Reporter's Handbook
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, continued investment in R&D, increased use of medicines in health care, increased value for today's patients, and continued importance of patent incentives 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.
- According to theTufts Center for the Study of Drug Development, the cost of developing a new drug now exceeds $1.2 billion. On average, it takes 10 to 15 years to bring a new medicine from the laboratory to the pharmacy shelf.
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 companies spent an estimated $44.5 billion to discover and develop new medicines in 2007.
- 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.”
- PhRMA member companies spend more on pharmaceutical R&D ($44.5 billion in 2007) than the National Institutes of Health's entire operating budget ($28.4 billion in 2007).
- According to IMS Health, the entire pharmaceutical industry spent $12 billion on marketing and promotion in 2006, including $4.8 billion for DTC advertising.This is a great deal less than the amount spent on research and development.
- Growth in overall prescription drug spending has decreased sharply in recent years and in 2006 was at its second lowest level in a decade, at 8.5%, even though 2006 was the first year that many millions of Medicare beneficiaries first gained comprehensive prescription drug insurance.
- Outpatient prescription medicines accounted for only 10 cents of every dollar spent on health care in 2006.
Source: Catlin, A., et. al., “National Health Spending in 2006: A Year of Change for Prescription Drugs,” Health Affairs 27 (January/February 2008): 14-29.
*2007 data represent first three calendar quarters of 2007.
Source: PhRMA Analysis of National Prescription Audit™ data from IMS Health, data through 3rd Quarter of 2007.
- While total patent life in the U.S. is 20 years, for medicines much of that span is spent in research and development. For example, drugs with over $100 million in annual sales had an effective patent life of 11 years in 2003 through 2005. There is evidence that effective patent life is shortening and will continue to decline due to the increasing number of patent challenges which are concentrated at earlier stages. Weakening patent incentives reduces the chance that investors will accept the risks of the long, risky 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.
- 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. In 2005, PhRMA member companies helped more than 7 million patients fill more than 236 million prescriptions. The estimated wholesale value of these prescriptions was more than $5 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, Boston, Denver, Indianapolis, Olympia, St. Paul, Sacramento, Amman, Brussels, and Tokyo. The Association is governed by a 36-member Board of Directors and a 20-member Executive Committee. There are four 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....
Members are listed in Tab 1.
PHARMACEUTICAL AFFILIATES. Pharmaceutical Affiliates shall be persons, partnerships, corporations or subsidiaries, divisions or units thereof, that would be eligible for membership above but for the fact that they have contracted with others to significantly engage in the manufacturer and/or marketing of the Pharmaceutical Affiliate’s finished dosage form ethical pharmaceutical or biological products under the Pharmaceutical Affiliate’s own brand name or another brand name. Pharmaceutical Affiliates may not be subsidiaries or divisions of or owned by a company engaged in the manufacture or marketing of finished dosage form pharmaceutical or biological products, and must be the holder of at least one New Drug Application approved by the Food and Drug Administration.
There are currently no Pharmaceutical Affiliates.
INTERNATIONAL AFFILIATES. International Affiliates shall be persons, partnerships, corporations or subsidiaries, divisions or units thereof, not eligible for membership above,which are the subsidiary in the United States of America of a foreign corporation that is engaged in discovery, research, manufacture, and marketing of finished dosage form pharmaceutical or biological products, for the cure, alleviation,mitigation, treatment, prevention or diagnosis of disease. International Affiliates shall be engaged in the United States of America in clinical, pharmaceutical, biopharmaceutical, or biological research and development of new molecular entities or new therapies, preventatives, or in vivo diagnostics, or new systems of therapy, prevention, or diagnosis.
International Affiliates are listed in Tab 2.
ASSOCIATES. 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:
(1) 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).
(2) Significantly engaged in supplying Members with contract research and development services.
(3) Significantly engaged in supplying Members with contract services in the manufacture of finished dosage form ethical pharmaceutical or biological products.
(4) Providers to Members of advertising or communications services to the health professions.
(5) Firms (a) that make and supply Members with drug discovery software, or (b) that are significantly engaged in providing Members with consulting services in management, marketing and information management directly related to the manufacture, marketing or research and development of ethical pharmaceutical or biological products.
Associates are listed in Tab 2.