№ 4 Subject: Pharmaceutical Market of Ukraine, Great Britain and the USA

 

Despite the development of local pharmaceutical manufacturing units, the development in locally manufactured drugs is below par to those imported into the country. This is because the domestic manufacturing units are extremely small and focus only on the production of older drugs. Also, despite having obtained GMP certificates, these pharmaceutical manufacturers can compete with the drugs imported only in terms of price. Thus, it can be seen that it is necessary for Ukraine to import drugs from foreign manufacturers to make up for the shortfall of the medicines in the local market. Latest statistics have confirmed that the annual supply of medical products imported into the country is much below its actual requirement. Hence, exporting and marketing of foreign medical products to Ukraine would be an extremely feasible and paying proposition. It is however important to remember that, before importing any foreign pharmaceutical product into the country, it is essential to register said product with the State Health Ministry. An amendment to the Law of Medicines in 2006, has been set up to provide protection of pharmaceutical data (which is submitted for marketing approval) from unfair commercial use. However, one needs to keep in mind that despite this there are grave concerns that intellectual property rights are not being enforced.

The domestic pharmaceutical sector is slowly changing form and growing. Privatisation and consolidation of once state owned industries is a slow but positive step in the building of this industry. At the present time there are fifty eight companies manufacturing drugs in Ukraine. Most of these produce lower-priced products, such as generic drugs and vitamins. Some of the large companies manufacturing these medical products are Darnytsia, Kyivmedpreparat, Pharmak and Halychpharm. Two of the countries giants in the pharmaceutical industry, Kyivmedpreparat and Halychpharm have got the Ukraine government’s approval to merge and form Arterium Corp which will be involved in the research, marketing and distribution of new medical products.

Despite this, the pharmaceuticals imported into the country accounted for 62 per cent of the Ukrainian drugs market. Of these 19.7 per cent of drugs were imported from Germany, 14.7 per cent from India, 9.5 per cent from France and 3 per cent from USA. It has also been observed that pharmaceutical companies from Eastern Europe hold a sway in Ukraine. This is possibly because both the patients and the doctors are familiar with the drugs, which have been present in the market from the time before its dissolution from the Soviet Union. As a result of their long-term presence in the Ukrainian market, they command the loyalty of the consumers.

According to BISNIS, most multinational pharmaceutical manufacturers who play a role in the Ukrainian market are present with their own respective representative offices or in a few cases through the local distributors.

Although, in financial terms, India ranks as the second largest exporter of pharmaceutical products after Germany which ranks first, its pharmaceutical exports are the largest in volume. Thirty per cent of Indian exports to Ukraine are in the pharmaceutical sector. Representative offices of a large number of Indian companies, like Ranbaxy, Dr Reddy’s Laboratory, Sun Group etc, have been set up in Ukraine. These major pharmaceutical companies have also set up the Indian Pharmaceutical Manufacturing Association (IPMA).

Today Ukraine is one of the biggest consumer markets in Europe. It has bilateral relationships with many countries all over the world. Despite getting its independence only a little over ten years ago, it is emerging as a major player in trade and industry in Eastern Europe. Its pharmaceutical industry is ieed of help at the moment and this makes it a good time for Indian pharmaceutical companies to step in.

The pharmaceutical industry and market in the UK

Pharmaceutical companies are making a great contribution to the UK economy, higher than most other high-tech industries. The pharmaceutical sector’s relative importance becomes even more obvious when considering productivity, measured as Gross Value Added (GVA).

• Figure 1 – The economic value of the pharmaceutical industry, 2008–2010
• Figure 2 – Annual growth and sales to NHS, 2003–2011
• Figure 3 – Components of growth for the pharmaceutical market in the UK, 1995–2011
• Figure 4 – International price comparisons
• Figure 5 – UK price indices
• Section 6 – Industry profitability

 

Figure 1 – The economic value of the pharmaceutical industry, 2008–2010

Economists use Gross Value Added (GVA) to represent the contribution made by busines and industry to the UK’s national income. To measure GVA the value of output generated by the business or industry is calculated and from this the cost goods and services involved in production are deducted.  

The graph below shows how the pharmaceutical industry’s contribution to the UK’s national income has evolved over recent years. This has been compared to other medium and high-tech industries as defined by the Department for Business, Innovation and Skills. For information on annual average GVA produced per employee for a cross-section of industry sectors, please visit our Employment in the pharmaceutical industry in the UK section.

Note: Using the new definition of high and medium high tech sector (SIC2007).
Source: ONS Annual Business Survey 2010, Section C Manufacturing, Release date 17 November 2011

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Figure 2 – Annual growth and sales to NHS, 2003–2011

The first graph below shows the total sales of prescription medicines to the NHS over the last nine years. The share of medicines sold via primary care is marked in dark purple and the share sold in hospitals (secondary care) is marked in light purple. The second graph below shows the growth profile for the same time period.

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Figure 3 – Components of growth for the pharmaceutical market in the UK, 1995–2011

The average annual growth (%) of the pharmaceutical market in terms of sales is shown on the y-label in the graph below. The bars show the contribution to growth attributable to factors such as volume increases, price changes, new products and other factor (new formulations or pack sizes). Prices have had a deflationary impact on the market in recent years.

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Figure 4 – International price comparisons

This table shows a comparison of prices of branded medicines in the UK with prices in a range of European countries and the USA. It compares the prices of all preparations for the top 150 branded medicines in the UK with other countries, depending on the availability of matching preparations elsewhere.

​	2008 DH estimate	2008 rank​	2009 DH estimate​	2009 rank​	2010 DH estimate​	2010 rank
USA	252​	1	249	1	281	1
Germany	142	2	169	2	155	2
Ireland	​134	​3	144	3	133	3
Belgium	​122	4	​132	4	122	5
Finland	119	5	​113	10	105	9
Netherlands	​115	6	–	12	–	12
Austria	​111	7	125	6	117	6
France	​108	8	115	9	104	10
Sweden	​116	9	126	5	130	4
Spain	​109	10	118	8	106	8
Italy	​101	11	1208	7	113	7
UK​	​100	1​2	100​	11	100​	11

Sources:

• Department of Health ‘PPRS Report to Parliament’ 10th and 11th reports
• 2009 ABPI calculations using ‘PPRS Report to Parliament’ methodology

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UK price indices

The graph below shows the development of Retail Price Index (RPI) and Producer Price Index (PPI) for pharmaceutical manufacturing between 1998 and 2010. PPIs are a series of economic indicators that measure the price movement of goods bought and sold by UK manufacturers. It is a base-weighted index using the ‘basket of goods’ concept. The PPI line graph shown below is for pharmaceutical products only and refers to the prices of these products when leaving the manufacturing plant, also often referred to as ‘ex-factory prices’.

The comparison between pharmaceutical PPI and the RPI demonstrates that prices for medicines in the UK have lagged behind prices generally. 

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Industry profitability

Many pharmaceutical and biopharmaceutical companies are registered on the global stock markets in order for the public to be able to invest in and part-own those companies. Over the last decade these markets have seen a large interest in biotechnological companies.

There are currently 10 biotechnology companies and 11 pharmaceutical companies on The London Stock Exchange (LSE) UK Main Market (FTSE100, FTSE250, FTSE500 etc), and 16 biotechnology companies and 13 pharmaceutical companies on the Alternative Investment Market (AIM) for smaller companies. The profitability measure on the LSE is market capitalisation, which is a measurement in terms of size of a company equal to the share price times the number of shares outstanding (i.e. shares that have been authorised, issued, and purchased by investors).

 

Health care sector indices

Financial Times (FT) and Reuters both publish indices for the healthcare sector as a whole as well as for individual companies:

• Financial Times health care market data 
• Reuters health care market data

The Reuters website also publishes figures on profitability measures such as Return on Investment (ROI), performance measures used to evaluate the efficiency of an investment, and Profit Margins. For more information, please see the Reuters: Pharmaceuticals diversified web page or the Reuters: Pharmaceuticals generic/specialty web page. These data are updated daily and should be extracted directly from their websites for accuracy.

The U.S. Pharmaceutical Industry

The United States is the world’s largest market for pharmaceuticals and the world leader in biopharmaceutical research. U.S. firms conduct 80 percent of the world’s research and development in biotechnology and hold the intellectual property rights to most new medicines. In 2010, the pharmaceutical sector employed approximately 272,000 people (source:  Bureau of Labor Statistics), and according to the Pharmaceutical Research and Manufacturers of America (PhRMA), those manufacturers spent $67.4 billion on research and development in 2010.

