Reporter's Handbook
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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 length and complexity of the research and development (R&D) process, dramatic growth in R&D, increased use of medicines in health care, pharmaceutical costs have increased value for today’s patients, and patent incentives are the key to innovative medicines.
• Drug development is risky as well as costly. Out of 5,000 to 10,000 screened compounds, only 250 enter preclinical testing, 5 enter human clinical trials, and 1 is approved by the Food and Drug Administration.
• According to the Tufts Center for the Study of Drug Development, the cost of developing a new drug is $802 million and takes an average of 10 to 15 years to bring a new medicine from the laboratory to the pharmacy shelf.
• PhRMA companies spent an estimated $38.8 billion to discover and develop new medicines in 2004.
• The average PhRMA member invests a greater percentage of sales in R&D than companies in other major U.S. industries, including the electronics, communications, and aerospace sectors.
• PhRMA member companies spend more on pharmaceutical R&D ($33 billion in 2003) than the National Institutes of Health’s entire operating budget ($27 billion in 2003).
• U.S. companies spend much more on R&D than on promotion.