From Wikipedia,
the free encyclopedia
A pharmaceutical company
(or drug company) is a
company licensed to discover,
develop, market and distribute
drugs.
History
Most large pharmaceutical
companies were founded in the late
19th and early
20th centuries, and derive
their market share from a few
well-marketed preparations. There
are currently more than 200 major
pharmaceutical companies (see
list). As in some other
industries, economic pressures are
forcing pharmaceutical companies
toward greater efficiency.[1]
Biotechnology company
A
biotechnology company is any
company that uses biological
systems, living organisms, or
derivatives thereof, to make or
modify products or processes for
specific use. Often biotechnology
companies produce pharmaceuticals.
Typically a
biopharmaceutical made in this
manner is composed of very large
molecules that are unstable and
must be administered by injection
in a physician's office.
Drug discovery
Drug discovery is the process
by which
drugs are discovered and/or
designed. In the past most drugs
have been discovered either by
identifying the active ingredient
from traditional remedies or by
serendipitous discovery. The
new approach has been to
understand how
disease and
infection are controlled at
the
molecular and
physiology level and to target
specific entities based on this
knowledge. New technologies and
Data Management/Informatics
systems are now employed to speed
up this process.
New drugs begin in the
laboratory with chemists,
scientists and pharmacologists who
identify cellular and genetic
factors that play a role in
specific diseases[2].
"They search for chemical and
biological substances that target
these biological markers and are
likely to have drug-like effects.
Out of every 5,000 new compounds
identified during the discovery
process, only five are considered
safe for testing in human
volunteers after preclinical
evaluations. After three to six
years of further clinical testing
in patients, only one of these
compounds is ultimately approved
as a marketed drug for treatment.
The following sequence of research
activities begins the process that
results in development of new
medicines:"
Target identification
"Drugs usually act on either
cellular or genetic chemicals in
the body, known as targets, which
are believed to be associated with
disease. Scientists use a variety
of techniques to identify and
isolate a target and learn more
about its functions and how these
influence disease. Compounds are
then identified that have various
interactions with drug targets
helpful in treatment of a specific
disease."
Target
prioritization/validation
"To select targets most likely
to be useful in the development of
new treatments for disease,
researchers analyze and compare
each drug target to others based
on their association with a
specific disease and their ability
to regulate biological and
chemical compounds in the body.
Tests are conducted to confirm
that interactions with the drug
target are associated with a
desired change in the behavior of
diseased cells. Research
scientists can then identify
compounds that have an effect on
the target selected."
Lead identification
"A lead compound or substance
is one that is believed to have
potential to treat disease.
Laboratory scientists can compare
known substances with new
compounds to determine their
likelihood of success. Leads are
sometimes developed as
collections, or libraries, of
individual molecules that possess
properties needed in a new drug.
Testing is then done on each of
these molecules to confirm its
effect on the drug target."
Lead optimization
"Lead optimization compares the
properties of various lead
compounds and provides information
to help pharmaceutical and
biotechnology companies select the
compound or compounds with the
greatest potential to be developed
into safe and effective medicines.
Often during this same stage of
development, lead prioritization
studies are conducted in living
organisms (in vivo) and in cells
in the test tube (in vitro) to
compare various lead compounds and
how they are metabolized and
affect the body."
Drug development
Drug development is considered
a costly and intensive process. Of
all compounds investigated for use
in humans only a small fraction is
eventually
approved, and only after heavy
investment in
pre-clinical development,clinical
trials, and
safety monitoring to determine
the safety and efficacy of a
compound. Most clinical trials are
randomized and controlled. The
cost for a new drug (new chemical
entity) is estimated to be about
$1 billion US$. This figure is
however disputed.[3]
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 for
about 20 years. Only after
rigorous study and testing, which
can take as long as 12 years, will
governmental authorities grant
permission for the company to
market and sell the drug. In
special circumstances, such as the
search for effective drugs to
treat AIDS, the Food and Drug
Administration (FDA) has
encouraged an abbreviated process
for drug testing and approval
called fast-tracking.[4]
Clinical testing is usually
described as consisting of Phase
I, Phase II and Phase III clinical
studies.[5]
In each successive phase,
increasing numbers of patients are
tested. There are a large number
of
firms that support clinical
trials.