The markets for biologics, over-the-counter (OTC) medicines, and generics show the most potential for growth and have become increasingly competitive. Biologics, valued at $67 billion in 2010 (source:  IMS Health), account for a quarter of all new drugs in clinical trials or awaiting Food and Drug Administration approval. OTC market growth will be driven by a growing aging population and consumer trend to self-medication, and the conversion of drugs from prescription to non-prescription or OTC status. Generic drug sales in the United States were valued at $78  billion in 2010 (source:  IMS Health).

The U.S. market is the world’s largest free-pricing market for pharmaceuticals and has a favorable patent and regulatory environment.  Product success is largely based on competition in product quality, safety and efficacy, and price. U.S. government support of biomedical research, along with its unparalleled scientific and research base and innovative biotechnology sector, make the U.S. market the preferred home for growth in the pharmaceutical industry.  

Industry Subsectors

Originator chemically synthesized drugs and biotechnology-derived drugs are developed as a result of extensive research and development (R&D) and clinical trials in both humans and animals.  The originator relies on patents and other forms of intellectual property rights to justify the investment required to bring a product to market.

Generic drugs are duplicative copies of originator chemically-synthesized drugs that contain the same active ingredient, are identical in strength, dosage form, and route of administration.  The prices of generic drugs are typically lower than the prices of originator drugs, particularly in the U.S. market where they are typically sold at a substantial discount from originator drug prices. 

Over-the-Counter (OTC) drugs are distinguished from originator and generic drugs in that consumers do not need a prescription to purchase the drug.  OTC drugs are considered by regulators to be safe for self-diagnosis and self-medication. 

Active Pharmaceutical Ingredients (APIs) and Excipients. Medication, in dosage form, is composed of active pharmaceutical ingredients (APIs) and excipients.  APIs are the ingredients that make drugs effective.  Excipients are inert substances that give a medication its form, such as cornstarch (to make a tablet) or sterile water (to make a liquid) and serve as a delivery vehicle to transport the active ingredient to the site in the body where the drug is intended to exert its action. 

Biosimilars, or Follow-on Biologics, are versions of biological products that reference the originator product in applications submitted to a regulatory body.   With the signing into law of healthcare reform legislation in March 2010, the FDA is authorized to approve biosimilars or follow-on versions of biologic drugs that were approved under the Public Health Service Act. The FDA is in the process of developing implementing guidelines and procedures to determine the extent of testing necessary to establish similarity of a follow-on product with a reference originator biologic. 

 

 

 

 

The UK pharmaceutical industry

The pharmaceutical industry is a global enterprise. It is dominated by a few

multinationals. The US is the industry’s largest and most profitable market.

Nonetheless, Europe, and the UK in particular, provide a strong market for medicines

and have traditionally been important sites for drug-related R&D. Two of the largest

pharmaceutical companies, questioned as to the relevance of UK health policies to their

global businesses, testified to the importance of the UK as a site for the marketing and

development of medicines:

Both those involved in the UK pharmaceutical industry and its critics have given

evidence of its strength and success. It is fifth largest in the world by total sales,

representing 7% of world sales, after the US, Japan,  Germany and France.14 The UK is the

third largest direct exporter of pharmaceuticals; has the third largest world trade surplus;

and accounts for 10% of world pharmaceutical R&D expenditure. The pharmaceutical

industry is an important employer and contributor to the economy of this country.15

The UK industry operates within a highly regulated environment. The way in which it

undertakes research, produces, licenses and markets its products are all subject to a detailed

regulatory system. In this chapter were discuss the industry. We later go on to look at

systems for controlling it.

Research and development

R&D facilities in the UK are world-class and British-based companies have a long

history of success in drug development. The pharmaceutical industry invests some Ł3.3

billion a year into R&D in the UK. Drug companies based in the UK employ 29,000

individuals in R&D, making it one of the largest employers of science graduates. The

industry funds more healthcare-related research in the UK than every other source

combined – six times as much as the Department of Health; five times as much as medical

charities; eight times as much as the Medical Research Council (MRC)

Funding of health-related R&D

The pharmaceuticals sector conducts 65% of health-rated R&D, and accounts for

around 40% of all industrial R&D expenditure in the UK, spending about Ł10 million each

day. The leading UK companies in R&D are GSK, AstraZeneca, Pfizer, Eli Lilly, Wyeth,

Roche, Merck Sharpe & Dohme and Novartis.17

The combination of a strong history and favourable environment means that the UK

pharmaceutical industry is able to “punch well above its market weight”: only 3% (by

value) of the world’s prescription medicines are sold here, yet the UK attracts around 10%

of global investment in pharmaceutical R&D.18 This is more than half of the total

pharmaceutical R&D investment in Europe as a whole (see Figure 2, below). Twenty-five

of the world’s leading medicines have their origins in this country, which is more than any

country except the US.

 

. The development of effective medicines has contributed significantly to the welfare of

patients, over the last 50 years in particular. Examples include the development of vaccines

against infectious diseases, the use of H2-antagonists in the treatment of peptic ulcers and

the discovery of AZT for the management of HIV/AIDS. The effective treatment of heart

disease with clot-busting medicines and anti-hypertensive drugs has helped reduce related

mortality rates by 40% in the last decade alone.21

According to the Association of the British Pharmaceutical Industry (ABPI), the UK

pharmaceutical industry’s representative body, improved treatments in 12 areas of serious

illness since the 1950s have reduced hospital bed days by a number equivalent to Ł11

billion NHS savings per year. This is 4 billion more than the total annual spend by the

NHS on medicines in England.22 A successful pharmaceutical industry therefore has

unquestionable healthcare as well as economic benefits. Advances in medicines and devices

can mean greater convenience in use as well as sometimes significant improvements in

treatment.

Generic medicines

All the major pharmaceutical companies produce branded products. Another section

of the industry has traditionally produced generic medicines, which come to market once

the branded drug’s patent expires. Generic drugs play a major part in containing NHS

drugs expenditure. In 2002, unbranded medicines accounted for 53% of all prescriptions

dispensed in England, but 20% of total drug costs. Four years after patent expiry of a

branded product, generic drugs will account for about half of the drug’s market (UK

average) and the average price differential between branded and generic versions of the

same drug is approximately 80%.

 

In the UK, those prescribing in the community are encouraged to write the generic

drug name, whereas in many other countries (and in UK hospitals) there is an automatic

generic substitution system in place. Nevertheless, the rate of generic prescribing is still

very high compared with other major European pharmaceutical markets, and substantial

costs savings are achieved. In 2003, 77.8% of prescriptions were written generically, a

record of which the Department is proud.24 Since 1997, the proportion of prescriptions

written and dispensed generically has significantly increased, though cost savings appear to

have slowed.

Over the past decade, there have been significant changes in the pattern of UK generic

manufacturing ownership, leading to increasing domination by large international generic

manufacturers. In general, these manufacturers operate independently of, and in

competition with, the major brand name companies. However, the Ł4.4 billion acquisition

of two major generic producers by the Swiss firm, Novartis, in February 2005, may presage

a major change. Novartis, the world’s sixth-largest producer of branded drugs, is now the

world’s largest manufacturer of generics.

The Pharmaceutical Industry Competitiveness Task Force

Despite its continuing success during the 1990s, there were increasing concerns about

the competitiveness of the UK pharmaceutical industry that were voiced at a meeting in

November 1999 between the Prime Minister and the Chief Executive Officers (CEOs) of

AstraZeneca, Glaxo Wellcome and SmithKline Beecham. The CEOs argued that the

traditional factors that underpinned the UK’s past success in pharmaceuticals were no

longer sufficient to guarantee good performance, and that an initiative was required to

ensure the UK retained its competitive edge. They expressed particular concern about

difficulty in getting their products to the UK market, and intellectual property protection.

This led to the establishment of the Pharmaceutical Industry Competitiveness Task Force

(PICTF).

The overall aim of PICTF was to look at ways of ensuring that the UK remained an

attractive location for the pharmaceutical industry, with specific reference to international

competitiveness, the free movement of medicines within the EU and European licensing of

medicines, the UK as a site for R&D (including partnerships with academia) and the NHS

as a location for clinical studies. The group was co-chaired by Lord Hunt, then

Parliamentary Under Secretary of State for Health, and Sir Tom McKillop, CEO of

AstraZeneca, with equal representation from Government and the industry.

