2014 Profile: Biopharmaceutical Research Industry

**Note: Data is adjusted to 2000 dollars based on correspondence with J.A. DiMasi.
**Note: First-in-class medicines are those that use a different mechanism of action from any other already approved medicine.
PERCENTAGE OF SALES THAT WENT TO
RD IN 2013
Domestic RD as a percentage of domestic sales = 22.7%
Total RD as a percentage of total sales = 17.8%
ECONOMIC IMPACT OF THE
BIOPHARMACEUTICAL SECTOR9
Direct jobs = more than 810,000
Total jobs (including indirect and induced jobs)
= nearly 3.4 million
APPROVALS
• Medicines approved 2000–2013 = more than 40010, 11
• In the 30 years since the Orphan Drug Act was
established, more than 450 orphan drugs have been
approved.12
• Only 2 of 10 marketed drugs return revenues that
match or exceed RD costs.13
MEDICINES IN DEVELOPMENT
• Medicines in development with the potential to aid
U.S. patients = 40014
• Potential first-in-class medicines** in clinical
development globally = 70%15
• Biologic medicines in development = More than 90016
DEVELOPMENT COSTS
Average cost to develop a drug
(including the cost of failures): 4, 5
• Early 2000s = $1.2 billion* (some more recent studies
estimate the costs to be even higher)6
• Late 1990s = $800 million*
• Mid 1980s = $320 million*
• 1970s = $140 million*
SALES
Generic share of
prescriptions filled:8
2000 = 49%
2013 = 86%
VALUE OF MEDICINES
• Cancer: Since 1980, 83% of life expectancy gains for
cancer patients are attributable to new treatments,
including medicines.17
• Cardiovascular Disease: According to a 2013
statistics update by the American Heart Association,
death rates for cardiovascular disease fell by about
39% over the past 10 years.18
• HIV/AIDS: Since the approval of antiretroviral treatments
in 1995, the HIV/AIDS death rate has dropped more than
80%.19
Today, 20-year-olds diagnosed with HIV can expect
to live into their early 70s—a life expectancy close to that
of the general population.20
See inside back cover for references.
RESEARCH AND DEVELOPMENT (RD)
Time to develop a drug = 10 to 15 years1, 2, 3
RD SPENDING
Year PhRMA members7
2013 $51.1 billion (est.)
2012 $49.6 billion
2011 $48.6 billion
2010 $50.7 billion
2009 $46.4 billion
2008 $47.4 billion
2007 $47.9 billion
2006 $43.0 billion
2005 $39.9 billion
2000 $26.0 billion
1990 $8.4 billion
1980 $2.0 billion
KEYFACTS 2014

Permission to reproduce is granted if proper credit is given.
Cover image: Human Immunodeficiency Virus (HIV).
l o r
Suggested Citation:
Pharmaceutical Research and Manufacturers of America,
2014 Biopharmaceutical Research Industry Profile
(Washington, DC: PhRMA, April 2014).
Copyright © 2014 by the Pharmaceutical Research and Manufacturers of America.

Letter from PhRMA’s
President and CEO
I am pleased to present the 2014 Biopharmaceutical
Research Industry Profile.
Emerging science and accelerating innovation, dramatic
population and lifestyle evolutions, and transitions to new
health policies are driving enormous change in the U.S. and
global health care systems. How we anticipate, navigate
and guide these changes will greatly determine the future
health and well-being of people and economies throughout
the world. America’s biopharmaceutical research
companies take this shared obligation very seriously,
and our sector is committed to helping lead the way as a
catalyst for positive, patient-focused change.
This report demonstrates the profound scope of how
innovative medicines—and the collaborative process
through which they are discovered and developed—benefit
patients, public health and the United States economy. At
the core of this process and the value medicines provide
is the dedication of researchers to advance biomedical
science and bring new treatment options to patients.
Helping patients to live longer, healthier lives. Recent
advances in biomedical science have led to significant
victories in the fights against cancer, rheumatoid arthritis,
HIV/AIDS and scores of other potentially devastating diseases.
Death rates have declined, and many previously fatal
diagnoses are now often manageable chronic conditions.
Since 2000, the biopharmaceutical sector has invested more
than half a trillion dollars in RD—including an estimated
$51 billion in 2013 alone. These investments have helped
generate incredible progress, but the work is far from done.
The more than 5,400 medicines in the global pipeline offer
great hope for continued advances in the years ahead.
Bringing value to patients and our health system.
In addition to the dramatic improvements in patient
outcomes generated by medicines, a growing body
of evidence demonstrates how innovative medicines
are helping patients to avoid costly medical care—for
example, by reducing the need for expensive surgeries and
hospitalizations. It’s a dynamic that necessitates long-term
vision and foresight, but it will be proven well worth the
investment in the long run.
Strengthening the U.S. economy. Our industry supports
nearly 3.4 million jobs across the economy, including more
than 810,000 direct jobs. It injects almost $800 billion in
economic output on an annual basis. When we bring the
strength and breadth of our sector to bear on the world’s
great challenges, we bolster America’s competitive
advantage and remind the world that true innovation and
economic leadership begin here.
Biopharmaceutical science is a complex, collaborative,
resource-intensive enterprise. It requires a highly skilled
workforce, sustained investment, and long-term vision.
Critical to its success are policies and regulations that foster
innovation and broad access to new medicines. By working
together—on the science, the research and the policies—we
can help ensure that medicines live up to patients’ hope
for new solutions to our greatest health care challenges.
John J. Castellani
President and Chief Executive Officer
Pharmaceutical Research and Manufacturers of America

