Pharmaceutical Industry

The first graph is a breakdown of the Healthcare sector by industries. As we can see from the figures, Pharmaceuticals, or Drug manufacturers are by far the biggest industry within the sector, with a market capitalization of more than US $36 trillion. The next largest industry by market capitalization is biotechnology, often compared and in competition with the pharmaceutical industry, with over US $4 trillion. These figures show the leading position of the pharmaceutical industry within the sector and the size and amount of the investment within the industry.

This leading position of the Pharma industry can be explained by numerous factors. First, the companies competing within the sector are within some of the biggest and more profitable in the global market. Take for example, Pfizer or Abbot. These companies operate internationally in all aspects of their business operation, and have an impact on numerous economies and geographies.

Another factor that explains this leading position is the nature of the pharmaceutical industry. In order to develop drugs, pharmaceutical companies spend billions of dollars and many years in R&D. this requires copious investments in both the intellectual and the physical part of the research. According to the IMS, the average cost of developing a new drug is US $1.5 billion. According to the same source, the average time period required to research, test, approve and market a new drug is of 10 – 15 years.

In addition to its large market capitalization, the pharmaceutical industry is also one of the most profitable within the sector, and within all economy industries. In the US, the Pharma industry has a return on equity of 15.8%. This figure is extremely attractive for investors and companies looking to enter the pharmaceutical market, although, this is not easily accomplished. In addition, the US Pharma industry has a net profit margin of 16.7, one the most attractive within all industry sectors. These high profitability...