Pharmaceutical Companies

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business of Pharmaceutical companies:-
Pharmaceutical companies are not especially big in terms
of revenues, but they are very profitable. For instance, in
2001, Pfizer was ranked 127th in the world on total
revenue (US$32·2 billion) but 7th in terms of profit.29 The pharmaceutical industry is the most profitable business
sector, with an average 16·2% profit, ahead of financial
companies (11·6%) and beverages (10%).30 However, net
income growth has declined, and growth in the value of
drug stocks has been reversed in the past year.31
In 2000, the global market value of prescription drugs
sold by leading companies exceeded US$320 billion, a rise
of 11% over the previous year.32 Over 46% of the market
value was from sales in North America.32 Until recently
drug company shares consistently outperformed market
indices (table 1). By February, 2001, Pfizer, had become
the 18th largest market entity, bigger than the listed
domestic equity markets of many countries, including
South Africa and South Korea.33
Mergers of pharmaceutical companies have been
common, and the number of major international
manufacturers is predicted to fall from over 30 to around
12 in the next 10 years.34 The main point of mergers seems
to be to replenish depleted product pipelines, cut costs
(including research and promotion), and maintain growth
and profitability, rather than to reduce prices to customers (see also article by Abraham, published in The Lancet on
Nov 9, p 1498).
The net profits of the industry generally exceed the
amounts that are spent on research and development
(table 1). Average claimed expenditure on research
and development by major companies was 16% of
their revenue in 2000 (table 1). According to the
Pharmaceutical Research and Manufacturers Association
of America, this is substantially higher than for other
industry sectors, which spend on average 4% (9% in the
case of the software industry).35 However, most
controversy surrounds the...
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