Pharmaceutical companies, also known as drug companies or sometimes Big Pharma, are businesses that research and develop medical drugs, market them to consumers, and distribute them to doctors, pharmacies, and other retailers. These companies are licensed to develop drugs and use clinical trials to test them before getting approval by the U.S. Food and Drug Administration (FDA) to sell them.
Pharma companies produce both generic and name brand drugs. They may develop over-the-counter medications that anyone can buy, but also prescription medications that require a written prescription from a physician. Laws govern how these companies go about testing, patenting, marketing, and selling the drugs, with more regulations for prescriptions than for over-the-counter drugs.
Developing, testing, and creating drugs that are effective and have minimum side effects is an expensive business, but it is also profitable. Drug companies spend a lot of money to develop a proprietary medication, but they can also sell them at high prices. The industry is highly profitable and influential, which has led to much controversy.
How Drugs Go from Research to the Marketplace
Creating new drugs that can go from the pharmaceutical company labs, through FDA approval, and into the marketplace is both costly and time-consuming. It takes years to test a drug and get it approved and, according to recent estimates, costs an average of $5 billion for each new drug that becomes a medicine. Part of the expense comes from the fact that as many as 95 percent of all new compounds fail to make it to the point of being approved and distributed as a medicine. For each one that succeeds, billions must be spent.
The process begins with the creation of compounds in the lab. These are tested in laboratory experiments for biological activity. A lab may use cell cultures, for instance, to see what the compounds do in living cells. For those that are promising, animal testing begins to see how the potential new drugs act in living systems. To get a drug to this point takes between one and two years. From there, a successful drug begins the lengthy FDA-approval process:
- Phase 1: The investigational new drug is used in clinical trials with people. Researchers try to determine how the drug acts in the body, how it is metabolized and excreted, how long it acts, and what dosages are safe.
- Phase 2: Those that are safe enough move on to phase two during which its effectiveness in treating illnesses is examined, as well as side effects. Between 100 and 200 volunteers are involved in this phase, up to five years after the compound was first created in the lab.
- Phase 3: Using several thousand volunteers if possible, the effectiveness of the drug is further tested along with its long-term safety. For a drug to get through this phase successfully may take up to eight years. Only about 25 percent of those that started the FDA process will make it this far.
- Phase 4: Drugs that have been approved by the FDA continue to go through clinical evaluations to keep testing safety and effectiveness.
Some drugs may be fast-tracked through the process of getting approval. To be fast-tracked, a drug must be purported to treat a condition that has few or no other effective treatments, and must be intended for use in patients with serious and life-threatening illnesses. For instance, a drug that has potential to treat advanced cancer that resists other treatments may be fast tracked to help patients who otherwise have no treatment options.
Revenues in the Pharmaceutical Industry
In spite of the lengthy and costly process of creating a drug and getting it through trials for FDA approval so it can be marketed and sold, revenues for pharmaceutical companies are huge. According to the World Health Organization, the pharmaceutical industry is worth $300 billion. It is expected to be worth $400 billion three years from now. Just ten companies control one-third of this revenue, and each are worth an average of $10 billion. Although these companies put a lot of money into the development, research, and approval process, they spend twice as much on marketing. One-third of sales money goes back into marketing drugs.
Of the ten biggest pharmaceutical companies in the world, five are U.S. companies, four are based in Europe, and one is in Israel:
- Pfizer (U.S.)
- Novartis (Switzerland)
- Merck & Co. (U.S.)
- Roche Holding (Switzerland)
- Sanofi (France)
- GlaxoSmithKline (United Kingdom)
- McKesson (U.S.)
- Teva Pharmaceuticals (Israel)
- AstraZeneca (United Kingdom)
The Powerful Influence of Pharmaceutical Companies on Doctors and Patients
A common criticism of the pharmaceutical industry is that these companies use money and power to influence legislators, researchers, physicians, and the general public. The problem with this is that while it may seem that the main goal of the industry is to create new drugs that help people and save lives, the truth is that it is a market-driven business.
According to studies the pharmaceutical industry in the U.S. spends twice as much on promoting and marketing drugs than it does on actual research and development. This proves that the industry’s main goal is to make money, not to create life-saving medications. As further proof of this, the research also found that the number of meetings within the industry for the purpose of promoting drugs has more than doubled in recent years.
In spending so much money, time, and effort on marketing drugs, the pharmaceutical industry is using its vast resources to influence the public, their physicians, and lawmakers. For the general public, that influence comes in the form of direct-to-consumer advertising. For many years, pharmaceutical promotions were restricted to physicians. This made sense, as physicians are the professionals who prescribe medications and make choices about what drugs would best help their patients.
When direct-to-consumer advertising became more prominent in the 1990s, pharmaceutical companies started promoting their products right to the patients themselves. This happened through print and television ads, and now through internet advertising as well.
The FDA regulates these advertisements, but critics say the regulations are not strict enough. The drug companies say that the ads are empowering consumers by giving them information, while critics say they use scare tactics, they don’t provide all the information, and they overemphasize positive benefits while downplaying side effects.
What is definitely known about direct-to-consumer advertising of prescription drugs is that it strongly influences the public. Patients are more likely to ask their doctors for specific prescriptions because of advertising, and may even pressure their doctors. Physicians are not immune to the ads either, and report being influenced by them in the decisions they make for their patients.
Physicians are also influenced more directly by drug companies, who send out one sales representative for every five physicians in the country. These reps’ jobs are to convince doctors to prescribe the medications they are selling. They offer free samples and even give doctors gifts in order to move their products.
Pharmaceutical Companies Influence Legislation
It isn’t just the general public, patients, and doctors who are targeted by the big money of Big Pharma. Drug companies also use their vast resources to influence legislation and researchers. The pharmaceutical industry spends more money on lobbying in Washington than any other group. Between 1998 and 2012 the industry spent about $2.6 billion on lobbying efforts. This is significantly less than other big lobby groups like oil and gas or defense.
One result of the influence of pharmaceutical companies on the government is that consumers pay high prices for medications. While governments in other countries have set caps on drug prices, the industry has kept that from happening in the U.S. so that they can charge as much as they want. In 2011, Americans spent 100 percent more on drugs than Canadians, as one example. The gap continues to get wider.
The industry influences policy worldwide, not just in the U.S. They played a big role in increasing intellectual property rights for drug makers. Thanks to the pushing by drug companies, the TRIPS Agreement on Intellectual Property ensures that members of the World Trade Organizations must grant 20-year patents on new drugs. This means that the drug companies get to make their medications exclusively longer, which drives out competitions and lower prices for consumers.
The Influence of Big Pharma on Research
Pharmaceutical companies also work hard to influence academic researchers. Not all research into new medications occurs within the industries. Academic researchers also play a big role in discovering and testing new drugs. Many research papers in journals are authored by people with ties to the drug companies, which is a big conflict of interest. Lead authors on articles testing drugs have been found to have been paid consulting fees by drug companies, for instance.
Clinical trials for new medications are largely funded by the drug companies themselves, another clear case of conflict of interest. They contract with academic researchers to get human volunteers for these trials, and many are conducted in medical schools. While once upon a time, the drug companies simply gave a medical school the money to do the trial, now they take control over much of the trials’ design. Academic researchers have become hired hands essentially, doing what the pharmaceutical companies tell them to do.
Pharmaceutical companies have brought many important, life-saving drugs to the public. However, the way this industry works is highly controversial. These companies are more influential than those in any other industry, and the money and power they wield influences legislators, the federal government, international organizations, researchers, physicians, and the public. Behind all this is the drive to make more money, and it is the public who suffers.