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Key Industry and PhRMA Facts
Industry Facts
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 who today can be treated more effectively with medicines.
Over time medicine has evolved in favor of less invasive treatments, and the role of prescription medicines in treating diseases has expanded. Advances in science and technology have given researchers more sophisticated knowledge of the root causes of disease. Scientists now can 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 increased lifespan.
Throughout this quarter-century, the biopharmaceutical industry also has evolved. Five major trends characterize these changes -- increased complexity of the research and development 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.
Research and Development Continues to Grow
Sources: Burrill & Company, analysis for Pharmaceutical Research and Manufacturers of America, 2010; and Pharmaceutical Research and Manufacturers of America, PhRMA Annual Member Survey (Washington,DC: PhRMA, 2010).
*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
- Drug development is risky as well as costly. Out of 5,000 to 10,000 tested compounds, only 250 enter preclinical testing, five enter human clinical trials, and one is approved by the Food and Drug Administration.
- PhRMA member companies alone spent an estimated $49.5 billion to discover and develop new medicines in 2011. That 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.”
- 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 healthcare spending growth.
- Outpatient prescription medicines accounted for only 10 cents of every dollar spent on health care in 2008.
2008 National Health Expenditures
Source: Centers for Medicare & Medicaid Services (CMS) 2010, National Health Expenditures; Milliman analysis.
*“Other”includes dental services, durable medical equipment, other professional services, other non¬durable medical products, other personal health care, public health activity, research, structures and equipment.
• While the basic U.S. patent term 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 percent 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 United States 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 longstanding 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 in 2005, PhRMA member companies have helped more than 9.4 million patients fill more than 94 million prescriptions (30-day supply). The estimated wholesale value of these prescriptions was more than $11 billion.
About PhRMA
PhRMA represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $49.5 billion in 2011 in discovering and developing new medicines.
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 32-member board of directors. 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
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).
