Term Paper on "How Does the Pharmaceutical Industry Affect the U.S. Economy?"

Term Paper 5 pages (1497 words) Sources: 1+

[EXCERPT] . . . .

Pharmaceutical Industry

How does the Pharmaceutical industry affect the U.S. economy

In the September 01, 2005 issue of Pharmaceutical Executive, it was reported that the overall global industry growth has to slowed to single digit rates: 2004 global dollar volume was $550 billion, a 7% increase over 2003, which represented a 9% increase over 2002. Sales in the United States grew to $235.4 billion, a growth rate of 8.3% compared with 11.5% growth from the 2002 to 2003 period. The United States accounts for 46% of the world's pharmaceutical market.

Comparing pharma to the stock market as a whole, the main market indices finished 2004 as follows: Standard & Poor 9%, Nasdaq 8.6%, Dow Jones Industrials 3.1%, Dow Jones U.S. Pharmaceuticals 10%. According to Fortune, as a whole, pharma placed 28 among the 42 industry groups, the 2003 to 2004 revenue growth of 7% was less than the Fortune 500 median growth rate of 10.3%. In fact, only pharmaceuticals, along with electronics and electrical equipment, telecommunications, and airlines, failed to post profit growth.

In 1995, the total retail cost of the prescriptions dispensed in the United States advanced 13.9% to $64.6 billion, and in terms of prescription volume, the retail market grew 8.3% with 1,235,708,000 and 912,565,000 new and refill prescriptions, respectively, dispensed. The pharmaceutical industry continues to look for innovative ways to reach new customers, for according to the Task Force for Compliance of the National Pharmaceutical Council, "noncompliant patients cost the U.S. economy an estimated $100 billion yearly in lost productivity and extra medical costs, not to mention lost product sales." To target the problem of under use, the industry implements disease management programs, as well as patient-focused education and promotional programs.

The number of approved biotechnology medicines and vaccines has risen steadily over the last two decades, with the total number of biotech products leaping seven-fold in the last 10 years, thus biotech has emerged as an icon of technology. New Jersey, home to eleven of the world's largest pharmaceutical firms, including Merck, Johnson and Johnson, Aventis, Novartis and Wyeth, which account for 40% of the world's pharmaceutical sales, prepared to consolidate three academic institutions, Rutgers, University of Medicine and Dentistry in New Jersey, and New Jersey Institute of Technology into one major state university with locations in Newark, New Brunswick and Camden, for the purpose of creating a powerhouse of biotech talent and capitalize on its infrastructure to attract more grant money and academic stars.

The pharmaceutical industry holds a significant and growing position in the United States economy, in fact pharmaceutical sales by research-based pharmaceutical companies in the United States for the year 2000 estimated $149.1 billion, an increase from $58.3 billion in 1990, according to Pharmaceutical Research and Manufacturers of America 2000.

According to Charles King, "marketing constitutes a major competitive force by which firms strive to differentiate their products and soften price competition, and pharmaceutical firms spend as much on marketing as they do on research and development.

The pharmaceutical industry is one of the most dynamic and largest sectors in the U.S. economy, and during the last decade pharmaceutical companies have become heavyweight contenders. Sales are being driven by the introduction of so-called "lifestyle" drugs such as Viagra to treat impotence and Propecia to alleviate baldness. Wall Street continues to place a high premium on pharmaceutical company stocks because they are long-term, stable investments, and sales of drugs have risen fairly steadily over the last five-to-ten years. According to IMS America, a Pennsylvania-based company that tracks statistics for the drug industry, worldwide sales in twelve key international markets grew an average 8% from August 1998 to July 1999, totaling $197 billion, with the U.S. market showing the strongest growth, 12%. The National Association of Chain Drug Stores estimated pharmacies would sell $121 billion of prescriptions in 1999, an increase of 18% from the previous year. The group also estimated 31,000 U.S. pharmacies would dispense 2.97 billion prescriptions, which is a staggering figure since the American population is roughly 270 million.

Americans spend $200 billion a year on prescription drugs, and the figure is growing at about 12% a year, making drugs the fastest-growing part of the heath care bill, which itself is rising at an alarming rate. The increase in drug spending reflects, in relative equal parts, the facts that people are taking more drugs and that those drugs are likely to be expensive new ones, not the older, cheaper ones, and that the prices of the most heavily prescribed… READ MORE

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