PICTF published a report in March 2001 that proposed specific measures and

commitments by Government to assist the UK pharmaceutical industry. It also defined

‘Competitiveness and Performance Indicators’ for the industry, to be recorded and

published each year to assess trends over time. These indicators provide the objective data

to underpin assessments of how well the UK is performing in the key areas that are crucial.

The first set of indicators was published in March 2001 and the most recent set was

published in December 2004. They show that the UK currently has:

A pharmaceutical industry that contributes significantly to the UK economy;

A comparatively strong scientific research base;

An impressive record of pharmaceutical innovation;

A relatively rapid regulatory process for medicines compared to other countries; and

Relatively slow uptake of medicines by prescribers.

There are not enough trained medical researchers in the UK. This means there are too

few individuals who can organise clinical trials or take part in a reviewing or

implementation capacity.

 There is a shortage of appropriately trained clinical investigators in the UK, and this

reflects lack of investment in clinical research and problems with clinical training

pathways.

Specialist facilities are also lacking. There are very few centres in which paediatric

clinical trials may be effectively conducted, for example. This will become more relevant

following the introduction of a new European Regulation on Paediatric Medicines in 2006,

which will require more medicines to be licensed for use in children.

Medicines licensing

Drug approval and licensing systems worldwide are based on detailed requirements

and elaborate processes, the scope of which is constantly changing. However, the core

elements of drug control remain essentially unchanged.

 The executive arm of the UK Licensing Authority is the Medicines and Healthcare

products Regulatory Agency (MHRA), which is also responsible for approving clinical

trials48. The MHRA is assisted by the Committee on the Safety of Medicines (CSM), and

the Medicines Commission. These latter two organisations are due to be merged into one

over-arching body, the Commission for Human Medicines. Medicines may be licensed for

use in the UK either on a national basis (directly through the MHRA), through a

centralised approval system of the European Medicines Agency (EMEA) or through a

procedure for ‘mutual recognition’. Under the centralised scheme, companies apply for a

licence directly to the EMEA. The centralised approval system is already compulsory for

biotechnology products and has expanded in scope to cover drugs for AIDS, cancer,

neurodegenerative diseases and diabetes. Alternatively, a company may designate one EU

country to approve a drug licensing application, and then receive marketing authorisation

in various EU countries, provided these other countries agree. Under this ‘mutual

recognition’ procedure, all EU countries in which marketing permission is sought receive

the full drug licence application, and any objections are considered and resolved through

EMEA’s oversight body, the Committee on Human Medicinal Products (CHMP). Details

for the arrangements for medicines licensing, regulation and post-licensing surveillance are

discussed in Part 5.

Once licensed, the drug itself is under patent protection for 10 years, although in

certain circumstances this may be extended. Once the period of patent protection has

expired, the originating company is deemed to have been rewarded for risks of innovation

and generic versions of the drug may enter the market. A generic medicine contains the

same active ingredients as an original product that has been researched and developed by a

pharmaceutical company. Regulatory standards for safety and efficacy are the same for

generic medicines as for branded products and marketing authorisation must be obtained

from the MHRA before the drug is allowed on to the market. Additional clinical data is not

required. The manufacturers of generic medicines need prove only that their products are

effectively identical to the original branded product, implying that they have identical

effects on patients.

Post-licensing evaluation, including value for money assessments

.The initial marketing authorisation lasts for five years, at which time the company must

apply to the MHRA for a further, essentially permanent, licence if it wishes the product to

remain on the market. The legal criteria for re-licensing are the same as those for the

original assessment (safety, efficacy and quality) but in reality scrutiny is much less

stringent and would rarely involve the CSM. Efficacy is rarely considered. There is no

specific policy regarding the continuing evaluation and safety assessment of medicines.

The MHRA is also charged with conducting more general post-marketing surveillance.

This may involve scrutiny of Phase IV trials, which include patients in a more typical

clinical setting, as well as monitoring published medical literature and evaluation of

spontaneous reports of suspected adverse drug reactions (ADRs.

Legislation requires that pharmaceutical companies must provide information on their

products on request from healthcare professionals. This obligation continues once

medicines come off-patent and does not apply to generic companies. Large companies in

the UK may each receive 15–30,000 requests for information annually. As an example,

Pfizer, the largest supplier of prescription medicines to the NHS, pays over Ł1 million

annually to cover the cost of providing this information service.51

Information to prescribers

A Summary of Product Characteristics (SPC) is issued to prescribers and other

healthcare professionals for every new drug. The detail of content, style, layout and format

are closely defined and approval is part of the licensing process.

The British National Formulary (BNF), which is published biannually, also provides

information to prescribers. The BNF is published jointly by the British Medical Association

(BMA) and the Royal Pharmaceutical Society of Great Britain (RPSGB). It provides

information on the prescription, dispensing, administration and cost of medicines.

A range of alternative sources of independent information is available, including the

Drug and Therapeutics Bulletin (DTB) that is published by Which? and distributed by the

Department of Health to all doctors,52 the Cochrane Collaboration and the James Lind

Library. Medical journals provide a variety of specialist and non-specialist data relating to

clinical trials or basic scientific studies. Industry produced or sponsored information is also

provided to prescribers, in the form of journal supplements, reprints and other literature.

Information to patients

Patient Information Leaflets (PILs), which are legally required documents written in

accordance with EU regulations and approved by the MHRA, are printed and distributed

alongside medicines by pharmaceutical companies to inform patients of how to take their

medicine most effectively and to warn them of possible risks and side-effects. Like the SPC,

they are approved as part of the licensing process; however, the regulations are not so

prescriptive for PILs, allowing limited variation in their content and appearance. The PIL

must correspond to the SPC. In response to long-standing criticisms, the MHRA set up a

Patient Information Working Group in 2003, to review the design, content and utility of

PILs. The work of this group is continuing

In addition to the PIL, patients (and carers) may receive industry-produced pamphlets

or written instructions through their doctor or other healthcare professional. Patients can

also access large amounts of information and promotional material on the Internet.

The Department provides a grant to cover this service.

Professional and patient education

Doctors are required to continue their education after they have qualified by taking

part in accredited activities. These may take the form of attendance at training days or

workshops. Industry funds over half of all postgraduate education and training for doctors

in the UK, often meeting the travel and accommodation costs of attendance. The

pharmaceutical industry also funds a significant amount of training for nurses. In 2003, for

instance, GSK funded 235 nursing diplomas in respiratory disease management and 199

diplomas in diabetes management.

Education for patients is provided in a variety of ways, including disease awareness

campaigns, which are discussed in detail in Part 8. Such campaigns are designed to increase

awareness among the general public of particular conditions that may be under-reported

or under-diagnosed and to encourage people to seek treatment. Often, such campaigns are

sponsored by a drug company and may bear a company’s logo; they may be also endorsedby a charity or patient organisation and/or supported by a celebrity.

Guidelines for disease awareness campaigns, developed jointly between the MHRA and the ABPI, were published in April 2003. The guidelines state that educational materials may highlight the availability of treatment but may not focus on, or name, any single intervention.

The promotion of drugs

Worldwide, there has been a marked trend to substantially increased expenditure on

marketing. In the US, major pharmaceutical companies spend of the order of 24% to 33%

of sales on marketing, about twice as much as on R&D.55 Exact comparisons are

complicated because of uncertainties about the dividing line/overlap between marketing

and related activities, notably provision of drug information and professional education

programmes. We have not been presented with UK figures, but direct promotional

expenditure in this country is proportionately lower than in most European countries,

reflecting the dominance of the NHS as the major drug purchaser and the terms of the

Pharmaceutical Price Regulation Scheme (PPRS),

Prescription-only medicines may be promoted only to healthcare professionals, except

in very specific cases such as Government-endorsed vaccination programmes. Promotion

to prescribers may take many forms:

a) Drug company representatives. Approximately. 8,000 drug company representatives

operate in the UK and play an important role in information provision and medicines.

 

b) Sponsored attendance at industry-organised events or medical conferences. Travel and

accommodation costs are often met by the company. Other forms of hospitality are

also provided.

c) Journal articles and supplements supporting use of the company’s drug. These are

distributed free to prescribers and are available at conferences and on the Internet.

d) Direct advertising. Advertisements are placed in medical journals and magazines.

