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Pharmaceutical Industry

Pharmaceutical Industry

GENERAL CHARACTERISTICS

INDUSTRY GROWTH

RESEARCH AND DEVELOPMENT (R&D)

ECONOMIC FEATURES

BIBLIOGRAPHY

The modern pharmaceutical industry in the United States originated during the 1818 to 1822 period when less than a dozen fine chemical manufacturers constructed factories in Philadelphia. History records Robert Shoemaker, producer of glycerin, as the first large-scale manufacturer in the period from 1818 to 1840. Medicines were previously manufactured in the laboratories of pharmacies where doctors and pharmacists compounded and administered drugs to patients and observed drug reactions. The Food and Drug Administration (FDA), which originated in 1902 by an act of U.S. Congress, regulates the modern pharmaceutical industry. (The agency is also a scientific and public health agency with oversight for the safety of most food products, radiation-emitting consumer products, cosmetics, and animal feed.)

Pharmaceutical firms are engaged in the discovery, manufacturing, and marketing of legal drugs, biologics (viruses, toxins, serums, and analogous products), vaccines, and medical devices such as pacemakers and prosthetics. Products are made for both humans and animals. Pharmaceutical products, both prescription and over the counter (OTC), account for a large share of the aggregate health care spending and represent major account items in international trade transactions of developed countries.

Pharmaceuticals as a percentage of total health care spending during 2002 comprised 12.8 percent in the United States, 14.5 percent in Germany, 15.8 percent in the United Kingdom, and 22.4 percent in Italy. Pharmaceutical spending in the United States grew at an average annual rate of 11 percent between 1970 and 2005. The industry is global and led all other industries in rent-seeking activities by spending nearly $1 billion from 1998 to 2004 on lobbying. Profit-seeking firms engage in strategic lobbying, a special case of rent seeking. Rent seeking is a selfishly motivated effort of one party (pharmaceutical firms) targeted at influencing another partys (government regulators) decision. Economic agents will decide to invest in rent-seeking activities, such as lobbying, if the expected net present value of the effort is profitable at the margin. Global pharmaceutical trade grew at an average annual rate of 23 percent from 2000 to 2003 and was valued at $200 billion in 2002. More than 80 percent of pharmaceutical production and consumption occurs in North America, Western Europe, and Japan.

GENERAL CHARACTERISTICS

Several characteristics distinguish the pharmaceutical industry from other industries. A newly released pharmaceutical agent is usually available only by physician prescription. Patients in effect transfer decision-making authority on the appropriateness of medications for their ailments to the gate-keeping physicians (or pharmacists and nurses in some countries). Generally, a prescription may become available OTC (i.e., without physician prescription) for a non-chronic condition that is relatively easy to self-diagnose and has low potential for harm from self-medication under conditions of widespread availability.

Another important industry characteristic is the availability of health insurance coverage for prescribed medications. Most often, private insurers or government entities subsidize retail drug purchases. Consumers make a co-payment (a fixed sum for each prescription regardless of the full price) or pay a coinsurance (a fixed percentage of the full price) that is less than the full market price. Co-payments tend to vary depending on the drug classification. Consumer payment of far less than full cost of prescriptions creates the familiar moral hazard (excessive use) problem.

INDUSTRY GROWTH

The Centers for Disease Control (CDC) estimated that in 2005 more than 130 million Americans got prescriptions monthly. Physicians acting as the decision maker for patients and health insurance coverage of prescriptions create a market with fairly inelastic product demand. An inelastic product demand means that buyers percentage change in quantity purchase decisions are relatively insensitive to a given percentage price change that brought it about. Pharmaceutical product demand elasticity estimates vary depending on many factors, including the setting (e.g., inpatient versus outpatient or military versus noninstitutional population), brands versus generics, stringency of regulatory and provider reimbursements, and the strength of the consumption habits of consumers.

Some experts predict that the rise in insurance coverage is a major culprit in the undisciplined rising consumption of prescribed drugs. Other experts contend that the growth in prescription drug use is partly a function of greater marketing efforts of the drug firms. The pharmaceutical industry in 2003 spent $3.3 billion on direct-to-consumer advertising and marketing expenditures totaled $25.3 billion. Doctors prescribing habits are directly influenced by the probability of patient noncompliance, and advertising targeted at doctors and patients. Direct-to-consumer advertising reportedly slowed noncompliance rates. The U.S. drug firms spend a similar percentage of their sales revenue on advertising as on research and development.

The pharmaceutical industry manufactures innovative products with government-granted patent rights that may be extended after application approval from the FDA. Patents give researchers and inventors exclusive rights to market an invention for twenty years before others may duplicate and sell it. Therefore, producers of new drugs are free to limit the supply and set prices that reflect profit-maximizing mark-ups with exclusive marketing rights. Most pharmaceutical manufacturers in the United States are multinational enterprises operating globally across countries. In 2004 the Pharmaceutical Research and Manufacturers of America (PhRMA) recorded drug sales of $159 billion within the United States and $79 billion abroad. The industry boasts investment rate of return that is four times the magnitude of the typical Fortune 500 firm. Technological progress in this industry and in the broader health care sector has led experts to project the global pharmaceutical market sales to be $842 billion in 2010.

There were more than 700 companies operating in the pharmaceutical preparations industry in 2006. The leading ten firms accounted for more than 40 percent of total industry sales. Other factors in this industry include retail pharmacies, health care provider institutions, and wholesalers. According to a 2000 report, the pharmaceutical industry earned 80 percent of the drug sales directly from wholesalers, 12 percent from retailers, and 4 percent from hospitals. Consumers typically buy drugs from retail pharmacies but there has recently been a rising trend in purchased drug activities via the Internet and from mail-order services within and outside the United States. Prescription drug buyers consider nontraditional purchasing outlets more convenient and private relative to traveling to a retail drugstore. Physicians may suggest Internet pharmacies to some homebound patients in order to improve compliance.

