Pharmaceutical Manufacturers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 1,900 pharmaceutical manufacturers in the US are engaged in researching, developing, manufacturing and marketing chemically-derived drugs and biologicals for human or veterinary use. A few large, multinational firms dominate the industry; but there are also a large number of smaller start-up or development firms, particularly in the biotech segment.

Competition From Generic Products

Branded prescription drugs face competitive challenges from generic pharmaceutical manufacturers.

Expanded Managed Care Influence

Managed Care Organizations (MCOs), Medicaid, and other government agencies continue to seek price discounts on or increased rebates for pharmaceuticals.

Industry size & Structure

An average pharmaceutical manufacturer generates about $118 million in annual revenue and has about 159 employees.

    • The pharmaceutical manufacturing industry consists of about 1,900 companies with $233 billion in sales and 312,600 employees.
    • A few large, multinational firms dominate the industry, but there is also a large number of smaller, start-up, or development firms, particularly in the biotech segment.
    • Large pharmaceutical manufacturers include Pfizer, Merck, Johnson & Johnson, Eli Lilly, and Bristol-Myers Squibb.
    • The states with the highest number of pharmaceutical manufacturers are California, New Jersey, New York, Florida and Texas.
    • The largest concentration of biotech firms are in California, Texas, Pennsylvania, Massachusetts, and Wisconsin.
                                      Industry Forecast
                                      Pharmaceutical Manufacturers Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      Nov 1, 2022 - Proposed Legislation Would Repeal Medicare Drug Price Negotiations
                                      • A proposal introduced in the US Senate would repeal the Inflation Reduction Act’s Medicare prescription drug negotiation policy. The Protecting Drug Innovation Act would also remove the rebates that drug companies would have to pay if their prices rise faster than the rate of inflation and reverse a provision that would cap seniors’ out-of-pocket costs at $2,000 per year. Senator James Lankford, one of the two senators who introduced the measure, maintained that any prescription drug price reforms should take on industry players like the middlemen that make money from the gaps in the list and net prices of drugs. “The ongoing issues with pharmacy benefit managers, the drug pricing middlemen, were also not addressed in the Democrats’ bill. We need more drug options, not less. We need more competition, not price controls. We need innovation, not stagnation,” he said.
                                      • The Inflation Reduction Act of 2022 empowers the federal government to negotiate prices of certain drugs for the first time starting in 2023. Experts say that language in the law barring judicial review of how Medicare determines which drugs are eligible for negotiation will make any challenge tricky. Potential avenues for lawsuits will include invoking the US Constitution, particularly the Due Process and Takings clause, legal experts say. Any lawsuit could delay implementation of the negotiations while increasing leverage through political bargaining, according to Thomas Miller, a senior fellow at the American Enterprise Institute. “Stalling until better political winds blow in another direction is a frequent last-resort gambit,” he said. The pharmaceutical industry, which largely opposes the negotiation provisions, will have to wait until the Department of Health and Human Services issues regulations to implement the law before it can sue the agency. The act imposes inflation rebates on drug manufacturers for products reimbursed under Medicare Parts B and D if the price of those products increases faster than inflation. Changes to the Medicare Part D benefit design will cap beneficiary annual out-of-pocket spending at $2,000 beginning in 2025, with new discount obligations for pharmaceutical manufacturers. The Act imposes a price cap (referred to as a “maximum fair price”) beginning in 2026 for a fixed number of drugs reimbursed under the Medicare Parts B and D programs following a process described in the Act as a “negotiation.” The Act will reduce drug spending by $288 billion over a 10-year period, according to the Congressional Budget Office.
                                      • The US Food and Drug Administration (FDA) wants expanded authority to detect and address supply chain shortages well before they become problems, citing the COVID-19 pandemic’s persistent effects on availability of many medical products. Experts say that the FDA is seeking additional power outside of pandemics and other public health emergencies, for example, when product recalls and natural disasters cause shortages that put patients at risk. The FDA called for new ways to “assure a more resilient domestic supply chain and help reduce dependence on foreign production.” One proposal targets shortages of critical drugs due to “unnecessarily short expiration dates.” The FDA wants drugmakers to study the maximum shelf life of drugs that are life-supporting, life-sustaining, or that prevent or treat debilitating diseases and conditions. The law would include a financial penalty for noncompliance.
                                      • The Biden administration is planning for worst-case contingencies that could include rationing supplies of vaccines and treatments this fall if Congress doesn’t approve more money for fighting the coronavirus pandemic, according to Dr. Ashish Jha, the White House coronavirus coordinator. Biden administration officials warn that nearly all of the $1.9 trillion American Rescue Plan funding that was dedicated directly to COVID-19 response is spent. That means tough decisions, like weighing whether to use the remaining funding to secure the next generation of vaccines or giving priority to therapies that dramatically reduce the risks of severe illness and death. Jha has warned that without more money, vaccines will be harder to come by, tests will once again be scarce, and the therapeutics that are helping the country weather the current omicron-driven surge in cases without a commensurate increase in deaths could be sold overseas before Americans can access them.
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