Direct mailing to healthcare professionals often takes the form of informing prescribers

of changes in drug delivery systems or the availability of new drug formulations.

Approximately 80% of medicines advertising is aimed at doctors, with an increasing

amount targeting nurses with new prescribing powers

Public relations and marketing agencies are often used by the pharmaceutical industry

to assist with the promotional activities described above. ‘Medical communications’ play an important role in the marketing of medicines. The main aim is to improve sales figures and there are dedicated agencies that often form part of enormous, multinational PR and communications companies, such as Ogilvy, Burson-Marsteller,

Medical communications agencies may be involved in all or some of the following:

a) Pre-marketing of drugs;

b) Identification of disease areas;

c) Disease awareness campaigns;

d) Consumer education and marketing;

e) Publications and papers;

f) Conferences, meetings and hospitality;

g) ‘Product lifecycle management’;

h) Regulatory and policy issues;

i) Grassroots communications;

j) Key opinion leader development; and

k) The production of ‘educational’ materials aimed at prescribers.

A critical element of the work of medical communications companies is the

recruitment and training of key opinion leaders (KOLs), who are usually ‘authoritative

third parties’ such as physicians at the top of their field. These individuals may be paid to

speak and write on behalf of the sponsoring pharmaceutical company.

 Increasingly creative methods are used in the promotion of drugs by Industry. Which?

cited a financial donation made by the manufacturers of Cipralex (escitalopram, an

antidepressant manufactured by Eli Lilly) to Depression Alliance when GPs completed and

returned a feedback leaflet relating to their drug58 and a spoof Mr Man book (‘Mr Sneeze’)

that was sponsored by a drug company and carried information about its anti-allergy

product.

The direct advertising of prescription drugs to patients is prohibited. Direct-to-

consumer advertising (DTCA) of prescription-only medicines is permitted only in the US

and New Zealand. Moves towards extending DTCA to Europe proposed by the European

Commission were quashed by the European Parliament in October 2002 by a majority of

494 to 42. Only over-the-counter (OTC) medicines may be advertised to the UK general

public. The Medicines (Advertising) Regulations 1994, amended in 1999, govern the

advertising of these medicines. There are specific regulations relating to promotional

methods that could lead to the unnecessary or excessive use of medicines.

85. Complaints regarding advertising material are handled by a variety of bodies. The

Proprietary Association of Great Britain (for OTC medicines), the Prescription Medicines

Code of Practice Authority (PMCPA, for prescription-only drugs) and the Advertising

Standards Authority operate as self-regulatory schemes and take responsibility for

handling advertising complaints alongside the MHRA. Corrective statements are rarely

mandatory, although a recent increase in the number of such statements required by the

MHRA has been observed.

 A number of processes are in place to control the research, marketing and promotional

activities of the UK pharmaceutical industry. These include:

a) International standards of good clinical practice (GCP) in research;

b) Research Ethics Committees;

c) Medicines licensing regulation;

d) Post-marketing safety surveillance and drug evaluation; and

e) Cost assessment.

Orphan drugs

In order to increase rates of research into areas of serious disease that affect relatively

few people (and therefore might be expected to have low market value) the US Orphan

Drugs Act was passed in 1983 in the US and its principles were adopted in the European

Orphan Drugs Act in 2000. Incentives to develop orphan drugs include intellectual

property protection and 11-year market exclusivity.

A number of criticisms have been levelled against the current system for encouraging

the development of orphan drugs. The lack of competition drives up orphan drug prices

and this may have important economic implications for PCTs and other healthcare

providers. An example of this is nitric oxide, which was available for years and, unlicensed,

cost very little (it cost approximately Ł2,000 to supply a neo-natal unit with nitric oxide for

one year71). Two clinical trials proved the benefit of inhaled nitric oxide and it was

approved and received a patent in the US and EU on this basis.72 Since licensing, nitric

oxide now costs many times more (it was estimated that supply of nitric oxide for the same

neo-natal unit would now cost over Ł63,000 per year).

Some drugs marketed as Orphan Drugs may have required little research input. The

quality of clinical trials of Orphan Drugs has been questioned. In addition, innovation in a

particular area may be reduced once a single product is available, due to market exclusivity.

The National Institute for Clinical Excellence

The uptake of novel drugs, an issue of great importance to the industry, is partially

determined by NICE. The Institute issues guidance about the use of both old and new

medicines and procedures. Guidance is of four main forms:

a) Technology appraisals: recommendations on the use of new and existing medicines

and other treatments (devices, surgical and other procedures, diagnostic techniques

and health promotion methods);

b) Clinical guidelines: recommendations on the appropriate treatment and care of

patients with specific diseases and conditions, such as diabetes and schizophrenia;

c) Cancer service guidance: recommendations on arrangements for the organisation and

delivery of services for people with cancer; and

d) Interventional procedures: guidance about whether interventional procedures used for

diagnosis and treatment are safe enough and work well enough for routine use. An

interventional procedure is one used for diagnosis or treatment that involves making a

cut or hole in the body, entry into a body cavity or using electromagnetic radiation

(including X-rays or lasers) and ultrasound.

NICE currenty publishes around 25 technology appraisals, 12 clinical guidelines and

60 pieces of interventional procedures guidance each year. Of the 25 technology appraisals,

not all are for new drugs; they can also be reviews of non-drug treatments, re-reviews or

reviews of medicines licensed several years ago. This means that a minority of new drugs

approved by the MHRA are subsequently subject to NICE scrutiny. The Department of

Health asks the Institute to look at particular drugs and devices only where the availability

of the drug or device varies across England and Wales or where there is confusion or

uncertainty over its value.

The pharmaceutical industry has some say in the selection of topics for appraisal.

Drug companies provide information to the National Horizon Scanning Centre on the

development of new pharmaceutical products and their licensing position and have one

seat on the Advisory Committee on Topic Selection (ACTS), which assesses proposals for

work topics for NICE against published criteria. The Joint Planning Group, which

considers ACTS’ proposals and advises Ministers, who take final decisions on NICE’s work

programme, does not include the pharmaceutical industry in its membership. NICE’s

approach to engaging with the pharmaceutical industry in the development of its

technology appraisals and clinical guidelines is as follows:

a) NICE drafts a written consultation on the scope for a technology appraisal or a clinical

guideline.

b) NICE invites relevant members of the pharmaceutical industry, alongside the other

stakeholders, to a meeting at the start of the development of a piece of guidance to

discuss the scope, the approach to assembling the evidence base, and the key issues that

will be addressed during the development of the guidance.

c) NICE consults on the evidence to be used by the advisory body and all stakeholders are

given the opportunity to supplement the evidence base. Ultimately, the evidence that is

taken account of is a matter for the advisory body, which sets out the rationale for the

use or otherwise of the evidence submitted by all stakeholders.

d) The advisory body prepares a written consultation on the draft recommendations, on

two occasions during the development of a clinical guideline (where there is no appeal

stage), and on one occasion during the development of technology appraisal guidance

(where there is an appeal stage). Comments received from the pharmaceutical industry

on draft documents, in common with responses from other stakeholders, are posted on

the Institute’s website.

e) In the technology appraisal programme the relevant pharmaceutical company,

alongside other stakeholders, has the opportunity to submit an appeal on the grounds

that the Institute has exceeded its powers or has failed to follow its process, or that the

guidance is perverse.

The Pharmaceutical Price Regulation Scheme

The Pharmaceutical Price Regulation Scheme (PPRS) is a mechanism for determining

the profit made by drug companies through the sales of their medicines to the NHS.73

Details of the Scheme, which has been running since 1956 (when it was known as the

Voluntary Price Regulation Scheme) are negotiated periodically by the Department of

Health and the ABPI. The present Scheme came into force on 1 January 2005 and, unless

either side withdraws beforehand, will continue until at least 2010. The overall objectives of

the PPRS are to:

Secure the provision of safe and effective medicines for the NHS at reasonable prices;

Promote a strong and profitable industry capable of such sustained research and

development expenditure as should lead to the future availability of new and improved

medicines; and

Encourage the efficient and competitive development and supply of medicines to

pharmaceutical markets in this and other countries.

The PPRS, which applies only to companies supplying licensed brand name products

to the NHS, indirectly controls drug prices. Although it nominally applies to all such drug

suppliers, only those companies with sales each year to the NHS of more than Ł25 million

become involved in detailed negotiations. Sales by the 44 companies currently involved at

this level account for 94% of the total amount the NHS spends on purchasing brand name

products.

