of such massive prices.
“If you are making $3bn a year on [cancer drug] Gleevec, could you get by with $2bn? When do you cross the line from essential profits to profiteering?” wrote on of the letter’s signatories.
New drugs are hard to make, yes, and even if only 30% of all new drugs are profitable, those which make it have the ability of becoming blockbusters. So research and development alone aren’t enough to justify such prices.
Pharmaceutical company officials also invoke the wider value of a drug, which saves millions of dollars by preventing transplantation necessities for Hepatitis C patients or allows countless patients to continue working rather than becoming homebound.
Patent controversies are also a favorite: since a big pharmaceutical company only owns a patent for a couple of decades (half of which is spent on research and development), officials claim that a pharma company is only left with 10 years to profit from a formula before it is picked up by generic drug companies.
Patent expiration, they explain, is synonymous with brand loyalty expiration and when this happens, profits drop by over 90%.
Oncology Market and Top Market Players
The oncology sector is perhaps one of the most disputed and coveted. Many pharmaceutical companies have attempted to enter this sector by acquisition and merger strategies. Even so, there are some companies neatly positioned as the leaders of the scoreboard.
Cancer has a death toll significantly exceeding that of AIDS, malaria and tuberculosis collectively and with its ever-increasing incidence, the market should continue growing.
Pharmaceutical companies are now focusing on targeted therapy as a means of effective treatment and this “top dog” is expected to bring in big bucks. It governs approximately three times the collective market of hormone and cytotoxic therapy, noticeably changing the landscape of cancer treatments.
In 2013, Roche was the all-around winner, with a 22.3 percent global market share. And in this sector, Roche has little competition, with the Novartis only accounting 5.6 percent of the global market share and Bristol-Myers Squibb 7.3 percent.
By 2020, Roche is expected to account for a whopping 34.5 percent of global oncology market share and statistics show that apart from Novartis and Celgene, most other pharma companies will actually start experiencing decreases their shares.
Roche’s dominion is explained by the fact that close to every drug it currently produces has experienced annual growths of over 10 percent. Moreover, the company holds the most in-line extensions and its bold acquisition strategies have propelled the company miles away from its competitors.
Hopefully, so much research will be enough to counter the massive burden that cancer represents on a global scale. By 2030, cancer-associated deaths are expected to reach 13 million so, if by that time, pharmaceutical companies will still leave patients with unmet needs, the oncology market may begin to stumble.
Currently, the oncology market is driven by a multitude of factors, from aging population and increasing incidence rates to FDA approval expeditions, urbanization, diagnostic procedure advances and emergence of combination or targeted therapies.
Top-Selling Pharmaceutical Products by Sales
The pharmaceutical market is volatile: products which ranked first or second just a couple of years ago may not even make the cut now, especially since countless patents and FDA approval expeditions allow new therapies to appear.
In 2014, AbbVie’s Humira was the overall winner with sales of over $11.84 billion. Humira (also known as adalimumab) is a TNF (tumor necrosis factor) inhibiting anti-inflammatory drug. The acronym stands for Human monoclonal antibody in Rheumatoid Arthritis and describes a potent drug which binds to TNF alpha receptors and reduces inflammation.
After receiving FDA approval, Humira is now used for rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, psoriasis and juvenile idiopathic arthritis.
Sanofi’s Lantus was the runner-up with sales of over $10.3 billion in 2014. This insulin analogue helps diabetic patients control their blood sugar levels by using long-acting microcrystals which ensure that insulin molecules are released slowly. Lantus provides a long-lasting duration with 18-26 hours of action and no insulin peaks.
According to the manufacturer, it best resembles the normal, physiological insulin secretion of a non-diabetic’s pancreas cells.
Lantus alone managed to increase Sanofi’s turn-over by 28 percent to approximately 2.45 billion Euros. But since the substance’s patent protection expired a few months ago (in February 2015), generic copies will soon begin invading the market, hence decreasing Sanofi’s profits.
With $9.38 billion in sales, Sovaldi was the third pharmaceutical product to rank in 2014. Developed by Gilead Sciences, Sovaldi is a drug administered in the treatment of Hepatitis C infections, alongside a combination of other drugs.
It has been on the market since 2013 but since its introduction, cure rates have risen and side effects have decreased. Sovaldi (sofosbuvir) is a nucleotide analog which prevents the RNA polymerase (an enzyme) to intervene in the hepatitis C virus’ replication process.
A course of treatment varies, however, some media sources quote costs of $84,000 to $168,000 in the US. However, Gilead discussed selling a name brand version of the treatment in countries such as India for $300 per course.
Gilead’s patent has been repeatedly criticized and Indian manufacturers have already begun producing generic formulae as the patent protection does not apply.
Abilify (Aripiprazole) is an antipsychotic drug recommended in the case of schizophrenia patients or bipolar disorder sufferers. With sales of $9.29 billion, Abilify was came in fourth in 2014 according to global sales.
Ebvrel and Seretide came in fifth and sixth on the list, with $8.71 and $8.65 billion in global sales, followed by Crestor (rosuvastatine), a widely-known AstraZeneca drug used in the treatment of high-cholesterol as well as cardiovascular disease prevention.
Courting and Fines that Pharmaceutical Companies Face
Among several things that were incompliant with ethical prerequisites, pharmaceutical companies often resorted to doctor courting in order to convince them to prescribe specific medications.
GSK, for instance, received a whopping $490 million fine in China after being accused of bribery, yet the UK company has been involved in similar cases in other European and Middle Eastern countries.
There are some rules on educational grants and sponsorships, however, they aren’t clearly established so similar practices are still commonplace.
Switching to generic versions of branded drugs, for instance, is less common in the case of doctors receiving “attention” from pharmaceutical companies, yet such switches could save up to 1 billion pounds yearly.
There are some massive fines that pharma companies have faced: GSK received a $3 billion fine for prescribing Paxil to patients under 18 while Pfizer’s misbranding mishap cost the company $2.3 billion. Similarly, Johnson & Johnson promoted drugs which hadn’t been approved as safe and received a $2.2 billion fine.
The pharmaceutical companies faced with this volatile terrain have to comply with both their shareholder’s interests and the overall welfare of the public. Hopeful, with better regulations and enforceable legislature, these mishaps will begin to disappear.
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