Key Industry Facts About PhRMA

Patient care has changed significantly over the past 25 years. Medicines now exist to treat conditions that had no treatment a quarter century ago. At that time, lengthy hospital stays, surgery, and time away from family and jobs were common for many patients. Health insurance focused more on reimbursing than on controlling the cost of care. Drug development was a simpler, less expensive process.

Over time medicine has evolved in favor of less invasive treatments, and the role of prescription medicines in treating disease has expanded. Advances in science and technology have given researchers more sophisticated knowledge of the root causes of disease. Scientists can now more effectively design medicines to attack specific disease targets, resulting in the invention of hosts of new medicines. These innovations have contributed to better patient outcomes and increases in our lifespan.

Throughout this quarter century, the biopharmaceutical industry also has evolved. Five major trends characterize these changes — increased complexity of the research and development (R&D) process, continued investment in R&D, increased use of medicines in health care, increased value for today's patients, and continued importance of intellectual property protections including patents and data protection for innovative medicines.

• Drug development is risky as well as costly. Out of 5,000 to 10,000 screened compounds, only 250 enter preclinical testing, five enter human clinical trials, and one is approved by the Food and Drug Administration.

Sources: Burrill & Company, analysis for Pharmaceutical Research and Manufacturers of America, 2008; and Pharmaceutical Research and Manufacturers of America, PhRMA Annual Member Survey (Washington,DC: PhRMA, 2008).

*The “Biopharmaceutical R&D” figures include PhRMA research associates and nonmembers; these are not included in “PhRMA Member Companies’ R&D Expenditures.” PhRMA first reported this data in 2004.

**Estimated

• PhRMA members alone invested an estimated $49.5 billion in 2011 in discovering and developing new medicines. This is more than the National Institutes of Health's entire operating budget ($30.9 billion in 2011).
• The average PhRMA member invests a greater percentage of sales in R&D than companies in other major U.S. industries. In fact, according to the Congressional Budget Office, “The pharmaceutical industry is one of the most research-intensive industries in the United States. Pharmaceutical firms invest as much as five times more in research and development, relative to their sales, than the average U.S. manufacturing firm.”
• According to IMS Health, the entire pharmaceutical industry spent $11.3 billion on marketing and promotion in 2008, including $4.4 billion for DTC advertising.
• Growth in overall prescription drug spending has decreased sharply in recent years and in 2008 was at its lowest rate since 1961 and below overall health care spending growth.
• Outpatient prescription medicines accounted for only 10 cents of every dollar spent on health care in 2007.

Source: CMS, "National Health Expenditures," at http://www.cms.hhs.gov/nationalhealthexpenddata, accessed January 6, 2009.

*The "Biopharmaceutical R&D figures include PhRMA research associates and non-members; these are not included in "PhRMA Member Companies' R&D Expenditures." PhRMA first reported this data in 2004.

**Estimated

• While the basic patent term in the U.S. is 20 years, for medicines much of the time is spent in research and development. Thus the effective patent life for medicines is much shorter. For medicines with annual sales of more than $100 million (which accounts for 90% of the sales of medicines exposed to generic competition) whose generic competitors entered the market in 2005, the average time on the market before generic competition was 11.5 years. Moreover, patent challenges are increasingly occurring earlier and more frequently in a pharmaceutical's life cycle, which can create uncertainty. Weakening patent incentives reduce the chance that investors will accept the risks of the long, risky, and costly development process. It’s important for the U.S. to maintain patent incentives at home, and support them abroad to bring the greater certainty that encourages continued medical innovation for American patients. Source: Grabowski, HG, and Kyle, M, “Generic Competition and Market Exclusivity Periods in Pharmaceuticals,” Managerial and Decision Economics (491 28:2007).
• Pharmaceutical companies have a long-standing tradition of providing prescription medicines free of charge or at reduced cost to patients who might not otherwise have access to these products. Since launch of the Partnership for Prescription Assistance (PPA) in 2005, PhRMA member companies helped more than 9.4 million patients fill more than 94 million (30-day supply) prescriptions. The estimated wholesale value of these prescriptions was more than $11 billion.

About PhRMA

The Pharmaceutical Manufacturers Association (PMA) was founded in 1958.The name was changed to the Pharmaceutical Research and Manufacturers of America (PhRMA) in 1994 to underscore the extraordinary commitment of member companies to research. PhRMA is headquartered in Washington, D.C., and also has offices in Albany, Atlanta, Baton Rouge, Boston, Denver, Indianapolis, Olympia, St. Paul, Sacramento, Amman, and Tokyo.

The Association is governed by a 31-member Board of Directors and an 18-member Executive Committee. There are two categories of membership in PhRMA:

MEMBERS. Any person, partnership, corporation, or subsidiary, division or unit thereof, in the United States of America or any of its territories or insular possessions, significantly engaged in the manufacture and marketing of finished dosage form ethical pharmaceutical or biological products under his or its own brand names for the cure, alleviation, mitigation, treatment, prevention or diagnosis of disease, and significantly engaged in pharmaceutical, biopharmaceutical or biological research and development of new molecular entities or new therapies, preventative, or in vivo diagnostics, or new systems of therapy, prevention, or diagnosis and who will continue to conduct such research and development.

RESEARCH ASSOCIATES. Research Associates shall be persons, partnerships, corporations, or subsidiaries, divisions or units thereof, not eligible for membership under Subsection (a) above, and not subsidiaries or divisions of or owned by a company engaged in the manufacture or marketing of finished dosage form pharmaceutical or biological products, who are engaged in research and development (significantly engaged, for profit, in biological research on their own behalf directly related to the development or production of ethical pharmaceutical or biological products for the cure, alleviation, mitigation, treatment or prevention of disease).