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Industry
The pharmaceutical industry undertakes the development, production and supply of pharmaceutical products needed to save lives, prevent disease and otherwise assist in maintaining quality of life.
The industry spans a spectrum of activity from the ultra-high research and development segment associated with human-use prescription medicines through to the production of the generic over the counter medicines.
For patients and doctors, innovation has resulted in the provision of new specific active agents that have been made available in many different formulations and can be administered by many different routes of administration. For key stakeholders and shareholders, this innovation has resulted in the formulation of a financially stable and profitable group of companies around the world.
The Australian pharmaceutical industry plays an important role in both the supply of medicines for the Australian population and in the development of Australia’s industrial base. These dual roles mean that the industry is the focus of considerable policy attention.
There are many different types of pharmaceutical companies operating in Australia. These include international companies with headquarters in the USA, UK or Europe, Australian-owned companies, companies who concentrate on a niche market, companies who manufacture products under license for other companies and companies who have entered into co-marketing agreements.
Every year thousands of Australians are saved from hospitalisation, surgery and death as a result of using medicines discovered by the pharmaceutical industry. During 2004-05, 23 new medicines were made available to Australians through the Pharmaceutical Benefits Scheme1.
The Australian pharmaceutical industry comprises of 1% of the world pharmaceutical market, with a turnover of $17 billion2. The industry, broadly-defined, employs 34,000 people across at least 300 firms and institutions, including manufacturing, research and wholesaling. Approximately 14,000 people are employed directly in the pharmaceutical manufacturing industry3 and in the two decades, Australian exports have increased from just over $100 million in 1984-85 to reach $3.9 billion in 20074. The pharmaceutical industry is one of Australia’s leading exporters in the manufacturing sector.
The Australian pharmaceutical industry spend, on average, $752million5 on Research and Development. Major pharmaceutical companies have been increasing their research and development expenditure considerably. Global pharmaceutical R&D expenditure reached US$45 billion in 20026 , reflecting the intense pressure within the industry for new medicines.
The average cost of discovery and developing a new medicine is more than $1 billion. The average development time for new medicines is 12-15 years. Only five of every 10,000 compounds investigated are tested in clinical trials. Of those five, only one is ever approved for patient use7.
Some people say that medicines cost too much. However, if we didn’t have the latest and the best medicines, we would almost certainly be paying more in other ways to maintain our good health. An increase in spending on new medicines by one dollar leads to savings in the hospital sector of between three and four dollars8 and another major study of new drug availability and death rates in 52 countries from 1986 to 2000 shows that innovative pharmaceuticals increased the average life expectancy of the entire population by almost 0.79 years.
On average, only three out of ten medicines will recoup their R&D cost of development, clinical trials, registration and marketing. However, payback times for 'blockbusters medicines’ can be much shorter. With such high R&D costs, patent and intellectual property protection has become a major issue for the pharmaceutical industry.
Pharmaceutical companies are constantly working on bringing a new effective medicine to patients, globally there are over 1,000 new medicines in clinical trials for Alzheimer’s disease, stroke, cystic fibrosis, arthritis and many other diseases. For cancer alone, there are almost 400 medicines in pipeline. Over the last decade, over 300 medicines have been made available to treat various diseases9.
The pharmaceutical industry is about quality of life of all Australians because together we make Australia better.
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1. Department of Health and Ageing, Annual Report 2004-05. Canberra p 94.
2. 2008 figures. Dept of Innovation, Industry, Science anr Research, www.innovation.gov.au /Pharmaceuticals Industry Fact Sheet. Accessed 28/02/08.
3. ABS data catalogue 5368.0
4. Australian Bureau of Statistics, unpublished data.
5. Dept of Innovation, Industry, Science and Research, www.innovation.gov.au
6. International Federation of Pharmaceutical Manufacturers & Associations www.ifpma.org accessed 12/01/06
7. PhRMA What goes into the cost of prescription drugs? Washington D.C. June 2005. p 2.
8. Lichtenberg, F. The Impact of new drug launches on longevity: Evidence from Longitudinal, disease-level data from 52 countries, 1982-2001, Cambridge. June 2003. p.21.
9. PhRMA What goes into the cost of prescription drugs? Washington D.C. June 2005. p 4.