Some of the principles and ideas of pharmaceuticals and biotechnology can be traced to the ancient world. The oldest known written records relating to pharmaceutical preparations, which are 5,000 years old, come from the Sumerians of the Middle East. Ancient Indian and Chinese cultures used primitive pharmaceutical applications to treat diseases that they believed were caused by the presence of spirits in the body. The Babylonians had elaborate laws relating to surgery and medicine. The ancient Assyrians, Greeks, and Egyptians, who used such medications as castor oil, senna, metallic salts, and a number of plants to cure a variety of illnesses, believed medications and medicine on the whole would purge and purify the body from sin, which they believed caused most illnesses. 

The roots of the modern pharmaceutical industry can be traced to the pharmacies and apothecaries that prepared traditional remedies all the way back to the Middle Ages. In fact, several pharmaceutical companies that still exist today were founded as town pharmacies. For example, Merck Company, the first pharmaceutical company, was founded in Germany in 1668 as a pharmacy. But it was not until 1827 that Merck transitioned from a pharmacy to a research-based industrial pharmaceutical company. 

This followed the earliest organized experiments in pharmaceutical preparation, which began in the 1600s. Exploration of the New World in the 17th century brought many previously unknown substances to the attention of European scientists, who conducted crude experiments to determine the toxicity of tobacco, ipecac, cinchona bark, coca leaves, and other substances. Most credit the 19th-century French physiologist Francois Magendie with the development of organized research in pharmaceutical substances. His studies of the poisons strychnine and carbon monoxide and the muscle relaxant curare helped to establish many of the modern principles of pharmacology, an integral part of the modern pharmaceutical industry.

Around this time—the mid 1800s—the pharmaceutical industry as we know it today began to form when industrial production of pharmaceuticals began. Many of today’s pharmaceutical giants were founded at that time, including Charles Pfizer & Company (1849), Bayer AG (1863), Eli Lilly and Company (1876), Johnson & Johnson (1886), Bristol-Myers Squibb (1887), and Abbott Laboratories (1888). Other pharmaceutical companies started out as chemical manufacturers. For instance, Frederich Bayer founded Bayer in Germany in 1863 to make synthetic dyes. Ciba and Sandoz (which merged to form Novartis) started out as dye manufacturers, then transitioned to producing pharmaceuticals. In 1852 the American Pharmaceutical Association was founded to represent the professional interests of pharmacists and others in the field. It is now known as the American Pharmacists Association.

In the United States, government intervention in the pharmaceutical industry began in 1848 with the Drug Importation Act, which restricted the import of substandard or adulterated drugs into the United States. The Federal Food and Drug Act of 1906 prohibited interstate commerce in adulterated or mislabeled drugs, and in 1927 the Food and Drug Administration (FDA) was formed to enforce the 1906 law. In 1938 the Federal Food, Drug, and Cosmetic Act went into effect, requiring strict and detailed studies in the development of medications before they could be made available to the general public. Since then many other laws have been passed to regulate the pharma/biotech industry and protect American consumers.

In the 1920s and 1930s scientists discovered miracle drugs such as insulin and penicillin, and companies began to market researchers’ life-saving inventions. The pharmaceutical industry continued to grow in the 1930s and 1940s as World War II created a demand for lifesaving drugs. During the 1950s and 1960s companies mass-produced and marketed new drugs such as blood pressure medications, birth control pills, and Valium. In the 1970s pharmaceutical companies researched and developed new cancer treatments, including chemotherapy. The field of biotechnology emerged in 1972, when scientists created a modified DNA molecule by recombining DNA from two different organisms. Today, there are more than 2,815 biotech companies in the United States, according to IBISWorld, and biopharma is the fastest-growing sector in the industry. It’s estimated that the biopharma sector comprises 20 percent of the pharmaceutical market.  Launched in 1990 and completed in 2001, the Human Genome Project (HGP) mapped the entire human genome, with the goal that a complete understanding of the human genome would prompt a variety of breakthroughs in the pharma/biotech industry.

Today, approximately 100 major companies make up the traditional U.S. pharmaceutical industry, according to Pharmaceutical Research and Manufacturers of America. The top 10 companies in terms of sales are referred to as “Big Pharma.” In 2018 these companies had sales revenue that ranged from $24.5 billion (#10, Eli Lilly) to $81.5 billion (#1, Johnson & Johnson), according to FiercePharma.com. There are also thousands of small biotech companies, some of which are affiliated with large pharmaceutical firms. Generic drugs make up 90 percent of industry sales, according to PhRMA. 

 This segment of the market has been booming since the 1984 Drug Price Competition and Patent Term Restoration Act, also called the Hatch-Waxman Act, was passed, increasing generic drug manufacturers’ access to the marketplace.