Analyzing the Pharmaceutical Industry in America - Essay Example

"Analyzing the Pharmaceutical Industry in America" is a perfect example of a paper on the health system. 
The pharmaceutical industry is one of the most profitable industries in America. The industry generated $773 billion in sales worldwide in 2008 (Plunkett Research, 2010). The reason companies can earn so much money is that pharmaceutical industries utilize the strategy of patenting their drugs in order to created monopoly markets for their products. A patent can protect the intellectual property of a company for up to 20 years. During that time span, the pharmaceutical industry can market a drug without having any direct competition from generic drugs that can imitate the product. Pharmaceutical companies spend a lot of money on developing new drugs. A new drug can cost an at times upward of $800 million to develop. In 2008 US pharmaceutical companies spend $65 billion in research and development. The reason the developing process of creating new drugs is so expensive is that the entire process takes up to 16 years to complete.

            One of the issues with the pharmaceutical industries in the US is that the rising prices of drugs are causing inflation in the healthcare industry. A medical plan for a four-member family in America costs approximately $11,000 a year with the annual inflation being upwards of 10%. The price of drugs is one of the main drivers that is making healthcare so expensive. The US Center for Medicare and Medicaid Services estimated that the number of prescription drugs purchased by US citizens in 2009 hovered around $244.8 billion (Plunkett Research, 2010). From a managerial point of view, pharmaceutical companies are reaping great profits. Managers have to invest money in R&D to develop new drugs to replace the patents of older drugs once they expired. One a patent expires competitors can use the drug formula to create generic drugs. These drugs are much cheaper than the original drugs which imply that the profit margin on these drugs is low. A new drug market that is being currently exploited by drug companies are genetically engineered drugs also referred to as biotech drugs.

            An interesting fact about the efforts of the pharmaceutical industry in America is that the industry is currently was developing 2,900 new drugs during 2009 (Plunkett Research, 2010). An advantage of developing biotech drugs is that they provide consumer drugs that better able to target the genes of patients. Medicine is a basic necessity which implies that there is always going to be a liquid market for the drugs pharmaceutical companies develop.