Through the Scheme, each year individual companies are set a level of return on

capital (ROC; the amount of money they can earn through sales to the NHS). Once this

profit target has been agreed, it is for the company to adjust the prices of its portfolio to

reach that target. Companies are required to reimburse the NHS when their returns are

above target, and may increase their prices when returns are below target.

Target ROCs are set in advance, so the profit actually achieved may differ from that

predicted. To take this into account, margins of tolerance (MOTs) are built into the PPRS

such that reimbursement is not required until returns are over 140% of the ROC target,

and price rises not permitted until returns are less than 40% of the ROC target. Increasing

the prices of established drugs is not encouraged, so companies generally aim to reach their

ROC targets by charging high prices for their drugs at the time of launch or by broadening

their sales base.

In order to set the ROC target, each year the company submits details of its business

in an annual financial return (AFR). One section of the AFR seeks information on the

company’s fixed assets (which includes the historic cost of the company’s UK sites, land,

buildings, plant and machinery). The profit the company is allowed is then calculated as

21% of the fixed asset figure, which, with the MOT, may rise to 29.4% of the fixed assets.

118. Also included in the determination of the final ROC are allowances for the company’s

spend on R&D, marketing and the provision of information. For R&D, the allowance is

 equivalent to up to 28% of the company’s sales to the NHS, and in this figure provision is

made for each new drug introduced. For drug promotion, the figure is 4% of sales, and to

this is added further allowances depending on the number of drugs available. For

providing information, the allowance is again equivalent to 4% of sales to the NHS.

By determining company profit margins allowed against the sale of medicines to the

NHS, and by incorporating into these margins allowances for R&D, innovation, drug

promotion and the provision of information, the PPRS provides a key mechanism by

which the Department can act as the UK-based industry’s sponsor.

The price of generic medicines is not controlled by the PPRS but, since August 2000,

the main generics used in the community have been subject to a statutory maximum price

scheme. This cap on prices was introduced following ‘turbulence’ and alleged price-fixing

in the generics market that led to substantial prices increases in 1999/2000.

 

Drug and Therapeutics Committees

Local NHS measures may also be in place to control the activities of the

pharmaceutical industry. Drug and Therapeutics Committees (also known as Use of

Medicines Committees), which operate in local hospital Trusts, address prescribing and

medicines use across the Trust, including affiliated primary care trusts (PCTs). Their

guidance may be stricter than that of NICE. [See boxed text in Part 6 for an example of a

Drug and Therapeutics Committee.]

There are also Area Prescribing Committees, which operate across health authorities

and aim to ensure appropriate medicines use across the primary and secondary care

boundary. In addition, there are prescribing advisers, usually pharmacists, who are

employed by Strategic Health Authorities and PCTs, and work to encourage rational and

cost-effective prescribing in primary care. According to the Department of Health, over

1,200 prescribing advisers are now in place in England and Wales.74 This works out at an

average of fewer than four per PCT.

Professional bodies

The core guidance booklet published by the General Medical Council (GMC), Good

Medical Practice, warns doctors against “involvement in any relationships with

pharmaceutical or other companies which could raise, or be seen to raise, a conflict of

interests”.75 The GMC states that this is intended to cover matters such as accepting any

kind of substantial hospitality or gifts from pharmaceutical companies. According to Good

Medical Practice, doctors must be honest about any financial or commercial interests they

have in pharmaceutical companies and ensure that those interests do not affect their

independent judgement in providing and arranging patient care. No mention is made of

guidelines for medically qualified doctors working within the industry but the GMC is

reported to be working with Faculty of Pharmaceutical Medicine to set standards for

. The World Medical Association also issued guidelines in October 2004 on the relationship between doctors and commercial enterprises, with particular reference to the disclosure of interests in the context of

research, conference attendance, gifts and affiliations.

Other professional bodies, such as the Royal College of Nursing (RCN), Royal College

of General Practitioners (RCGP) and National Pharmaceutical Association (NPA), may

have individual policies in place regarding funding received from the pharmaceutical

industry. For example, the RCGP, which received 3% of its annual income from the

industry in the 2003–2004 financial year, stated:

The College has strict guidelines on accepting money from any sponsor, in order to

ensure that the sponsor has no direct influence on the educational content of an

event or conference.Although the GMC pointed out that, “complaints about doctors asking for or

accepting inappropriate fees or hospitality” from pharmaceutical companies are unusual,

we have not heard of any standard policies in place among professional organisations

governing the interaction between industry and their members. There is no centrally held

register of personal or financial interests in the pharmaceutical industry. The RCN, which

receives approximately 30% of its annual sponsorship income from the pharmaceutical

industry, stated that individual contact betweeurses and drug company representatives

does not involve the College:

Nurses can get offered the opportunity to negotiate payment of expenses for further

training directly with company representatives without reference, support or the

knowledge of the RCN. In these situations the RCN is not in any way involved, and

does not attempt to regulate.

The industry’s codes of practice

The industry has its own arrangements for regulating the sales and marketing

activities of its companies. This is largely achieved through the Code of Practice of the

ABPI.81 The Medicines Act and related EU legislation requires Ministers to exercise

oversight of these activities. All aspects of the promotion of medicines, including

advertisements, representatives’ activities, meetings, the provision of education and

hospitality and the provision of medical information by the industry are subject to self-

regulation through the Code. The ABPI states that the industry “works well within self-

regulation”.

 

History

The earliest drugstores date to the Middle Ages. The first known drugstore was opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating throughout the medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drugstores in Europe and North America had eventually developed into larger pharmaceutical companies.

Most of today’s major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-manufactured and distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US, Belgium and the Netherlands following suit.

Legislation was enacted to test and approve drugs and to require appropriate labeling. Prescription and non-prescription drugs became legally distinguished from one another as the pharmaceutical industry matured. The industry got underway in earnest from the 1950s, due to the development of systematic scientific approaches, understanding of human biology (including DNA) and sophisticated manufacturing techniques.

Numerous new drugs were developed during the 1950s and mass-produced and marketed through the 1960s. These included the first oral contraceptive, “The Pill”, Cortisone, blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine (Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric medication.Valium (diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most prescribed drug in history, prior to controversy over dependency and habituation.

Attempts were made to increase regulation and to limit financial links between companies and prescribing physicians, including by the relatively new U.S. Food and Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide tragedy came to light, in which the use of a new anti-emetic in pregnant women caused severe birth defects. In 1964, the World Medical Association issued its Declaration of Helsinki, which set standards for clinical research and demanded that subjects give their informed consent before enrolling in an experiment. Pharmaceutical companies became required to prove efficacy in clinical trials before marketing drugs.

The industry remained relatively small scale until the 1970s when it began to expand to a greater rate.[citatioeeded] Legislation allowing for strong patents, to cover both the process of manufacture and the specific products, came in to force in most countries. By the mid-1980s, small biotechnology firms were struggling for survival, which led to the formation of mutually beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of the smaller firms. Pharmaceutical manufacturing became concentrated, with a few large companies holding a dominant position throughout the world and with a few companies producing medicines within each country.

The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation.[citatioeeded] Drugs for heart disease and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval process.

Managed care and Health maintenance organizations (HMOs) spread during the 1980s as part of an effort to contain rising medical costs, and the development of preventative and maintenance medications became more important. A new business atmosphere became institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic increase in the use of contract research organizations for clinical development and even for basic R&D. The pharmaceutical industry confronted a new business climate and new regulations, born in part from dealing with world market forces and protests by activists in developing countries. Animal Rights activism was also a challenge.

Marketing changed dramatically in the 1990s. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. In the US, Direct-to-consumer advertising proliferated on radio and TV because of new FDA regulations in 1997 that liberalized requirements for the presentation of risks. The new antidepressants, the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for additional disorders. In the United States as of 2012, the industry spent about 1.3 percent of its revenue on research vs. about 25 percent on marketing.

Drug development progressed from a hit-and-miss approach to rational drug discovery in both laboratory design and natural-product surveys. Demand for nutritional supplements and so-called alternative medicines created new opportunities and increased competition in the industry. Controversies emerged around adverse effects, notably regarding Vioxx in the US, and marketing tactics. Pharmaceutical companies became increasingly accused of disease mongering or over-medicalizing personal or social problems.

