Factors affecting the growth of Pharmaceutical Industries
Every year, billions of dollars are invested by pharmaceutical industries in research and development area in the hope to find more effectual treatments and therapies. They also hope to regain what they have invested and make a profit out of it. The more the pharmaceutical industries grow, the more risks are included. Patients’ expectations are high, competition is rigid and requirements of FDA are strict. There are numerous factors that affect the growth of a pharmaceutical industry. Some of them are:
Research and development (R&D)
Research and development for new vaccines and treatments have become a complex procedure. According to a research, the industry’s total expenditure on (R&D) into new therapies summed to $73.3 billion in 2015. The ability of the companies to regain their investment and make a profit depends on how many drugs pass the approval process, which is often a time taking procedure.
The extent of government regulation also plays a key role in determining the profitability of a pharmaceutical industry. Each consecutive government administration controls the pharmaceutical industry to a disparate degree. Complying with the strict rules of the regulating bodies is a costly affair as it costs pharmaceutical industries about millions of dollars every year.
During the past years, there is a tremendous increase in the consumer demand for drugs that helps in enhancing one’s well being and health. This has played a vital role in the industry growth. As genetic testing allows for latest and highly targeted therapies, tailored therapy is becoming a major portion of pharmaceutical market share. Also, there has been consistent increase in the consumer demand for affordable drugs as famous brand-name drugs go off-patent.
Managed Care and Insurers
Price for prescription drugs are often paid by third-party insurers as consumers seldom pay full price. This helps third party payers to negotiate prices for drugs, thus lowering prices and depressing profit margins for pharmaceutical industries.