Sample Essay on Factors Affecting Pharmaceutical Industry

Factors Affecting Pharmaceutical Industry

Pharmaceutical companies are known to invest billions of dollars in R&D (research and development) with the hope of finding cures or treatments that are more effective. The role of the industry has grown since modern health care is heavily dependent on the companies for alternative to surgery and maintenance therapy.

Yet, these companies face numerous patent challenges at any giving time which slows it down and demand has also shifted to emerging markets and generic segments. Some of the major hurdles faced by the pharmaceutical company include:

  • Persistent regulatory hurdles
  • Increasing demand from stake holders like pharmacies and providers
  • Value chain slumping R&D productivity to supply shortages.

There are several factors that affect the pharmaceutical   industry and some of the key ones are as highlighted below.


Research and development

New treatments have to be researched and developed yet, this has become more specialized and complex. According to PhRMA (Pharmaceutical Manufacturers Association) the leading consortium of pharmaceuticals the expenditures of the industry in R&D totaled to $67.4 billion in the year 2010. The ability of the companies to recoup on investments and make profits depends on how many of the developments get through to the approval stage. Drug companies are required to carry out at least six hundred clinical trials on all new drugs before they are approved in the market. After this, they only get a couple of year’s patent protection before their competitors are given the right to manufacture their products at half of their costs.

Consumer demand

In the last several decades, demand from consumers for ‘lifestyle’ drugs that enhance well being and health have risen tremendously and this has led to growth of the industry as well. There are blockbuster drugs like Viagra, Lipitor and Claritin which have been advertised heavily increasing consumer demand. Patients who are educated have also driven prescription explosion in the doctor’s office hence driving sales even higher.

Government regulation

The level of regulation carried out by the government on the industry determines its profitability. Every successive federal government regulates the industry to a certain extent. Some countries like Germany and Canada are known to have caps or price controls on all pharmaceuticals that are within their border.

The United Stated government and FDA are also known to exert a high level of control over the advertising made by pharmaceutical companies. This is especially true in regard to what the drugs ‘claim’ they can or cannot do.  Complying with the strictures of the regulating bodies costs pharmaceutical companies millions of dollars every year.

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