Research and development

Drug discovery is the process by which potential drugs are discovered or designed. In the past most drugs have been discovered either by isolating the active ingredient from traditional remedies or by serendipitous discovery. Modern biotechnology often focuses on understanding the metabolic pathways related to a disease state or pathogen, and manipulating these pathways using molecular biology or biochemistry. A great deal of early-stage drug discovery has traditionally been carried out by universities and research institutions. Public funding accounts for 80% of the amount spent on basic research for new drugs and vaccines in the United States.

Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug development are to determine appropriate Formulation and Dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivostudies, and clinical trials. The amount of capital required for late stage development has made it a historical strength of the larger pharmaceutical companies.

Often, large multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of new drug substances.

 

 

 

The cost of innovation

Drug companies are like other companies in that they manufacture products that must be sold for a profit in order for the company to survive and grow. They are different from some companies because the drug business is very risky. For instance, only one out of every ten thousand discovered compounds actually becomes an approved drug for sale. Much expense is incurred in the early phases of development of compounds that will not become approved drugs. In addition, it takes about 7 to 10 years and only 3 out of every 20 approved drugs bring in sufficient revenue to cover their developmental costs, and only 1 out of every 3 approved drugs generates enough money to cover the development costs of previous failures. This means that for a drug company to survive, it needs to discover a blockbuster (billion-dollar drug) every few years.

Drug discovery and development is very expensive; of all compounds investigated for use in humans only a small fraction are eventually approved in most nations by government appointed medical institutions or boards, who have to approve new drugs before they can be marketed in those countries. In 2010 18 NMEs (New Molecular Entities) were approved and three biologics by the FDA, or 21 in total, which is down from 26 in 2009 and 24 in 2008. On the other hand, there were only 18 approvals in total in 2007 and 22 back in 2006. Since 2001, the Center for Drug Evaluation and Research has averaged 22.9 approvals a year.http://en.wikipedia.org/wiki/Pharmaceutical_industry – cite_note-7  This approval comes only after heavy investment in pre-clinical development andclinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way through this process often incur large costs, while generating no revenue in return. If the cost of these failed drugs is taken into account, the cost of developing a successful new drug (New chemical entity or NCE), has been estimated at about 1.3 billion USD[8](not including marketing expenses). Professors Light and Lexchin reported in 2012, however, that the rate of approval for new drugs has been a relatively stable average rate of 15 to 25 for decades.

Industry-wide research and investment reached a record $65.3 billion in 2009.[9] While the cost of research in the U.S. was about $34.2 billion between 1995 and 2010, revenues rose faster (revenues rose by $200.4 billion in that time).

A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five-year period to nearly $1.7 billion in 2003.

These estimates also take into account the opportunity cost of investing capital many years before revenues are realized (see Time-value of money). Because of the very long time needed for discovery, development, and approval of pharmaceuticals, these costs can accumulate to nearly half the total expense. Some approved drugs, such as those based on re-formulation of an existing active ingredient (also referred to as Line-extensions) are much less expensive to develop.

Calculations and claims in this area are controversial because of the implications for regulation and subsidization of the industry through tax credits and federally funded research grants.

“Me-too” drugs

Competition between pharmaceutical companies has resulted in “me-too” drugs, which are defined as chemically-similar compounds or compounds with the same mechanism of action as an existing, approved chemical entity. Critics of the pharma industry suggest that “me-too” drugs are only brought to market because their development is cheaper and less risky than drugs with a novel mechanism of action. However, proponents point to the cost benefits of market competition between similar drugs. In addition, it may take 10 or more years for a drug to go from discovery to FDA approval, and if a new clinical pathway is discovered, multiple companies often will simultaneously develop a drug treatment within this pathway, leading to several similar drugs arriving on the market within a short period of time. This is why some suggest that much of the “me-too” drug phenomenon is actually a result of independent parallel research at rival companies.

Controversy over commercial ties and unfavorable studies

Due to repeated accusations and findings that some clinical trials conducted or funded by pharmaceutical companies may report only positive results for the preferred medication, the industry has been looked at much more closely by independent groups and government agencies.

In response to specific cases in which unfavorable data from pharmaceutical company-sponsored research was not published, the Pharmaceutical Research and Manufacturers of America have published new guidelines urging companies to report all findings and limit the financial involvement in drug companies of researchers.[18] US congress signed into law a bill which requires phase II and phase III clinical trials to be registered by the sponsor on the clinical trials.gov website run by the NIH.

Drug researchers not directly employed by pharmaceutical companies often look to companies for grants, and companies often look to researchers for studies that will make their products look favorable. Sponsored researchers are rewarded by drug companies, for example with support for their conference/symposium costs. Lecture scripts and even journal articles presented by academic researchers may actually be ‘ghost-written’ by pharmaceutical companies.[20] Some researchers who have tried to reveal ethical issues with clinical trials or who tried to publish papers that show harmful effects of new drugs or cheaper alternatives have been threatened by drug companies with lawsuits.

Product approval in the US

In the United States, new pharmaceutical products must be approved by the Food and Drug Administration (FDA) as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following IND approval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and Dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. Following the successful completion of phase III testing, a New Drug Application is submitted to the FDA. The FDA review the data and if the product is seen as having a positive benefit-risk assessment, approval to market the product in the US is granted.

A fourth phase of post-approval surveillance is also often required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active.

The FDA provides information about approved drugs at the Orange Book site.

Orphan drugs

There are special rules for certain rare diseases (“orphan diseases”) involving fewer than 200,000 patients in the United States, or larger populations in certain circumstances. [26]Because medical research and development of drugs to treat such diseases is financially disadvantageous, companies that do so are rewarded with tax reductions, fee waivers, andmarket exclusivity on that drug for a limited time (seven years), regardless of whether the drug is protected by patents.

 

 

 

 

Legal issues

Where pharmaceutics have been shown to cause side-effects, civil action has occurred, especially in countries where tort payouts are likely to be large. The top 20 pharmaceutical cases account for over $16 billion in recoveries. Due to high-profile cases leading to large compensations, most pharmaceutical companies endorse tort reform. Recent controversies have involved Vioxx and SSRI antidepressants.

Pharmaceutical fraud

Pharmaceutical fraud involves activities that result in false claims to insurers or programs such as Medicare in the United States or equivalent state programs for financial gain to a pharmaceutical company. There are several different schemesused to defraud the health care system which are particular to the pharmaceutical industry. These include: Good Manufacturing Practice (GMP) Violations, Off Label Marketing, Best Price Fraud, CME Fraud, Medicaid Price Reporting, and Manufactured Compound Drugs. The Federal Bureau of Investigation (FBI) estimates that health care fraud costs American taxpayers $60 billion a year. Of this amount $2.5 billion was recovered through False Claims Act cases in FY 2010. Examples of fraud cases include the GlaxoSmithKline $3 billion settlement, Pfizer $2.3 billion settlement and Merk $650 million settlement. Damages from fraud can be recovered by use of the False Claims Act, most commonly under the qui tam provisions which rewards an individual for being a “whistleblower“, or relator (law).

Antipsychotic drugs are now the top-selling class of pharmaceuticals in America, generating annual revenue of about $14.6 billion. Every major company selling the drugs — Bristol-Myers Squibb, Eli Lilly, Pfizer, AstraZeneca and Johnson & Johnson — has either settled recent government cases, under the False Claims Act, for hundreds of millions of dollars or is currently under investigation for possible health care fraud. Following charges of illegal marketing, two of the settlements set records last year for the largest criminal fines ever imposed on corporations. One involved Eli Lilly’s antipsychotic Zyprexa, and the other involved Bextra. In the Bextra case, the government also charged Pfizer with illegally marketing another antipsychotic, Geodon; Pfizer settled that part of the claim for $301 million, without admitting any wrongdoing.

The following is a list of the four largest settlements reached with pharmaceutical companies from 1991 to 2012, rank ordered by the size of the total settlement. Legal claims against the pharmaceutical industry have varied widely over the past two decades, including Medicare and Medicaid fraud, off-label promotion, and inadequate manufacturing practices.

 

 

Product approval elsewhere

In many non-US western countries a ‘fourth hurdle’ of cost effectiveness analysis has developed before new technologies can be provided. This focuses on the efficiency (in terms of the cost per QALY) of the technologies in question rather than their efficacy. In England NICE approval requires technologies be made available by the NHS, whilst similar arrangements exist with the Scottish Medicines Consortium in Scotland and the Pharmaceutical Benefits Advisory Committee in Australia. A product must pass the threshold for cost-effectiveness if it is to be approved. Treatments must represent ‘value for money’ and a net benefit to society. There is much speculation[42] that a NICE style framework may be implemented in the USA in an attempt to decrease Medicare and Medicaid spending by balancing benefits to patients versus profits for the medical industry.

