Pharmaceutical Industry Analysis Paper

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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
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Also, several Governments and health insurance organizations have cut their drug reimbursement programs in order to control healthcare costs. This has caused a shift in demand from high-margin brand-name drugs to low cost generic drugs. In response, “the industry will contend with compliance-related operational costs that constrain profit.” In addition to this, there is also “increasing pressure from government to lower costs of drugs and also …show more content…
This trend, combined with the increase in per capita healthcare income and increase in chronic illnesses within this age demography will likely bring about increased revenue and demand for pharmaceuticals.

Advancements in technology have improved functionality across the industry and have resulted in reduced costs. “For example, bioinformatics solutions are helping to accelerate pharmaceutical drug development, and IT plays a vital role in improving the supply chain efficiency and regulatory compliance.” Improvement in technology will then

Patent cliffs have threatened the industry over the last five years since most patents for drugs are expiring within this year. This has forced manufacturers to cut R&D expenditures due to emerging competition with generic drug manufacturers from Korea, India and China. Between 2012 and 2015, the industry incurred an estimated loss of $250 billion dollars in sales due to blockbuster drugs losing their patent

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