RESEARCH AND DEVELOPMENT (R&D)

In the United States new drugs must be approved by the FDA. In order to satisfy safety and benefit considerations of the FDA, pharmaceutical companies conduct on average ten to fifteen years of research on a new medication. Approval of a new drug is a rigorous process and for every 5,000 to 10,000 compounds tested, only one receives FDA approval and becomes a new or improved treatment. The entire U.S. pharmaceutical industry spent an estimated $51.3 billion on research and development in 2005. Nearly 80 percent of global R&D spending takes place in the United States and the major portion of the remaining 20 percent occurs in Europe.

The drug discovery process begins with the screening of thousands of compounds and modifying them to raise disease-fighting activity and/or minimize undesirable side effects for patients. Both laboratory and animal studies may be used to evaluate a drugs safety and efficacy during preclinical testing. Investigational new drugs go through a rigorous review by the FDA before moving to the clinical trials stage. Clinical trials of new medicines occur in three testing phases. Phase I includes drug tests in a small group of about 20 to 100 healthy volunteers to determine safety. During Phase II, 100 to 500 volunteer patients participate in controlled trials to determine whether the medicine effectively treats the disease. Phase III includes 1,000 to 5,000 patients taking the new drug and being monitored to confirm effectiveness and identify any side effects with comparison to patients in the placebo (inactive substance) group.

Drug development responds to the urgency and intensity of consumer demand, and economic harm, measured by disease-specific mortality, in the United States largely motivates the global distribution of drug development. The FDA approved 28 new drugs in 2005 and more than 350 medications became available for treating patients in the last decade. New medicines in development in 2006 included 682 to treat cancer, 531 to treat neurological disorders, 341 to treat infections, and 303 to treat cardiovascular disorders. One study in 2005 reported that new drugs generated 40 percent of the two-year gain in life expectancy achieved in 52 countries from 1986 to 2000.

When a companys patent rights expire, other companies can imitate the drug and produce generic brands of the medication. According to PhRMA, the generics share of the U.S. prescription drug market was 57 percent in 2005. This share is expected to rise within the next decade as the rate of brand patent expirations increases.

ECONOMIC FEATURES

The discovery and manufacture of new drugs is a risky business without guaranteed profitability. The cost of developing one new medicine is estimated to be about $800 million (higher if genetically engineered) and on average, only three of every ten prescription medications available to treat Americans generate revenues that meet or exceed average R&D costs.

In the absence of patent protection, imitators could copy the new medication and manufacturers would lack practical incentives to invest millions of dollars on R&D of new drugs. Although patents nominally last for 20 years, the average effective patent life of prescribed medicines is only about 11.5 years due to time lost during the development and distribution of the new medicine to the market. Patent protection gives pharmaceutical manufacturers a monopoly status although generic drug makers can start preparing copies of drugs for FDA approval before patent expiration. A monopoly provides the patent owner with the sole right to manufacture the drug and determine the quantity to supply (hence the market price) according to its projected profit margin. The Treaty of Marrakech, signed in 2004 during the international trade negotiations, provided full patent protection for pharmaceutical products across industrialized nations as well as in the less-developed nations.

The pharmaceutical sector is controlled or strictly regulated by the government acting as a single buyer (payer) or a monopsony in countries with nationalized health systems (e.g., Canada, the United Kingdom). There are many end-users but they buy at government-regulated prices. Governments can regulate drug prices in a variety of ways. The most common methods of price regulation are reference pricing, formula pricing, capping or budgetary control, profit regulations and item-by-item negotiation. Reference pricing is a reimbursement rule where the government sets the maximum reimbursement for one drug by reference to the price of a comparable drug in the same market. Under formula pricing, governments use a wide criteria set, such as therapeutic novelty, to set drug prices. Capping or budgetary control would involve limiting reimbursement to the providers at a certain capitated level.

Other regulatory instruments generally target the profit margins of pharmaceutical companies and quality of manufacturing practices. For example, a 1990 law in the United States required drug manufacturers to apply on retail Medicaid prescriptions the largest discount they give any purchaser (the Medicaid drug rebate program). The U.K. government has used a rate of return regulation in which each firm negotiates with the government an allowed before-tax rate of return on its assets. Germany has used aggregate budget constraints and rollbacks. In this application, the government sets a tight overall budget and any amount above this budget would be deducted from payments to a third party (e.g., from the incomes of physicians, from the reimbursements to the drug manufacturers). These are all examples of government regulations to control drug prices and regulate excess profitability in the pharmaceutical industry.

The future pharmaceutical industry faces multi-faceted challenges that include setting and enforcing manufacturing standards; rapid patent expiration of widely used brand drugs; unregulated parallel trades (re-importation in the European context) that ignores intellectual property rights; highly fluid and unregulated Internet sales; shortage of pharmaceutical scientists; biotechnology drugs and genetically engineered products (As of 2006 the FDA had no generics approval process in place for patented biotechnology drugs whose patents are about to expire.); ineffective post-marketing surveillance; foreign manufacturing, regulatory, and pricing challenges of drugs for major diseases afflicting developing countries (e.g., AIDS and malaria); and counterfeit products.

Intellectual property abuse and counterfeiting, the fastest growing economic crime, is a $200 to $400 billion global industry. In 2006, the National Association of Boards of Pharmacy (NABP) reported that the prevalence of counterfeit medicines can range to over 10 percent of the drug supply globally. A dramatic growth of global counterfeit and piracy activities would seriously threaten the economic well-being of international pharmaceutical companies.