In the UK, the British National Formulary is the core guide for pharmacists and clinicians.

Industry revenues

For the first time ever, in 2006, global spending on prescription drugs topped $643 billion, even as growth slowed somewhat in Europe and North America. The United States accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales followed by the EU and Japan.(pdf) Emerging markets such as China, Russia, South Korea and Mexico outpaced that market, growing a huge 81 percent.http://en.wikipedia.org/wiki/Pharmaceutical_industry – cite_note-forbes-10-43

US profit growth was maintained even whilst other top industries saw little or no growth. Despite this, “..the pharmaceutical industry is — and has been for years — the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue.”

Pfizer’s cholesterol pill Lipitor remains a best-selling drug world wide. Its annual sales were $12.9 billion, more than twice as much as its closest competitors: Plavix, the blood thinner from Bristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill from AstraZeneca; and Advair, the asthma inhaler from GlaxoSmithKline.

IMS Health publishes an analysis of trends expected in the pharmaceutical industry in 2007, including increasing profits in most sectors despite loss of some patents, and new ‘blockbuster’ drugs on the horizon.

Teradata Magazine predicted that by 2007, $40 billion in U.S. sales could be lost at the top 10 pharmaceutical companies as a result of slowdown in R&D innovation and the expiry of patents on major products, with 19 blockbuster drugs losing patent.

Market leaders in terms of healthcare revenue

The following is a list of the 20 largest pharmaceutical and biotech companies ranked by healthcare revenue. Some companies (e.g., Bayer, Johnson and Johnson and Procter & Gamble) have additional revenue not included here. The phrase Big Pharma is often used to refer to companies with revenue in excess of $3 billion, and/or R&D expenditure in excess of $500 million.

Patents and generics

Depending on a number of considerations, a company may apply for and be granted a patent for the drug, or the process of producing the drug, granting exclusivity rights typically for about 20 years.http://en.wikipedia.org/wiki/Pharmaceutical_industry – cite_note-50  However, only after rigorous study and testing, which takes 10 to 15 years on average, will governmental authorities grant permission for the company to market and sell the drug. Patent protection enables the owner of the patent to recover the costs of research and development through high profit margins for the branded drug. When the patent protection for the drug expires, a generic drug is usually developed and sold by a competing company. The development and approval of generics is less expensive, allowing them to be sold at a lower price. Often the owner of the branded drug will introduce a generic version before the patent expires in order to get a head start in the generic market.[52] Restructuring has therefore become routine, driven by the patent expiration of products launched during the industry’s ‘golden era’ in the 1990s and companies’ failure to develop sufficient new blockbuster products to replace lost revenues.

In 2003 the United States enacted the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), a program to provide prescription drug benefits to the elderly anddisabled. This program is a component of Medicare (United States) and is known as Medicare Part D. This program, set to begin in January 2006, will significantly alter the revenue models for pharmaceutical companies. Revenues from the program are expected to be $724 billion between 2006 and 2015.

Pharmaceuticals developed by biotechnological processes often must be injected in a physician’s office rather than be delivered in the form of a capsule taken orally. Medicare payments for these drugs are usually made through Medicare Part B (physician office) rather than Part D (prescription drug plan).

 

Mergers, acquisitions, and co-marketing of drugs

A merger, acquisition, or co-marketing deal between pharmaceutical companies may occur as a result of complementary capabilities between them. A small biotechnologycompany might have a new drug but no sales or marketing capability. Conversely, a large pharmaceutical company might have unused capacity in a large sales force due to a gap in the company pipeline of new products. It may be in both companies’ interest to enter into a deal to capitalize on the synergy between the companies.

Prescriptions

In the U.S., prescriptions have increased over the past decade to 3.4 billion annually, a 61 percent increase. Retail sales of prescription drugs jumped 250 percent from $72 billion to $250 billion, while the average price of prescriptions has more than doubled from $30 to $68.

Retail prescription drug sales 1995 to 2006 PDF from www.census.gov

Publications

The drug company Merck & Co. publishes the Merck Manual of Diagnosis and Therapy, the world’s best-selling medical textbook, and the Merck Index, a collection of information about chemical compounds.

Marketing

Pharmaceutical companies commonly spend a large amount on advertising, marketing and lobbying. In the US, drug companies spend $19 billion a year on promotions. Advertising is common in healthcare journals as well as through more mainstream media routes. In some countries, notably the US, they are allowed to advertise directly to the general public. Pharmaceutical companies generally employ sales people (often called ‘drug reps’ or, an older term, ‘detail men’) to market directly and personally to physicians and other healthcare providers. In some countries, notably the US, pharmaceutical companies also employ lobbyists to influence politicians. Marketing of prescription drugs in the US is regulated by the federalPrescription Drug Marketing Act of 1987.

To healthcare professionals

Currently, there are approximately 81,000 pharmaceutical sales representatives in the United Statespursuing some 830,000 pharmaceutical prescribers. A pharmaceutical representative will often try to see a given physician every few weeks. Representatives often have a call list of about 200-300 physicians with 120-180 targets that should be visited in 1-2 or 3 week cycle. The number of pharmaceutical sales reps has been shrinking between 2008 and 2010, an estimated 30% industry wide reduction has occurred and current estimates are there may only be 60,000 pharmaceutical sales reps in the United States.

To insurance and public health bodies

Private insurance or public health bodies (e.g. the NHS in the UK) decide which drugs to pay for, and restrict the drugs that can be prescribed through the use of formularies. Public and private insurers restrict the brands, types and number of drugs that they will cover. Not only can the insurer affect drug sales by including or excluding a particular drug from a formulary, they can affect sales by tiering or placing bureaucratic hurdles to prescribing certain drugs as well. In January 2006, the U.S. instituted a new public prescription drug plan through its Medicare program known as Medicare Part D. This program engages private insurers to negotiate with pharmaceutical companies for the placement of drugs on tiered formularies.

To retail pharmacies and stores

Commercial stores and pharmacies are a major target of non-prescription sales and marketing for pharmaceutical companies.

 

 

Direct to consumer advertising

Since the 1980s new methods of marketing for prescription drugs to consumers have become important. Direct-to-consumer media advertising was legalised in the FDA Guidance for Industry on Consumer-Directed Broadcast Advertisements.

Internationally, many pharmaceutical companies market directly to the consumer rather than going through a conventional retail sales channel. For example, Japan-based Kenricomarkets largely through its company website.

Controversy about drug marketing and lobbying

There has been increasing controversy surrounding pharmaceutical marketing and influence. There have been accusations and findings of influence on doctors and other health professionals through drug reps, including the constant provision of marketing ‘gifts’ and biased information to health professionals; highly prevalent advertising in journals and conferences; funding independent healthcare organizations and health promotion campaigns; lobbying physicians and politicians (more than any other industry in the US); sponsorship of medical schools or nurse training; sponsorship of continuing educational events, with influence on the curriculum; and hiring physicians as paid consultants on medical advisory boards.

To help ensure the status quo on U.S. drug regulation and pricing, the pharmaceutical industry has thousands of lobbyists in Washington, DC that lobby Congress and protect their interests. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.

Some advocacy groups, such as No Free Lunch, have criticized the effect of drug marketing to physicians because they say it biases physicians to prescribe the marketed drugs even when others might be cheaper or better for the patient.

There have been related accusations of disease mongering (over-medicalising) to expand the market for medications. An inaugural conference on that subject took place in Australia in 2006. In 2009, the Government-funded National Prescribing Service launched the “Finding Evidence – Recognising Hype” program, aimed at educating GPs on methods for independent drug analysis.

A 2005 review by a special committee of the UK government came to all the above conclusions in a European Union contextwhilst also highlighting the contributions and needs of the industry.