Contents
Introduction
v Biopharmaceutical Innovation: Benefiting Patients and the U.S. Economy
1 Helping Patients Live Longer and Healthier Lives
5 Progress Against Disease
8 The Evolving Value of Medicines
13 Improving Patient Care and Outcomes
15 The Health Impact of Better Use of Medicines
16 Savings Resulting from Better Use of Medicines
19 Gaps in Appropriate Use of Medicines
21 Improving Use of Medicines
25 Growing the U.S. Economy
28 Supporting State and Regional Economies
29 Supporting the Broader Life Sciences Ecosystem
34 Leading the World in Medical Research: Bringing New Medicines to Patients
37 RD: Bringing Hope to Patients
39 Examining the Pipeline
45 Overview of the RD Process
49 The Prescription Drug Lifecycle
50 The Evolving RD Process
57 The Outlook for Innovation
59 Opportunities for Fostering Continued Innovation
61 Appendix
62 PhRMA: Who We Are
63 PhRMA Leadership
65 PhRMA Member Companies: Full Members Research Associate Members
67 PhRMA Annual Membership Survey: Definition of Terms
68 List of Tables: Detailed Results from the PhRMA Annual Membership Survey
CONCLUSION
APPENDIX

vIntroduction
Introduction
I
nnovative medicines benefit our lives in many
different ways. At the forefront of biomedical
science and American ingenuity, new medicines
have improved the quality and length of life for
millions of patients and enhanced public health
in the United States and around the world. What’s
more, the collaborative biopharmaceutical
research and development (RD) and
manufacturing enterprise is a pillar of strength and
competitiveness for the U.S. economy.
Biopharmaceutical
Innovation: Benefiting
Patients and the U.S.
Economy

vi
Introduction
Introduction
New medicines have transformed the trajectory of
many diseases over the years, providing treatments
for diseases for which there were few or no
options and increasing patient survival rates for
certain cancers, HIV/AIDS, rheumatoid arthritis
and Hepatitis C, to name just a few. Among the
27 new molecular entities approved by the U.S.
Food and Drug Administration in 2013, one-third
represent first-in-class medicines, meaning they
use new or unique mechanisms of action, and
one-third address rare diseases. Coupled with
the tremendous promise in the drug development
pipeline, America’s biopharmaceutical sector—
working hand in hand with stakeholders across the
research ecosystem—is on the cusp of transforming
many more deadly and costly diseases.
The biopharmaceutical research industry is a
dynamic, knowledge-driven sector. The work of
its scientists brings hope to millions of patients
and benefits local, state and national economies.
Biopharmaceutical companies invest heavily
in research and development. Pharmaceutical
Research and Manufacturers of America (PhRMA)
members have invested more than half a trillion
dollars in RD since 2000, including an estimated
$51 billion in 2013 alone. As discussed in the
2014 Biopharmaceutical Research Industry Profile,
PhRMA’s members represent a key driver of
innovation in the U.S. health care system.
In addition to developing life-enhancing medicines,
biopharmaceutical companies increasingly provide
services and processes that:
Improve health care quality and outcomes;
Increase patient access to needed medicines;
Help to control health care costs by reducing the
need for hospital stays, surgeries and other costly
interventions, ultimately improving quality of life
and productivity;
Develop and harness new technological and
scientific breakthroughs in collaboration with
others in the life sciences field, enhancing
the efficiency and effectiveness of many
complementary technologies; and
Improve the RD and manufacturing processes
that help sustain and grow the U.S. economy.
The 2014 Biopharmaceutical Research Industry Profile
provides an overview of the range of contributions
our nation’s innovative biopharmaceutical
companies make to the lives and health of people
and to the U.S. economy. Chapter 1 examines
the benefits new prescription medicines bring to
patients. Chapter 2 discusses the critical role that
medicines can play in improving the quality and
value of health care and highlights how appropriate
use of medicines can reduce costs elsewhere in the
health care system. Chapter 3 describes the impact
of the dynamic and collaborative biopharmaceutical
industry on local, state and national economies,
highlighting various ways in which the industry
supports the broader life sciences ecosystem.
Chapter 4 explores the robust biopharmaceutical
pipeline and provides an overview of the RD
process as well as the challenges and opportunities
related to drug discovery and development.