SEE ALSO Drugs; Industry; Medicine

BIBLIOGRAPHY

Armantier, Olivier, and Soiliou Daw Namoro. 2006. Prescription Drug Advertisement and Patient Compliance: A Physician Agency Approach. Advances in Economic Analysis & Policy 6(1). Article 5.

Civan, Abdulkadir, and Michael T. Maloney. 2006. The Determinants of Pharmaceutical Research and Development Investments. Contributions to Economic Policy & Analysis 5(1), Article 28.

DiMasi, Joseph A., Ronald W. Hansen, Henry G. Grabowski, and Louis Lasgna. 1991. Cost of Innovation in the Pharmaceutical Industry. Journal of Health Economics 10: 10742.

Landsman, P. B., W. Yu, X. Liu, M. Teutsch, and M. L. Berger. 2005. Impact of 3-tier Pharmaceutical Benefit Design and Increased Consumer Cost-sharing on Drug Utilization. The American Journal of Managed Care 11(10): 621628.

Lichtenberg, Frank R. 2005. The Impact of New Drug Launches on Longevity: Evidence from Longitudinal, Disease-Level Data from 52 Countries, 19822001. International Journal of Health Care Finance and Economics 5 (1): 4773.

Lichtenberg, Frank R. 2006. Did CMS Functional Equivalence Decision Result in Equitable Payments? Journal of Pharmaceutical Finance, Economics & Policy 15(1): 720.

Okunade, Albert A. 2001. Cost-output Relation, Technical Progress, and Clinical Activity Mix of U.S. Hospital Pharmacies. Journal of Productivity Analysis 16(2): 167193.

Okunade, Albert A. 2001. The Impact of 1990 Medicaid Drug Rebates Policy on Access to Prescription Drugs. Journal of Health & Social Policy 12 (3): 3351.

Okunade, Albert A. 2003. Are Factor Substitutions in HMO Industry Operations Cost Saving? Southern Economic Journal 69(4): 800821.

Okunade, Albert A., and Chutima Suraratdecha. 2006. The Pervasiveness of Pharmaceutical Expenditure Inertia in the OECD Countries. Social Science & Medicine 63 (July): 225238.

Okunade, Albert A., and Murthy Vasudeva. 2002. Technology as a Major Driver of Health Care Costs: A Cointegration Analysis of the Newhouse Conjecture. Journal of Health Economics 21(1): 147159.

Ringel, Jeanne S., Susan D. Hosek, Ben A. Vollaard, and Sergej Mahnovski. 2001. The Elasticity of Demand for Health Care. A Review of the Literature and Its Application to the Military Health System. Prepared for the Office of the Secretary of Defense. National Defense Research Institute. RAND Health.

Seget, Steven. 2006. Pharmaceutical Market Trends, 20062010: Key Market Forecasts and Growth Opportunities. London: URCH Publishing.

Albert A. Okunade

Mustafa C. Karakus

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Pharmaceutical Chemistry

Pharmaceutical Chemistry


Pharmaceutical chemists are involved in the development and assessment of therapeutic compounds. Pharmaceutical chemistry encompasses drug design, drug synthesis , and the evaluation of drug efficacy (how effective it is in treating a condition) and drug safety. Prior to the nineteenth century, schools of pharmacy trained pharmacists and physicians how to prepare medicinal remedies from natural organic products or inorganic materials. Herbal medications and folk remedies dating back to ancient Egyptian, Greek, Roman, and Asian societies were administered without any knowledge of their biological mechanism of action. It was not until the early 1800s that scientists began extracting chemicals from plants with purported therapeutic properties to isolate the active components and identify them. By discovering and structurally characterizing compounds with medicinal activity, chemists are able to design new drugs with enhanced potency and decreased adverse side effects.

Drug discovery is the core of pharmaceutical chemistry. The drug discovery process includes all the stages of drug development, from targeting a disease or medical condition to toxicity studies in animals, or even, by some definitions, testing the drug on human subjects. Typically, conditions that affect a larger percentage of the population receive more attention and more research funding. Antiulcer drugs and cholesterol-reducing agents are currently the therapeutic areas of greatest emphasis. To develop a drug to target a specific disease, researchers try to understand the biological mechanism responsible for that condition. If the biochemical pathways leading up to the disease are understood, scientists attempt to design drugs that will block one or several of the steps of the disease's progress. Alternatively, drugs that boost the body's own defense mechanism may be appropriate.

How do chemists "discover" drugs? Often there is an existing remedy for a condition, and scientists will evaluate how that drug exerts its actions. Once the drug's structure is known, the drug can serve as a prototype or "lead compound" for designing more effective therapeutic agents of similar chemical structure. Lead compounds are molecules that have some biological activity with respect to the condition under investigation. However, the lead compound may not be effective in combating the disease, or it may produce undesirable side effects. Lead optimization involves chemical modifications to the lead compound to produce a more potent drug, or one with fewer or decreased adverse effects.

Computers have transformed the drug discovery process. Rational drug design involves computer-assisted approaches to designing molecules with desired chemical properties. Rational drug design is based on a molecular understanding of the interactions between the drug and its target in biological systems. Molecular modeling software depicts three-dimensional images of a chemical. Mathematical operations adjust the positions of the atoms in the molecule in an attempt to accurately portray the size and shape of the drug, and the location of any charged groups. Chemists can vary the atoms or groups within the model and predict the effect the transformation has on the molecular properties of the drug. In this way, new compounds can be designed.