There is also huge concern about the influence of the pharmaceutical industry on the scientific process. Meta-analyses have shown that studies sponsored by pharmaceutical companies are several times more likely to report positive results, and if a drug company employee is involved (as is often the case, often multiple employees as co-authors and helped by contracted marketing companies) the effect is even larger. Influence has also extended to the training of doctors and nurses in medical schools, which is being fought.http://en.wikipedia.org/wiki/Pharmaceutical_industry – cite_note-67

It has been argued that the design of the Diagnostic and Statistical Manual of Mental Disorders and the expansion of the criteria represents an increasing medicalization of humaature, or “disease mongering“, driven by drug company influence on psychiatry.[68] The potential for direct conflict of interest has been raised, partly because roughly half the authors who selected and defined the DSM-IV psychiatric disorders had or previously had financial relationships with the pharmaceutical industry.[69] The president of the organization that designs and publishes the DSM, the American Psychiatric Association, recently acknowledged that in general American psychiatry has “allowed the biopsychosocial model to become the bio-bio-bio model” and routinely accepted “kickbacks and bribes” from pharmaceutical companies.[70]

Developing world

The role of pharmaceutical companies in the developing world is a matter of some debate, ranging from those highlighting the aid provided to the developing world, to those critical of the use of the poorest in human clinical trials, often without adequate protections, particularly in states lacking a strong rule of law. Other criticisms include an alleged reluctance of the industry to invest in treatments of diseases in less economically advanced countries, such as malaria; Criticism for the price of patented AIDS medication, which could limit therapeutic options for patients in the Third World, where most of the AIDS infected people are living. However, a better policy of price discrimination would benefit to both patients and companies.

In September 2008 the Open Source Drug Discovery Network was launched in India to combat infectious diseases common to developing countries.

Patents

Patents have been criticized in the developing world, as they are thought to reduce access to existing medicines. However, without the financial incentive of patents, future innovation of medicines is discouraged. Reconciling patents and universal access to medicine would require an efficient international policy of price discrimination. Moreover, under the TRIPS agreement of the World Trade Organization, countries must allow pharmaceutical products to be patented. In 2001, the WTO adopted the Doha Declaration, which indicates that the TRIPS agreement should be read with the goals of public health in mind, and allows some methods for circumventing pharmaceutical monopolies: via compulsory licensing or parallel imports, even before patent expiration.

In March 2001, 40 multi-national pharmaceutical companies brought litigation against South Africa for its Medicines Act, which allowed the generic production of antiretroviral drugs (ARVs) for treating HIV, despite the fact that these drugs were on-patent. HIV was and is an epidemic in South Africa, and ARVs at the time cost between 10,000 and 15,000 USD per patient per year. This was unaffordable for most South African citizens, and so the South African government committed to providing ARVs at prices closer to what people could afford. To do so, they would need to ignore the patents on drugs and produce generics within the country (using a compulsory license), or import them from abroad.

 

http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_the_United_Kingdom – mw-headhttp://en.wikipedia.org/wiki/Pharmaceutical_industry_in_the_United_Kingdom – p-search

The pharmaceutical industry in the United Kingdom directly employs around 72,000 people and in 2007 contributed ?8.4 billion to the UK’s GDP and invested a total of ?3.9 billion in research and development.^[1][2] In 2007 exports of pharmaceutical products from the UK totalled ?14.6 billion, creating a trade surplus in pharmaceutical products of ?4.3 billion.^[

The UK is home to GlaxoSmithKline and AstraZeneca, respectively the world’s fifth- and sixth-largest pharmaceutical companies measured by 2009 market share. Foreign companies with a major presence in the UK pharmaceutical industry include Pfizer, whose only research hub outside of the United States is based in Sandwich, Kent, Novartis,^[ Hoffmann–La Roche and Eisai. One in five of the world’s biggest-selling prescription drugs were developed in the UK.

19th century

In 1842 Thomas Beecham established the Beecham’s Pills laxative business, which would later become the Beecham Group. By 1851 UK-based patent medicine companies had combined domestic revenues of around ?250,000.^[9] Beecham opened Britain’s first modern drugs factory in St Helens in 1859. Henry Wellcome and Silas Burroughs formed a partnership in September 1880, and established an office in Snow Hill in Central London. The London Wholesale Drug and Chemical Protection Society was formed in 1867, which became the Drug Club in 1891, the forerunner of the present-day Association of the British Pharmaceutical Industry. In 1883 Burroughs Wellcome & Co. opened their first factory, at Bell Lane Wharf in Wandsworth, utilising compressed medicine tablet-making machinery acquired from Wyeth of the United States.^[10] Burroughs Wellcome & Co. established its first overseas branch in Sydney in 1898.

20th century

The Glaxo department of Joseph Nathan and Co was established in London in 1908.^[  Glaxo Laboratories Ltd absorbed Joseph Nathan and Co in 1947 and was listed on the London Stock Exchange in the same year. In order to satisfy regulations then in place in the UK on the importation of medicines, Pfizer established a compounding operation in Folkstone, Kent in Autumn 1952. Pfizer acquired an 80 acre site on the outskirts of Sandwich in 1954 to enable the expansion of its Kent-based activities.^[12] Glaxo acquired Allen and Hanburys Ltd. in 1958. In 1981 the bacterial infection treatment Augmentin (amoxicillin/clavulanate potassium) was launched by Beecham; the anti-ulcer treatment Zantac (ranitidine) was launched by Glaxo; and the antiviral herpes treatment Zovirax (aciclovir) was launched by Wellcome.

In 1991 SmithKline Beecham launched Seroxat/Paxil (paroxetine hydrochloride). In June 1993 Imperial Chemical Industries demerged its pharmaceuticals and agrochemicalsbusinesses, forming Zeneca Group plc. In 1995 Glaxo opened a major research and development facility in Stevenage, constructed at a cost of ?700 million. In March 1995 the ?9 billion acquisition of Wellcome by Glaxo was completed, forming Glaxo Wellcome, in what was the largest merger in UK corporate history to date. BASF completed the acquisition of the pharmaceutical division of The Boots Company in April 1995.^[16] In 1997 SmithKline Beecham opened a major new research centre at New Frontiers Science Park in Harlow, Essex.^[  In 1999 Zeneca Group plc and Sweden-based Astra AB merged to form AstraZeneca plc.^[  Glaxo Wellcome and SmithKline Beecham announced their intention to merge in January 2000, with the merger completing in December of that year, forming GlaxoSmithKline plc.

21st century

In February 2001 the Novartis Respiratory Research Centre, the largest single-site respiratory research centre in the world, opened in Horsham. In May 2006 AstraZeneca agreed to buy Cambridge Antibody Technology, then the largest UK-based biotechnology company, for ?702 million. In April 2007 AstraZeneca agreed to acquire the U.S.-based biotechnology company MedImmune for $15.6 billion. In April 2009 GlaxoSmithKline agreed to acquire Stiefel Laboratories, then the world’s largest independent dermatology company, for US$3.6 billion. In June 2009 Eisai opened a major new research and development and manufacturing facility in Hatfield, constructed at a cost of over ?100 million. In November 2009 GlaxoSmithKline and Pfizer combined their respective AIDS divisions into one London-based company, ViiV Healthcare. On 1 February 2011 Pfizer announced that it would be closing its entire research and development facility at Sandwich, Kent within 18-24 months with the loss of 2,400 jobs, as part of a company-wide plan to reduce its spending on research and development.

 

The current world headquarters of GlaxoSmithKline in Brentford, London

In 2007 the UK had the third-highest share of global pharmaceutical R&D expenditure of any nation, with 9% of the total, behind the United States (49%) and Japan (15%).The UK has the largest pharmaceutical R&D expenditure of any Europeaation, accounting for 23% of the total; followed by France (20%), Germany (19%), and Switzerland (11%).

Top 25 UK investors in pharmaceuticals & biotechnology R&D – 2009/10[]
	Companya	R&D spendingb(?m)
1	GlaxoSmithKline	3,629.00
2	AstraZeneca	2,745.68
3	Shire	346.71
4	Pfizer UK	325.66
5	Roche Products	208.44
6	Eisai Europe	151.13
7	Eli Lilly and Company	130.21
8	Amgen	127.06
9	Merial	102.42
10	Novartis Pharmaceuticals	90.27
11	John Wyeth & Brother	60.33
12	Bristol-Myers Squibb	55.49
13	Janssen-Cilag	54.37
14	PowderMed	45.57
15	Aventis Pharma	44.92
16	Allergan	37.40
17	Organon Laboratories	36.78
18	Vectura	36.40
19	Antisoma	35.77
20	Boehringer Ingelheim	29.29
21	Genus	28.60
22	BTG	27.00
23	Servier R&D	25.10
24	Ipsen Developments	23.97
25	Renovo	18.07