Case Study : The Pharmaceutical Industry Essay

728 Words Apr 26th, 2015 3 Pages
II. Industry Overview
A. Industry Sector
On average, Americans spend about $800 to $1,000 annually per person in purchasing pharmaceuticals; this translates to about 2.0% of total GDP of the United States. Given this, we see that the pharmaceutical industry plays a critical role in the everyday spending of consumers. The industry total revenue is currently valued at $1,140 billion and expected to grow at a rate of 4% in the next 5 years.

The pharmaceutical industry is characterized by heavy investment in research and development (R&D). Companies need to spend a lot on developing new drugs in order to increase and maintain market share and of course, meet the ever-changing needs of consumers. R&D expenses add up to 12.9% of total industry costs (See Appendix A). “According to the Pharmaceutical Research and Manufacturers of America, it can take 10 to 15 years and about $1.5 billion to develop a new product, and only two out of ten products recover their research and development (R&D) costs.”

The Government and other regulatory bodies are also considered as major stakeholders in this industry. For example, the FDA must approve a product before it is made available to the public and even after products are released, companies need to abide by the safety standards set by these agencies.

The industry also plays a considerable role in the global economy as it employs over 2 million people and that number is expected to grow at 1.4% annually . With regard to the…

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