Book contents
- Frontmatter
- Contents
- List of Tables
- List of Figures
- Contributors
- Acknowledgments
- PHARMACEUTICAL INNOVATION
- 1 Introduction
- PART I THE INDUSTRY STRUCTURE OF PHARMACEUTICAL INNOVATION
- 2 The Pharmaceutical Sector in Health Care
- 3 The Economics of Research and Development in the Pharmaceutical Industry
- PART II STRUCTURING INCENTIVES FOR RESEARCH AND DEVELOPMENT
- PART III COMPETITION AND MARKETING
- PART IV PUBLIC EVALUATION OF THE BENEFITS AND COSTS OF INNOVATION
- Notes
- References
- Index
2 - The Pharmaceutical Sector in Health Care
Published online by Cambridge University Press: 18 December 2009
- Frontmatter
- Contents
- List of Tables
- List of Figures
- Contributors
- Acknowledgments
- PHARMACEUTICAL INNOVATION
- 1 Introduction
- PART I THE INDUSTRY STRUCTURE OF PHARMACEUTICAL INNOVATION
- 2 The Pharmaceutical Sector in Health Care
- 3 The Economics of Research and Development in the Pharmaceutical Industry
- PART II STRUCTURING INCENTIVES FOR RESEARCH AND DEVELOPMENT
- PART III COMPETITION AND MARKETING
- PART IV PUBLIC EVALUATION OF THE BENEFITS AND COSTS OF INNOVATION
- Notes
- References
- Index
Summary
Introduction
In 2004 total global pharmaceutical sales were reported to have been about $550 billion in U.S.-dollar equivalents (IMS Intelligence 2005), only a tiny fraction of total global gross national product (GNP) of about $35 trillion (FinFacts 2005).
Sales reported for 2004 in the United States, which spends more per capita and absolutely on pharmaceuticals than does any other country, amounted to only $200 billion, which is about 1.7% of U.S. gross domestic product (GDP in that year, or 11.1% of total U.S. health spending; Heffler et al. 2005). Assuming that drug manufacturers received about 75% of total retail sales and that their net after-tax profit margin was 16% on sales (Fortune 2005), their after-tax profits of about $24 billion in 2004 amounted to only 0.20% of U.S. GDP in that year, and about 1.3% of total U.S. national health spending.
These statistics, which portray the pharmaceutical industry as only a minor player in health care and an almost trivial player in the economy as a whole, belie the importance of the industry in terms of value added and in terms of the heated policy debate it triggers all around the globe.
The value that pharmaceutical research and products add to human existence can be appreciated by anyone who has used pharmaceutical products to reduce pain, eliminate potentially lethal infections, or control high blood pressure or cholesterol, not even to speak of other popular life-style drugs.
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- Pharmaceutical InnovationIncentives, Competition, and Cost-Benefit Analysis in International Perspective, pp. 25 - 53Publisher: Cambridge University PressPrint publication year: 2007