Phase I Clinical Studies
"Phase I studies are designed
to verify safety and tolerability
of the candidate drug in humans
and typically take six to nine
months. These are the first
studies conducted in humans. A
small number of subjects, usually
from 20 to 100 healthy volunteers,
take the investigational drug for
short periods of time. Testing
includes observation and careful
documentation of how the drug acts
in the body -- how it is absorbed,
distributed, metabolized and
excreted."
Phase II Clinical Studies
"Phase II studies are designed
to determine effectiveness and
further study the safety of the
candidate drug in humans.
Depending upon the type of
investigational drug and the
condition it treats, this phase of
development generally takes from
six months up to three years.
Testing is conducted with up to
several hundred patients suffering
from the condition the
investigational drug is designed
to treat. This testing determines
safety and effectiveness of the
drug in treating the condition and
establishes the minimum and
maximum effective dose. Most Phase
II clinical trials are
randomized, or randomly
divided into groups, one of which
receives the investigational drug,
one of which gets a placebo
containing no medication and
sometimes a third that receives a
current standard treatment to
which the new investigational drug
will be compared. In addition,
most Phase II studies are
double-blinded, meaning that
neither patients nor researchers
evaluating the compound know who
is receiving the investigational
drug or placebo."
Phase III Clinical Studies
"Phase III studies provide
expanded testing of effectiveness
and safety of an investigational
drug, usually in
randomized, and
blinded clinical trials.
Depending upon the type of drug
candidate and the condition it
treats, this phase usually
requires one to four years of
testing. In Phase III, safety and
efficacy testing is conducted with
several hundred to thousands of
volunteer patients suffering from
the condition the investigational
drug treats."
New Drug Application
"(NDA)/Marketing Authorization
Application (MAA) NDAs (in the
U.S.) and MAAs (in the U.K.) are
examples of applications to market
a new drug. Such applications
document safety and efficacy of
the investigational drug and
contain all the information
collected during the drug
development process. At the
conclusion of successful
preclinical and clinical testing,
this series of documents is
submitted to the FDA in the U.S.
or to the applicable regulatory
authorities in other countries.
The application must present
substantial evidence that the drug
will have the effect it is
represented to have when people
use it or under the conditions for
which it is prescribed,
recommended or suggested in the
labeling. Obtaining approval to
market a new drug frequently takes
between six months and two years."
Orphan drug
There are
special rules for certain rare
diseases ("orphan diseases")
involving fewer than 200,000
people in the United States.
Because medical research and
development of drugs to treat such
diseases is financially
disadvantageous, companies that do
so are rewarded with tax
reductions and a monopoly on that
orphan drug for a limited time
(seven years).
Post-approval surveillance
Some medications only show to
have safety issues after they are
marketed, as clinical trials are
of a limited size, such as the
3,000 test subjects required by
the FDA. 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.
After the FDA (or other
regulatory agency for drugs
marketed outside the U.S.)
approves a new drug,
pharmaceutical companies may
conduct additional studies,
including Phase IIIb and Phase IV
studies.[6]
"Late-stage drug development
studies of approved, marketed
drugs may continue for several
months to several years."
Phase IIIb/IV Studies
"Phase IIIb trials, which often
begin before approval, may
supplement or complete earlier
trials by providing additional
safety data or they may test the
approved drug for additional
conditions for which it may prove
useful. Phase IV studies expand
testing of a proven drug to
broader patient populations and
compare the long-term
effectiveness and/or cost of the
drug to other marketed drugs
available to treat the same
condition."
Post-Market Studies
"Post-market studies test a
marketed drug in new age groups or
patient types. Some studies focus
on previously unknown side effects
or related risk factors. As with
all stages of drug development
testing, the purpose is to ensure
the safety and effectiveness of
marketed drugs."