Advances in technology have made it possible for medicinal chemists to synthesize a vast number of compounds in a relatively short time, a process referred to as combinatorial chemistry. In this technique, one part of a molecule is maintained, as different chemical groups are attached to its molecular framework to produce a series of similar molecules with distinct structural variations. Combinatorial libraries of these molecular variants are thus created.

Every chemical that is synthesized must be tested for biological activity. In vitro testing involves biological assays outside a living system. For example, if the desired effect of a drug is to inhibit a particular enzyme, the enzyme can be isolated from an organ and studied in a test tube. New technologies have made it possible to assay large numbers of compounds in a short period. High-throughput drug screening allows pharmaceutical chemists to test between 1,000 and 100,000 chemicals in a single day! A compound that demonstrates some biological activity will undergo further tests, or it may be chemically modified to enhance its activity. As a consequence, chemical libraries consisting of potentially therapeutic compounds are developed. Each of these compounds can then serve as leads for the development of new drugs to be screened.

Once a drug shows promise in vitro as a therapeutic agent, it must also be screened for toxic properties. Adverse drug side effects are often due to the interaction of the drug with biological molecules other than the desired target. It is very rare that a drug interacts with only one type of molecule in a living system. Drug selectivity refers to the ability of the compound to interact with its target, not with other proteins or enzymes in the system. To investigate drug toxicity, animal studies are performed. These studies also estimate mutagenicity, that is, whether the compound under investigation damages genetic material.

Rarely does a drug pass through a biological system unchanged. Most drugs undergo chemical transformations (in a process known as drug metabolism ) before they are excreted from the body. The drug transformation products (metabolites ) must be identified so that their toxicological profiles can be determined.

Since the 1970s more attention has been given to drug formulation and methods of drug delivery. Historically, drugs have been administered orally, as a pill or a liquid, or in an injectable form. The goal of drug-delivery systems is to enable controlled and targeted drug release. Today, many medications are commonly introduced as inhalants or in a time-release formulation, either encapsulated in a biodegradable polymer or by means of a transdermal patch.

Once scientists and government regulatory agencies have determined the drug candidate to be relatively safe, it can enter into clinical trials. The clinical stage involves four phases of testing on human volunteers. Animal studies and in vitro testing continue during clinical investigations of a drug. Drug-therapy evaluation is very costly and time consuming. Phase I clinical trials evaluate drug tolerance and safety in a small group of healthy adult volunteers. Phase II trials continue to assess the drug's safety and effectiveness in a larger population. Volunteers participating in phase I trials understand that they are receiving experimental therapy. While those patients involved in phase II clinical trials are made aware of the medication and any known side effects, some of the volunteers may be administered a placebo (a compound with no pharmacological activity against the condition being treated) rather than the drug being studied. In a blind study, only the physician administering therapy knows whether the patient is receiving the drug or a placebo. Both groups of patients are monitored, and physicians or clinicians evaluate whether there is significant improvement in the condition of the group receiving the experimental drug, compared with those individuals who were administered a placebo. In a double-blind study, neither the physician nor the patient knows whether the drug, a placebo, or a related remedy has been administered. Therapy is monitored by an outside group.

Phase III and phase IV clinical trials involve larger populations. During phase III trials, which can last two to eight years, a drug is often brought to market. Phase IV studies continue after the drug is being marketed.

The field of pharmaceutical chemistry is diverse and involves many areas of expertise. Natural-product and analytical chemists isolate and identify active components from plant and other natural sources. Theoretical chemists construct molecular models of existing drugs to evaluate their properties. These computational studies help medicinal chemists and bioengineers design and synthesize compounds with enhanced biological activity. Pharmaceutical chemists evaluate the bioactivity of drugs and drug metabolites. Toxicologists assess drug safety and potential adverse effects of drug therapy. When a drug has been approved for human studies, clinicians and physicians monitor patients' response to treatment with the new drug. The impact of pharmaceutical chemistry on the normal human life span and on the quality of life enjoyed by most people is hard to overestimate.

see also Combinatorial Chemistry; Computational Chemistry; Molecular Modeling.

Nanette M. Wachter

Bibliography

Vogelson, Cullen T. (2001). "Advances in Drug Delivery Systems." Modern Drug Discovery 4(4):4950, 52.

Williams, David A., and Lemke, Thomas L. (2002). Foye's Principles of Medicinal Chemistry, 5th edition. Philadelphia: Lippincott Williams & Wilkins.

Wolff, Manfred E., ed. (1996). Burger's Medicinal Chemistry and Drug Discovery, 5th edition. New York: Wiley.

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Wachter, Nanette M.. "Pharmaceutical Chemistry." Chemistry: Foundations and Applications. 2004. Encyclopedia.com. 30 Sep. 2016 <http://www.encyclopedia.com>.

Wachter, Nanette M.. "Pharmaceutical Chemistry." Chemistry: Foundations and Applications. 2004. Encyclopedia.com. (September 30, 2016). http://www.encyclopedia.com/doc/1G2-3400900386.html

Wachter, Nanette M.. "Pharmaceutical Chemistry." Chemistry: Foundations and Applications. 2004. Retrieved September 30, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3400900386.html

Pharmaceutical Industry

PHARMACEUTICAL INDUSTRY

PHARMACEUTICAL INDUSTRY. Production of substances for the prevention or treatment of disease or other human ailments began in the American colonies as an unspecialized craft. By the mid-twentieth century, however, it was largely the province of a few specialized corporate enterprises that depended on a flow of creative product developments from well-financed research laboratories. In the colonial period, physicians of limited training and even the keepers of general stores often compounded and distributed medicinal materials, but by about 1800, pharmaceutical production and distribution began to emerge as a specialized area of commerce.

