Economics of the Pharmaceutical Industry

The economics of the pharmaceutical industry right now is doing very well in particular. According to George Cressanthis in, the article, now that the baby boom generation is becoming older, more drugs are needed. “Spending on pharmaceuticals represents around 11 percent of total healthcare spending, which in turn is over 14 percent of gross domestic product (GDP) and rising” (Cressanthis). The pharmaceutical industry is also expected to grow in the years and according to the article, it is on an upward trend. This industry makes their money mostly on a buyer-to-buyer market. The article also says that the main way drug companies make money in the pharmaceutical industry is in the science and manufacturing operations areas. According to Cressanthis, “Drug discovery and research and development (R&D) will always represent the life-blood of a pharmaceutical company.” Recently, The pharmaceutical industry primarily spends their money on marketing the drugs. With the recession, drug manufactures are putting “…more efforts are being placed on novel ways that these new drugs can be commercialized in the marketplace” (Cressenthis). The pharmaceutical industry also spends money on analyses of the market. “The role of the government in regulating pharmaceutical activities, both at the federal and state levels, is growing. Numerous companies hire economists to conduct analyses on the expected impacts of proposed governmental policies and develop analyses to propose policy directions of interest and importance to individual companies and the industry”(Cressenthis). Pharmaceutical industries also have excellent working conditions and environments. This affects the income and cost of the company because the drug company initially spends money to make their employees happy and comfortable. “The combination of highly competitive compensation and benefit packages and overall high-quality work environment (opportunities and resources for research, computer programming, software, and technology, and well-trained staff with advanced degrees operating in a collegial work place) attract and retain top talent” (Cressenthis). This helps with their over all GDP and having the “best talent” will set them apart from other drug companies. Finally, drug companies spend their money on increasing Drug discovery and R&D costs. “…as investments in drug pipelines require ever greater resources to generate differentiable and novel approaches to treat diseases”(Cressenthis). The drug industry is on an upward trend and had a larger GDP than they are spending. This is because of the drug companies spending on ways to move product, employees and data analysis. The drug company relies heavily on the time period and the economy and must change their strategies and spending accordingly.

Palgrave Macmillan jul. 2008 (pp65-68). Retrieved from http://proxyau.wrlc.org/login?url=http://search.proquest.com/docview/199823424?accountid=8285