Products
Drug information
Drug information and data are
provided by the
FDA and are located at the
Orange Book site. Drug
information is commercially
available at
eKnowledgebase.
ICD and DRG
Diseases are classified by
ICD-9 codes. These ICD codes
are aggregated into approximately
500
diagnosis-related groupss (DRG)
expected to have similar hospital
use.
In
1991, the top 10 DRGs overall
were:
These DRGs comprised nearly 30%
of all hospital
discharges. The complete list
with prevalence rates is given in
[7].
Revenues
Industry revenues
2004 global dollar volume was
$550 billion, a 7% increase over
2003—which in turn represented a
9% increase over 2002. US sales
grew to $235.4 billion, a growth
rate of 8.3% compared with 11.5%
growth from 2002 to 2003
[8]. The United States
accounts for 46% of the world's
pharmaceutical market.
According to Teradata Magazine,[9]
"By 2007, $40 billion in U.S.
sales will be lost at the top 10
pharma companies as a result of
the slowdown in R&D innovation and
the expiry of patents on major
products," ... "Taking a broader
look across the industry, no fewer
than 19 blockbuster drugs are
expected to hit patent crisis by
2008. Analysis suggests that 150
mid-sized new compounds will be
needed by 2007-2008 in the U.S.
alone to plug this gap."
Top 10 pharmaceutical
companies by sales
The top 10 pharmaceutical
companies by 2004 sales are:
Source: Wendy Diller and
Herman Saftlas, "Healthcare:
Pharmaceuticals," Standard &
Poor’s Industry Surveys, 22
December 2005, 13
See also the
top 50 pharmaceutical companies
and the
top 100 biotechnology companies.
Patents and Generics
Drugs are patentable. A typical
patent lasts for 20 years.
However, it often takes as long as
12 years to approve a drug for
patient use. Patent protection
allows the owner of the patent to
charge high margins for the
branded drug. When the patent
for the drug runs out, a
generic drug
[10] is usually created by a
competing company and released,
causing the price to drop
markedly. Often the owner of the
branded drug will introduce a
generic version before the patent
runs out in order to get a head
start in the generic market.
Medicare Part D
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 and
disabled. 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
[11].
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).
Sales and marketing
The pharmaceutical industry is
different
The pharmaceutical industry is
different from most industries in
that the products are usually not
chosen by the consumers or paid
for by the consumers. Physicians
control the choice of many drugs
through prescription writing.
Private or public insurance often
pays for most of the drugs.
Moreover, insurance companies
restrict the drugs that can be
prescribed through the use of
formularies. This along with the
high margins for the industry make
pharmaceutical marketing a
complex discipline.
Advertising to physicians
Physicians are perhaps the most
important players in
pharmaceutical sales. They write
the prescriptions that determine
which drugs will be used by the
patient. Influencing the physician
is key to pharmaceutical sales.
Historically, this was done with
large pharmaceutical sales forces.
A medium-sized pharmaceutical
company might have a sales force
of 1000 representaives. The
largest companies have tens of
thousands of representatives.
Currently, there are approximately
100,000 pharmaceutical sales reps
in the United States pursuing some
120,000 pharmaceutical prescribers.[12]
Drug companies spend $5 billion
annually sending representatives
to physician offices.
Direct to consumer
Since the 1980s new methods of
marketing for prescription drugs
to consumers have become
important. Patients are far less
deferential to doctors and will
inquire about, or even demand, to
receive a medication they have
seen advertised on television. In
the United States recent years
have seen an increase in mass
media advertisements for
pharmaceuticals.
The payers
Public and private insurers
affect the writing of
prescriptions by physicians
through formularies that restrict
the number and types of drugs that
the insurer 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. 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.