During the second half of the nineteenth century, the character of production of pharmaceutical preparations again changed substantially. The large military demand during the Civil War encouraged large-scale, specialized, and mechanized production. The rapid growth and dispersion of the population in the late 1800s stimulated further entry of manufacturers into the field, many of whom were trained pharmacists or physicians. Around 1900 many new substances joined the pharmacopoeia, which reflected the influence of scientific work. Leadership in both scientific and commercial development came from Germany, Switzerland, and France. In the early twentieth century, a few American companies introduced research facilities, but they enjoyed only limited success competing against German and Swiss companies.

The two world wars did much to change the character and role of the American industry. The large military market and American and Allied civilian markets, cut off from the German suppliers, became the domain of American companies. Moreover, American patents held by German firms became available to American companies. The new therapeutic approaches that emerged during the first third of the century, including the development of chemicals that specifically attack disease-causing agents without harming the human host and the identification of vitamins and hormones, changed the general character of the pharmacopoeia. One of the most important new developments, antibiotics, was the product of British research from the late 1920s to the early 1940s, but leading American companies introduced commercial production of the first antibiotic, penicillin, during World War II. After the war, the leading companies introduced a number of important new antibiotics, which helped to place the American industry in a position of international leadership in innovation and sales.

About two dozen corporations came to dominate the industry. The drug industry grew rapidly and began to produce a host of new products that were effective in the prevention, treatment, and eradication of many deadly diseases. Drug therapy became important, widespread, and generally cost effective. The drug industry in the late twentieth century was a large, highly profitable, socially important, and politically powerful entity. As a result of these successes and some widely publicized failures, drug company activities became highly politicized.

The largest and most sophisticated multinational drug companies combined research and development with an elaborate network for distribution of information and products. The industry became increasingly international. Worldwide production doubled between 1975 and 1990, reaching $150 billion. Market growth proved nearly as robust. Debate continued in the early twenty-first century about the extent and appropriateness of the high profits of the industry, which were well above the average for all manufacturing industries as well as for Fortune 500 companies.

By the end of the 1980s, public concern over the cost of health care and growing interest in health care reform had increased markedly. This concern politicized federal agency and industry decisions. Drug makers typically offered price breaks to hospitals and health maintenance organizations, but pharmacists often faced huge markups. In the early 1990s, retail pharmacists and others brought price-discrimination suits against drug manufacturers. Analysts doubted the pharmacists would prevail in court because they suspected that the real intent behind such suits may have been to keep pressure on Washington to include some limits on differential pricing practices as part of health care reform.

Conservatives and industry spokespeople argued against government interference in the market, particularly through price controls. They claimed that without high profits, there would be little innovation. Liberals and consumer advocates pointed to the monopoly benefits of patent protection, evidence of oligopolistic behavior, and extensive government subsidization of research costs to back their claims that there should be price controls or profit limits set by the government.

Pricing decisions have always taken place within the context of patent laws, and in industrial countries, patent protection usually lasts sixteen to twenty years from the date of application. During this period, the company has exclusive marketing rights. Once the patent expires, a drug is much less profitable. Even when prices are high,

companies may claim products are cost-effective by pointing to the cost of alternative methods such as surgery and other treatments. Since the 1950s, debate over pharmaceutical profits has been tied to the question of whether high profitability is the result of monopoly or oligopoly. It is doubtful that any firm enjoys monopolistic status, but evidence suggests that some enjoy considerable market power.

The largely cordial relationship between government and the drug industry began to change in 1959 with the Kefauver hearings. Questions emerged about research practices, drug safety and effectiveness, and price disparities between brand-name drugs and generic equivalents. The Thalidomide disaster, widely publicized in 1961, heightened public concern. Such events led to a more complex approval process and stricter manufacturing guidelines in the attempt to ensure both the safety and efficacy of drugs.

Drug manufacturers have complained about such regulations as lengthy approval processes by claiming that they prevent marketing of potentially beneficial drugs. Many new drugs, however, are often essentially equivalent to existing drugs and are not necessarily more effective. The industry has often benefited from government policies. Pharmaceutical manufacturers have rightly noted that research and development is risky and expensive, but university laboratories, small companies, and the National Institutes of Health (NIH) bear much of the risk associated with the research and development of new drugs. These organizations do much of the initial screening of compounds for possible therapeutic efficacy. Once they discover a promising compound, they can sell or license it to the large drug companies. Furthermore, the government provides roughly half of all U.S. health-related research money, largely through the NIH. The NIH conducts drug-related research, and when promising compounds appear, companies bid for a license to market them. The industry benefits from a variety of tax breaks, including Section 936 of the U.S. Internal Revenue Code. Intended to promote economic development in Puerto Rico, Section 936 allows U.S. industries partial tax exemption on profits from operations in Puerto Rico and other U.S. possessions. Consumer advocates and policy-makers continue to debate these and other issues as they address the rising costs of health care.

BIBLIOGRAPHY

Abraham, John. Science, Politics, and the Pharmaceutical Industry: Controversy and Bias in Drug Regulation. New York: St. Martin's Press, 1995.

Blackett, Tom, and Rebecca Robins, ed. Brand Medicine: The Role of Branding in the Pharmaceutical Industry. New York: St. Martin's Press, 2001.

Gambardella, Alfonso. Science and Innovation: The US Pharmaceutical Industry during the 1980s. Cambridge, U.K.: Cambridge University Press, 1995.

Harris, Michael R., and Mark Parascandola. Medicines: The Inside Story. Madison, Wis.: American Institute of the History of Pharmacy, 1996.

