The pharmaceutical industry--prices and progress.

The new england journal of medicine 927 health policy report For more than four decades, beginning with an investigation chaired by Senator Estes Kefauver in the 1950s, debate has raged over the economics of the pharmaceutical manufacturing industry. Critics point to monopolistic pricing and high profits; defenders emphasize the advances in medical therapy achieved by the industry. In this article, I will attempt to clarify components of the debate, although this discussion cannot resolve the uncertainties and value judgments required to achieve closure. The bounds of the industry are indistinct. From statistics compiled by the industry's principal trade association, " Big Pharma " companies reported U.S. prescription-drug sales in 2002 of $145 billion. 1 Included in this figure are drug sales of companies that have successfully marketed new biopharma-ceutical products. A higher estimate, $192 billion, comes from Intercontinental Marketing Services, a leading independent collector of industry data. The latter figure includes the sales of smaller companies , generic drug specialists, and some over-the-counter drugs. 2 In 2000, prescription-drug outlays made up 9 to 10 percent of total U.S. health care expenditures. 3,4 The pharmaceutical industry is the most research-intensive of U.S. industries that support their research and development with private funds (as distinguished from defense and space contractors). In 2002, Big Pharma companies devoted 18 percent of their sales revenue to research, development, and testing activities. 5 The much lower percentages often reported in the press are misleading because they use companywide data, including the sales of less research-intensive activities such as pharmacy benefit-management services and the production of high-purity chemicals, cosmetics, prosthetics, over-the-counter drugs, vitamins, and so forth. Excluded from the 18 percent figure was roughly $10 billion of activity by start-up companies in biotechnology doing little else but research and development that had not yet yielded salable products. From the industry's research-and-development efforts has come a stream of new therapeutic products , most offering modest variations on existing therapies but some providing groundbreaking new approaches to the treatment of disease. From 1963 to 1999, the number of new chemical entities (or molecules) approved for marketing in the United States averaged 18.7 per year, with an upturn to 27 (plus 4 new biologic entities) per year during the 1990s and a downturn in number more recently. 6,7 Using advanced statistical techniques with available (but necessarily limited) data, Frank Lichten-berg found that the use of new drug therapies contributed appreciably …