This paper examines the broad economic influence of the pharmaceutical industry on the United States. Drawing on data from the early 1990s through the mid-2000s, the paper surveys global and domestic sales figures, compares pharmaceutical performance against major stock market indices, and analyzes rising prescription drug costs. It also discusses the role of biotechnology, the industry's marketing versus research-and-development expenditures, the economics of drug pricing, and employment trends in drug manufacturing. Together, these dimensions illustrate how pharmaceuticals function as one of the largest and most consequential sectors of the American economy.
In the September 2005 issue of Pharmaceutical Executive, it was reported that overall global industry growth had slowed to single-digit rates: 2004 global dollar volume was $550 billion, a 7 percent increase over 2003, which itself had represented a 9 percent increase over 2002.[1] Sales in the United States grew to $235.4 billion, a growth rate of 8.3 percent compared with 11.5 percent growth from the 2002–2003 period.[2] The United States accounts for 46 percent of the world's pharmaceutical market.[3]
Comparing pharma to the stock market as a whole, the main market indices finished 2004 as follows: Standard & Poor's, 9 percent; Nasdaq, 8.6 percent; Dow Jones Industrials, 3.1 percent; and Dow Jones U.S. Pharmaceuticals, 10 percent.[4] According to Fortune, pharma as a whole placed 28th among 42 industry groups; its 2003–2004 revenue growth of 7 percent was less than the Fortune 500 median growth rate of 10.3 percent.[5] In fact, only pharmaceuticals — along with electronics and electrical equipment, telecommunications, and airlines — failed to post profit growth.[6]
The pharmaceutical industry holds a significant and growing position in the United States economy. Pharmaceutical sales by research-based companies in the United States for the year 2000 were estimated at $149.1 billion, an increase from $58.3 billion in 1990, according to the Pharmaceutical Research and Manufacturers of America.[12] 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."[13]
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.[14] Sales are driven in part by the introduction of so-called "lifestyle" drugs such as Viagra, used to treat impotence, and Propecia, used to alleviate baldness.[15] Wall Street continues to place a high premium on pharmaceutical company stocks because they are considered long-term, stable investments, and drug sales have risen fairly steadily over the preceding five to ten years.[16] 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 of 8 percent from August 1998 to July 1999, totaling $197 billion, with the U.S. market showing the strongest growth at 12 percent.[17] The National Association of Chain Drug Stores estimated that pharmacies would sell $121 billion worth of prescriptions in 1999, an increase of 18 percent from the previous year.[18] The group also estimated that 31,000 U.S. pharmacies would dispense 2.97 billion prescriptions — a staggering figure given that the American population at the time was roughly 270 million.[19]
In 1995, the total retail cost of prescriptions dispensed in the United States advanced 13.9 percent to $64.6 billion. In terms of prescription volume, the retail market grew 8.3 percent, with 1,235,708,000 new prescriptions and 912,565,000 refill prescriptions dispensed, respectively.[7] The pharmaceutical industry continues to look for innovative ways to reach new customers. 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."[8] To address the problem of underuse, the industry implements disease management programs as well as patient-focused education and promotional programs.[9]
The number of approved biotechnology medicines and vaccines has risen steadily over the last two decades. The total number of biotech products leaped sevenfold in the ten years prior to 2003, and biotech has emerged as an icon of technological innovation.[10] New Jersey, home to eleven of the world's largest pharmaceutical firms — including Merck, Johnson & Johnson, Aventis, Novartis, and Wyeth — accounts for 40 percent of the world's pharmaceutical sales. The state prepared to consolidate three academic institutions — Rutgers, the University of Medicine and Dentistry of New Jersey, and the New Jersey Institute of Technology — into one major state university with locations in Newark, New Brunswick, and Camden. The purpose was to create a powerhouse of biotech talent and capitalize on existing infrastructure to attract more grant funding and leading academic researchers.[11]
"Rising drug prices and consumer cost burden"
"R&D investment versus marketing expenditure debate"
"Job growth projections in pharmaceutical sector"
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