Kaplan, Steven N., ed. Mergers and Productivity. Chicago: University of Chicago Press, 2000.

Schweitzer, Stuart O. Pharmaceutical Economics and Policy. New York: Oxford University Press, 1997.

Swann, John Patrick. Academic Scientists and the Pharmaceutical Industry: Cooperative Research in Twentieth-Century America. Baltimore: Johns Hopkins University Press, 1988.

Weatherall, Miles. In Search of a Cure: A History of Pharmaceutical Discovery. Oxford: Oxford University Press, 1990.

Resse V.Jenkins/a. e.

See alsoAcquired Immune Deficiency Syndrome (AIDS) ; Biochemistry ; Chemical Industry ; Clinical Research ; Food and Drug Administration ; Health and Human Services, Department of ; Health Care ; Medicine and Surgery ; Medicine, Military ; Pharmacy ; Pure Food and Drug Movement .

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Pharmaceutical Scientist

Pharmaceutical Scientist

The role of the pharmaceutical scientist in drug discovery and development is highly varied. Duties range from the synthesis of novel compounds designed to alter disease processes, to the formulation of these compounds into a tablet or capsule, to the development of assays (tests) to measure the drug and its metabolites in the body, to the testing of compounds for their effects in animals and humans. In addition, scientists in this industry pursue more basic questions, such as which genes or processes are critical in disease, as well as better ways to diagnose disease and predict clinical outcomes of treatment strategies. While the pharmaceutical industry employs thousands of chemists and biologists, the skills needed to work in the pharmaceutical industry are much broader and are being substantially changed by the infusion of genetics and genomics into the drug development process. Therefore those interested in a scientific career in the pharmaceutical industry should seriously consider training in the important areas of genetics and genomics .

The drug development processes can be divided into three major sections: research, where compounds are synthesized and tested against potential drug targets and for activity in animal models of disease; preclinical safety, where the compounds are analyzed for their potential toxicity in the laboratory and in animal model studies; and manufacturing of clinical-grade material and testing in human clinical trials. Individuals with a range of skills in chemistry, biology, manufacturing, and clinical sciences are very important. However, it is not limited to these areas, since the pharmaceutical industry employs most types of scientists. The increasing amount of genome sequence available at the present time has generated a need for individuals trained in bioinformatics. These scientists use computational methods to answer biological questions, particularly methods involving massive amounts of data produced by the field of genomics. In addition, scientific expertise is needed in many of the support areas of the drug development process, including the business, legal, and regulatory aspects. As a consequence, the training, skills, and qualifications needed for work in the industry are very broad and varied.

Beginning at the technical level with a college degree, there is a variety of entry-level positions in all areas of drug development. Opportunities also exist for individuals to work on postgraduate degrees within a pharmaceutical company, and there are many options for conducting postdoctoral research throughout the industry. Naturally, the work environment varies as much as the types of positions. Pharmaceutical scientists are typically based in the laboratory, manufacturing facility, or office. Those working on clinical trial design will typically work from corporate offices and then implement the patient treatment with investigators at universities or clinics, rather than actually conducting the patient research themselves.

Due to the wide variety and types of positions in this global industry, salary ranges are very broad. Historically, pharmaceutical scientists receive competitive salaries and they may also receive cash or stock bonuses. The pharmaceutical industry is oriented toward extremely high-quality research that leads to new treatments for people in need. Successful scientific work leads to useful drugs that benefit patients as well as the company that develops them. Therefore, the success of pharmaceutical scientists is tied to the degree to which their work benefits patients and to the degree of financial success achieved by the company as a whole.

A career as a pharmaceutical scientist can be exceptionally rewarding. It provides the professional with an opportunity to participate in a team that seeks to discover useful new drugs. There is satisfaction in knowing that, when approved and sold on the market, such a discovery can help millions of people for years to come. In addition, pharmaceutical scientists have the opportunity to work in cutting edge areas, using new methods for studying genetics in clinical trials. One such field of study, called pharmacogenetics, examines the reasons that individuals have different responses to the same drug. This area of study is expected to greatly improve the understanding of how drugs work and enable physicians to prescribe them to those who are most likely to benefit, while minimizing the risk of adverse reactions.

see also Bioinformatics; Pharmacogenetics and Pharmacogenomics; Physician Scientist.

Kenneth W. Culver

and Mark A. Labow

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Culver, Kenneth W.; Labow, Mark A.. "Pharmaceutical Scientist." Genetics. 2003. Encyclopedia.com. 30 Sep. 2016 <http://www.encyclopedia.com>.

Culver, Kenneth W.; Labow, Mark A.. "Pharmaceutical Scientist." Genetics. 2003. Encyclopedia.com. (September 30, 2016). http://www.encyclopedia.com/doc/1G2-3406500206.html

Culver, Kenneth W.; Labow, Mark A.. "Pharmaceutical Scientist." Genetics. 2003. Retrieved September 30, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3406500206.html

Pharmaceutical Industry

PHARMACEUTICAL INDUSTRY

The pharmaceutical industry has two distinct functions: research and development (R&D), and manufacturing. Some firms are primarily engaged in R&D, while others concentrate on manufacturing. The largest and best-known pharmaceutical firms do both.

Research-oriented firms include the large, well-known drug producers, which are often multinational firms with a presence in the three largest drug marketsthe United States, Europe, and Japan. Others are smaller, and usually younger, firms that are attempting to develop a narrower range of products. This grouping includes most biotechnology firms, few of which have so far succeeded in bringing the results of their research to market. Among the manufacturers are firms producing generic drugsproducts that are in many ways equivalent to existing drugs whose patents have expired.

