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.
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.