Mergers, acquisitions, and
co-marketing of drugs
A
merger, acquisition, or
co-marketing deal between
pharmaceutical companies can occur
if the companies have
complementary capabilities. A
small
biotechnology company 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
company's interest to enter into a
deal to capitalize on the synergy
between the companies. The
difference between the value of
the two companies after the deal
and before the deal is known as
the
synergy value of the deal.
News affecting the value of a
pharmaceutical company can be
obtained through
PharmaSentry.
Controversy
- Accusations of forging or
suppressing clinical trial
results to maximise uptake of
some medications;
- Accusations of manipulating
the market for their products by
showering doctors with free
gifts[13].
- Too much advertising
materials in the doctor's
office, such as clocks, poster
ads, etc.
- Aggressive representation by
pharmaceutical companies'
salespeople (detailmen).
- Sponsorship of
medical schools, with
influence on the curriculum to
discourage the teaching of
alternative medicines.
- Increased number of drug
tests on animals before
FDA approval
- Criticism for the price of
patented
AIDS medication, which could
limit therapeutic options for
patients in the
Third World, where the most
people have AIDS. Under
World Trade Organization
rules, a developing country has
options for obtaining needed
medications under
compulsory licensing or
importation of cheaper versions
of the drugs, even before
patent expiration(WTO
Press Release).
Pharmaceutical companies often
offer much needed medication at
no or reduced cost to the
developing countries. Proposals
to allow the manufacture generic
AIDS drugs are not without
controversy; it is sometimes
claimed that this might cause
pharmaceutical companies to move
away from AIDS drug research and
focus their research on other,
more profitable areas. In March
of
2001,
South Africa was sued by 41
pharmaceutical companies for
their
Medicines Act, which allowed
the import and generic
production of cheap AIDS drugs.
The case was later dropped after
protest around the world.
- Between 1980 and 1997, drug
industry funding for academic
research rose eight fold, as
research costs rose, and the
rate of federal support fell.
Drug researchers not employed by
pharmaceutical companies often
look to companies for grants,
and companies often look to
researchers for studies that
will make their products look
good. 79% of papers written by
independent researchers are
favorable to new drugs. 98% of
papers written by researchers
sponsored by the drug companies
are favorable. Sponsored
researchers are rewarded by drug
companies by putting them on
symposium circuits to lecture,
with the lecture scripts written
by pharmaceutical companies.
Some researchers who have tried
to publish papers that show
harmful effects of new drugs or
cheaper alternatives have been
threatened by drug companies
with lawsuits.
- Drug companies spent $900
million on consumer ads in the
first half of 1999 alone.
Pharmaceutical companies often
fund non-profit "patient groups"
that consume their drugs.
Patient groups can advertise for
the drug companies, and are
unregulated by the
Food and Drug Administration
(FDA). Advertising directly to
consumers, however, is strictly
regulated in the United States
by the FDA, as described in
FDA Guidance for Industry on
Consumer-Directed Broadcast
Advertisements.
- Where pharmaceutics have
been shown to cause
side-effects,
civil action has occurred,
especially in countries where
tort payouts are likely to
be large. Due to high-profile
cases leading to large
compensations, most
pharmaceutical companies endorse
tort reform.
- The cost for a new drug (new
chemical entity) is estimated to
be about $1 billion US$. This
figure is however hotly
disputed.[14]
Half of this figure are
opportunity cost of capital,
compunded by long development
cycles. Moreover, all expenses
for unsuccessful development of
other drugs are included so that
the figure represents the
average expected cost of
developing an approved drug in
economic terms rather than the
actual "out-of-pocket" expenses
for a single drug.
Bibliography
Controversy
- Ray Moynihan, Alan Cassels:
Selling sickness: How the
world's biggest pharmaceutical
companies are turning us all
into patients". Nation Books,
New York, 2005.
- Merrill Goozner: The $800
million pill.
[15] University of
California Press, Berkeley,
2004, 297 S.
ISBN 0-520-23945-8.
- Marcia Angell: The truth
about the drug companies.
Random House, New York, 2004,
305 S.
ISBN 0-375-50846-5.