The number of pharmaceutical manufacturers is large; the Department of Commerce listed nearly 1,500 in 1997. This might suggest that the industry is highly competitive. But the number of pharmaceutical compounds is also very large. The Physician's Desk Reference lists 1,300 different distinct compounds. In spite of the large number of drug products, there are so many therapeutic classes that the number of products that are substitutes for one another, and hence compete with each other, is small. So though the industry as a whole is highly competitive, individual products are less so.

Another remarkable characteristic of the pharmaceutical industry is its high rate of investment in R&D, with a correspondingly rapid pace of product innovation. U.S. firms, for example, spent over $21 billion in R&D in the United States and abroad in 1998, an increase of nearly 11 percent from the year before. Expenditures in 1999 were estimated to be over $24 billion, an annual increase of 14 percent. These investments represent a 12 percent share of total revenue, a share that is nearly double that of most other industries, including office equipment, electronics, and telecommunications companies. This rate of investment has enabled the U.S. pharmaceutical industry to produce nearly half of all patented drugs that were introduced globally between 1975 and 1994.

The high rates of innovation that characterize the pharmaceutical industry result from high rates of return on investment in R&D, which create the incentives necessary to conduct this research. This implies that R&D will typically flow to clinical areas characterized by relatively large marketseither large numbers of patients; or purchasers willing to pay prices that, in the long run, cover the costs and risks of these investments. Smaller markets or markets that are unable to pay such prices will rarely attract these investments.

The Orphan Drug Act was enacted by Congress in 1984 to create incentives to encourage manufacturers to develop products for diseases affecting relatively small numbers of patients. Following the act's passage, many drugs were developed and introduced addressing these relatively rare diseases. To replicate the act's success in a broader international context, however, would require support of international organizations such as the World Health Organization or the World Bank.

Stuart O. Schweitzer

(see also: Antibiotics; Drug Resistance; Economics of Health )

Bibliography

Barral, P. E. (1996). Twenty Years of Pharmaceutical Research Results Throughout the World. Paris: Rhone Poulenc Foundation.

Physicians Desk Reference, 54th edition (2000). Montvale, CA: Medical Economics Company.

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Schweitzer, Stuart O.. "Pharmaceutical Industry." Encyclopedia of Public Health. 2002. Encyclopedia.com. 30 Sep. 2016 <http://www.encyclopedia.com>.

Schweitzer, Stuart O.. "Pharmaceutical Industry." Encyclopedia of Public Health. 2002. Encyclopedia.com. (September 30, 2016). http://www.encyclopedia.com/doc/1G2-3404000645.html

Schweitzer, Stuart O.. "Pharmaceutical Industry." Encyclopedia of Public Health. 2002. Retrieved September 30, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3404000645.html

Pharmaceutical Industry

PHARMACEUTICAL INDUSTRY


The pharmaceutical industry in the United States dates back to the early 1800s. Opium was routinely prescribed in the United States as far back as the eighteenth century; however, concoctions known as "patent medicines" did not make an appearance until the nineteenth century. Patent medicines became very popular; they bore names such as "Carter's Little Liver Pills." During this time many pharmaceutical companies were founded in the Midwest, including Parke Davis, Eli Lilly, and Upjohn Company.

As the industry developed, New York City was an important center of trade in drugs; Philadelphia also emerged as a home for about six pharmaceutical manufacturers. Pharmacy schools, which began to open in several states between 1821 to 1859, probably contributed to the growth of the pharmaceuticals industry. (The American Journal of Pharmacy began publication in 1825.) Another probable factor in the growth of the industry was the prodigious amount of drugs used during the American Civil War (18611865). By 1870 there were almost 300 pharmaceutical manufacturers in existence.

During the early nineteenth century, several new drugs quickly came into common use. Some of these were opiates, which were later greatly restricted during the twentieth century. Morphine was first commercially produced in the 1830s. After the invention of the hypodermic needle in the 1860s, morphine use became more widespread as it could be easily injected into the patient. Another (subsequently) restricted drug, cocaine, was first commercially produced in the 1880s. When it was first introduced, it became very popular physicians thought that it was harmless. (Until it was found to be addictive, cocaine was even used as an ingredient in the soft drink Coca-Cola.) In 1898, another opiate, heroin, was commercially available from the Bayer Company.

The dangers of opiates were not acknowledged until the 1900s, in part because there were no laws regulating the drug industry until the 1870s and 1880s. The Pure Food and Drug Act of 1906, the Shanghai Opium Convention of 1909, The Hague Opium Treaty, and the Harrison Narcotic Act (both in 1912) were all early attempts by the U.S. government to regulate drug manufacturing and distribution.

Several advancements in drug production were developed during the late nineteenth century which furthered development of the industry. Pharmaceutical manufacturers attempted to standardize batches of medicines between the various companies. In 1888 another improvement came in the form of a machine that produced pills of uniform dose and purity. Later, during the early twentieth century over-the-counter drugs were developed and marketed. Products, such as aspirin and laxatives, greatly increased the availability of medicines to the general public.

Following World War I (19141918) demand influenced the rapid commercial expansion of the pharmaceuticals industry. The number of chain drugstores increased during the 1920s and, as the industry grew, it consolidated; several drug companies merged. By the 1930s, market research became important in the industry; consumers wanted new medicines that could help two or more symptoms at a time. Sulfa drugs, designed to fight bacteria, were also developed during this period and became the choice for treatment of infections until the mid-1940s, when penicillin was commercially developed and marketed.

In 1937 over 100 Americans were killed when treated with a drug that had a toxic solvent in it. This resulted in stricter governmental regulations to improve drug testing. Changes included passing the Food, Drug, and Cosmetic Act of 1938, which was enforced by the Food and Drug Administration (FDA).

