Pharmaceuticals and Biotechnology
Pharmaceutical companies are located in both the United States and abroad. Many companies are multinational, but there are also thousands of start-ups—especially in biotechnology—that have one location. Pharmaceutical companies range from large companies with many approved drugs on the market, to newer firms that have products in the development pipeline but none on the market, to generic drug manufacturers. Medical equipment and device manufacturers are also often classified as part of the pharma/biotech industry.
The Global Pharmaceutical Industry
The pharma/biotech industry spans the globe. Many companies have facilities and offices in several countries; some companies have dozens of offices worldwide. The United States is the largest market, with 40.4 percent of total revenues worldwide in 2018, according to Statista.com. Here are the next-largest markets:
- China: 11.1 percent
- Japan: 7.1 percent
- Germany: 4.4 percent
- France: 3.0 percent
- Italy: 2.8 percent
- Brazil: 2.6 percent
- Great Britain: 2.4 percent
- Spain: 2.0 percent
- Canada: 1.8 percent
Although a handful of super-large companies rake in most of the pharmaceutical industry’s revenue, the global industry is actually highly fragmented. Thousands of pharma and biotech companies exist worldwide. This includes middle-tier specialty companies. These second-tier companies are often absorbed by large companies before they become successful enough to pose a competitive threat. This trend keeps down the total number of firms. The opposite happens on the third tier, which is comprised of an ever-increasing group of start-ups focused mainly on discovery research.
The U.S. Pharmaceutical Industry
There are about 100 major companies in the U.S. pharmaceutical industry, according to Pharmaceutical Research and Manufacturers of America. The top 10 companies by revenue are referred to as “Big Pharma.” There are more than 2,815 biotech companies in the United States, according to IBISWorld.
Types of Pharmaceutical Companies
There are three main types of pharmaceutical companies.
Large pharmaceutical companies have many approved drugs on the market. They are huge research, development, and manufacturing concerns with subsidiaries around the globe. The largest of these players—companies such as Pfizer, GlaxoSmithKline, and Merck—as well as the other top 10 companies in terms of revenue are known as “Big Pharma.”
The second category consists of newer firms that often do not have any approved drugs on the market. Many of these companies are still involved in the lengthy process of taking drugs through the clinical-trials process. It takes 10 to 15 years for an experimental drug to become an approved drug used by U.S. patients.
Generic drug manufacturers are the last type of pharmaceutical company. Generic drugs are medications that were previously protected by a patent (typically for 20 years) and available only as a name brand but that can now be produced by any number of manufacturers. Generic drug companies typically place more emphasis on manufacturing, rather than research, because their products are established drugs. There are many independent generic drug manufacturers, but some are also owned or have working relationships with “Big Pharma” and other traditional companies. The generic drug industry provides 90 percent of all prescriptions that are dispensed in the United States, according to the Association for Accessible Medicines. Generic drugs saved the healthcare system about $293 billion in 2018, according to Becker’s Hospital Review. In 2019, IMARC (a market research company) reported that U.S. sales of generics reached $115.2 billion—up significantly from $65.2 billion in 2014.
The Medical Equipment and Device Manufacturing Subsector
Medical technology (medtech) manufacturing is often considered a subsector of the pharma/biotech industry. According to Ernst & Young, all publicly traded medtech companies are classified as belonging to one of five product groups: imaging technology, non-imaging diagnostics, research and other equipment, therapeutic devices, and other (products that do not fit in any of the aforementioned categories). There more than 5,000 medtech companies in the United States, with many companies consisting of 50 or fewer employees. Companies in California (72,471 workers), Minnesota (30,466), Florida (23,015), Indiana (20,046), Pennsylvania (17,144), Massachusetts (15,342), and Texas (15,087) employed the highest number of workers in 2019, according to Medical Design & Outsourcing. More than 700,000 people work in the industry.
How Do Pharmaceutical/Biotech Companies Turn a Profit?
Pharmaceutical companies are generally organized around the “blockbuster” model, i.e., they derive most of their sales and profits from a handful of broadly acting drugs. By industry consensus, a “blockbuster” is a drug whose annual revenues reach or exceed $1 billion. This model has changed in recent years, as drug companies have lost their patents and have failed to create as many new blockbuster drugs as in the past.
The biotech firms, on the other hand, tend to be focused around smaller franchises, i.e., their products are targeted to small patient populations with rare genetic diseases. Their biologics are sold by specialty sales representatives, who often have a high degree of scientific knowledge. Because of these characteristics, biotech products are often referred to as specialty pharmaceuticals. To complicate matters, some biologics reach revenue blockbuster status by virtue of being much more expensive than synthetics. Considering that some biologics cost $10,000 per patient per year, only 100,000 patients taking the drug would mean $1 billion in revenues.
Key Jobs in the Industry
Research and development (R&D) departments employ a large number of workers in the pharma/biotech industry. The R&D process requires teams of experts that include traditional organic chemists, analytical chemists, physiologists, statisticians, biochemists, molecular biologists, toxicologists, pharmacologists, pharmacists, bioinformatics specialists and other computer scientists, and physician investigators. The initial teams in the early stages of drug development usually include chemists and biologists who are experts in synthesizing and testing compounds and setting day-to-day goals. Much of this basic research takes place in a university setting or in a National Institutes of Health lab, while much of the applied research is more likely to be the responsibility of the pharma/biotech industry. The initial teams of scientists are joined by experts in drug metabolism, pharmaceutical development, and clinical development. Toxicologists, statisticians, and physician reviewers are called upon to evaluate the drug’s safety. Other specialists involved in the process include molecular modelers, protein chemists, and X-ray crystallographers.
There are many other career paths in the pharma/biotech industry. Thirty-four percent of jobs are in production, according to the U.S. Department of Labor. Managerial and office and administrative support occupations make up the majority of the remaining careers in the industry. Other opportunities can be found in human resources, quality control/assurance/validation, regulatory affairs, legal, sales and marketing, and finance.