World War II (19391945) caused an upsurge in demand for the new antibiotic drug, penicillin, which was first marketed in 1946. (The major producer of penicillin was the Pfizer Company.) New medicines continued to appear after the war. Almost 500 new drugs entered the market between 1950 and 1959. With this expansion came advanced marketing tactics pharmaceutical companies began to advertise drugs on television. As the pharmaceutical market grew, so increased the level of government regulation. In the 1950s and 1960s several new FDA laws were passed to further regulate the testing, certification, and prescription of drugs.

In the mid-1980s, the FDA was reorganized due to allegations of deficient practices. One issue examined by the reorganized FDA was the use of generic drugs, which, according to "The American Druggist," accounted for almost 45 percent of all prescriptions by the mid-1990s.

In the 1990s the pharmaceutical industry focused on the research and development of new drugs, especially drugs for treating diseases common to an elderly population, as well as cancer and AIDS. Biotechnology began to make an impact in the drug industry, as companies such as Amgen, Inc., and Chiron Corporation were founded. Competition resulted in the merging, restructuring, and downsizing of many pharmaceutical companies.

See also: Pure Food and Drug Act


FURTHER READING

Cray, William C. The Pharmaceutical Manufacturers Association: the First 30 Years. Washington, DC: Pharmaceuticals Manufacturers Association, 1989.

Foner, Eric, and John A. Garraty, eds. The Reader's Companion to American History. Boston, MA: Houghton Mifflin Co., 1991, s.v. "Drug."

McConnell, Stacy A., and Linda D. Hall, eds. Dun & Bradstreet/Gale Industry Reference Handbooks: Pharmaceuticals. Detroit: The Gale Group, 1998.

Mez-Mangold, Lydia. A History of Drugs. Totowa, NJ: Barnes & Noble, 1986.

"Phrma: Publications: Industry Profile 1998, Chapter 1," [cited January 31, 1999] available from the World Wide Web @ www.phrma.org/publications/industry/profile98/chap1.html#improved/.

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Pharmaceutical Scientist

Pharmaceutical Scientist

Pharmacists are professionals whose goals are to achieve positive outcomes from the use of medication to improve patients' quality of life. The practice of pharmacy is a vital part of the complete health care system. Due to society's many changing social and health issues, pharmacists face constant challenges, expanded responsibilities, and increasing growth in opportunities.

Pharmacists are specialists in the science and clinical use of medications. They must have the knowledge about the composition of drugs, their chemical and physical properties, and their uses as well as understand the activity of the drug and how it will work in the body. Pharmacy practitioners work in community pharmacies, hospitals, nursing homes, extended care facilities, neighborhood health centers, and health maintenance organizations. A doctor of pharmacy degree (Pharm.D.) requires four years of professional study, following a minimum of two years of pre-pharmacy study.

Pharmacy practitioners may combine their professional activities with the challenge of scientific research. Many pharmacists go on to obtain postgraduate degrees in order to meet the technical demands and scientific duties required in academic pharmacy and the pharmaceutical industry. Students have the opportunity to complete advanced study (graduate work) at pharmacy schools across the United States. Graduate studies may qualify the student for a Master of Science (M.S.) or Doctor of Philosophy (Ph.D.) degree in various areas of pharmaceutical sciences (medicinal and natural products chemistry, pharmacognosy , pharmacology, toxicology). These research degrees require an undergraduate bachelor's or a doctor of pharmacy degree. The pharmaceutical scientists are mainly concerned with research that includes sophisticated instrumentation, analytical methods, and animal models that study all aspects of drugs and drug products.

The pharmaceutical industry offers many opportunities to pharmaceutical scientists in research, development, and manufacture of chemicals, prescription and nonprescription drugs, and other health products. Colleges and schools of pharmacy present options in teaching and in academic research. Pharmaceutical scientists may also be employed in a variety of federal and state positions including with the U.S. Public Health Service, the Department of Veterans Affairs, the Food and Drug Administration, the Centers for Disease Control, and in all branches of the armed services. In addition, they may also be engaged in highly specialized jobs such as science reporters, as experts in pharmaceutical law, or as drug enforcement agents, or they may specialize in medicinal plant cultivation and processing.

As society's health care needs have changed and expanded, there has been an increased emphasis on the use of herbal remedies as dietary supplements or the search for new prescription drugs from natural sources such as microbes and plants. As a result, an increased number of pharmaceutical scientists hold doctoral degrees in natural products chemistry, pharmacognosy , or medicinal chemistry and are involved in biodiversity prospecting for the discovery of new medicines. At the turn of the twenty-first century there exists a shortage of specialists in this area, and they are in great demand if they are also trained in ethnobotany.

There are many opportunities and great potential for advancement and competitive salaries within a pharmacy science career. In 1999, starting annual salaries average between $50,000 and $65,000, depending on location.

see also Ethnobotany; Medicinal Plants; Plant Prospecting.

Barbara N. Timmermann

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pharmaceutical

phar·ma·ceu·ti·cal / ˌfärməˈsoōtikəl/ • adj. of or relating to medicinal drugs, or their preparation, use, or sale. • n. (usu. pharmaceuticals) a compound manufactured for use as a medicinal drug. ∎  (pharmaceuticals) companies manufacturing medicinal drugs. DERIVATIVES: phar·ma·ceu·ti·cal·ly / -(ə)lē/ adv. phar·ma·ceu·tics / -soōtiks/ n.

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pharmaceutical

pharmaceutical (farm-ă-sewt-ikăl) adj. relating to pharmacy.

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pharmaceutical

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