5 Progress Against Disease
8 The Evolving Value of Medicines
Helping Patients
Live Longer and
Healthier Lives

Helping Patients Live Longer and Healthier Lives2
Chapter1
N
ew medicines offer patients safe and
effective treatment options, allowing
people to carry out their daily activities
and live longer and healthier lives. In recent
years, medicines have resulted in significant
progress against many diseases. With advances in
personalized medicines and the application of novel
scientific approaches in drug development, the
science is proving more promising than ever.
In the past 5 years we have seen an upward trend in
the number of medicines approved by the Food and
Drug Administration (FDA). These approvals reflect
breakthroughs treating many challenging diseases.
In 2013, the FDA approved 34 new molecular entities
(NMEs), of which 27 were approved by the Center for
Drug Evaluation and Research (CDER).1
One-third
of CDER approvals were identified by the FDA as
first-in-class, meaning drugs using a new and unique
HelpingPatientsLive
LongerandHealthierLives

Helping Patients Live Longer and Healthier Lives 3
mechanism of action for treating a medical condition
that is distinct from any other approved medicine.
Another third of the NMEs—many of which are also
first-in-class—were approved to treat rare diseases.3
These novel therapies are providing important new
treatments for patients in a range of disease areas.
For example:
Blood Cancers: Three new medicines were
approved to treat various forms of rare blood cancers
in 2013. One is a first-in-class medicine for treating
multiple myeloma; it provides an important new
option for patients who have not responded to other
cancer drugs.4
Another first-in-class medicine
approved this year belongs to a promising group of
medicines called B-cell receptor pathway inhibitors.
These medicines target an important biological
pathway found to be linked to the development of
cancer cells. The new medicine treats a particularly
aggressive form of blood cancer called mantle cell
lymphoma.5
(For more information about B-cell
receptor pathway inhibitors, see Chapter 4.)
Hepatitis C: Two new oral “direct-acting antiviral”
medicines are changing the treatment of Hepatitis C.
Both work by blocking a specific protein needed
by the hepatitis C virus to replicate.6
(For more
information about direct-acting antivirals, see
Chapter 4.)
More important than the quantity of new drugs approved in 2013 is the quality
of the new drugs the pharmaceutical industry has developed and the important
new roles these drugs are serving to advance medical care.” fda’s center for drug
evaluation and research2
As our understanding of the genetic and molecular basis of disease grows, so too
does our ability to effectively target disease with medicines. Personalized medicine
advances are possible because of a growing understanding of how individual
patients react differently to diseases and to their treatments, based upon their
genetic makeup. This knowledge may help determine a person's risk of developing a
particular medical condition and can inform not just potential treatment options but,
increasingly, approaches to disease prevention and wellness. Moreover, by targeting
treatments to patients most likely to benefit, personalized medicines represent
an important tool, as they may reduce the use of unnecessary and often costly
treatments or procedures.7
A 2010 study by the Tufts Center for the Study of Drug Development found that between 2005 and 2010,
pharmaceutical companies increased their personalized medicine investment by roughly 75%. These companies
also projected an additional 53% increase by 2015. The survey further found that 94% of pharmaceutical
companies are investing in personalized medicine research, and 12% to 50% of the products in their pipelines
are personalized medicines.8
Continuing Advances in Personalized Medicine

Chapter1
Skin Cancer: Two personalized medicines with
companion diagnostic tests are now approved to
treat patients who have specific genetic mutations
that are associated with the two most dangerous
forms of skin cancer. About half of all melanoma
cases express one of the two gene mutations
targeted by these new medicines. One of these
medicines is a first-in-class treatment.10
Multiple Sclerosis: A new oral medication for
adults with relapsing forms of MS has been
proven to significantly reduce important measures
of disease activity, including relapses and
development of brain lesions. The medicine has
also been shown to slow disability progression
over time. While there is no cure for MS, this first-
in-class medicine expands the options for treating
this complex disease.11
Depression: A novel therapy to treat a form
of depression, commonly referred to as major
depressive disorder, increases treatment options
for patients and their doctors. Because different
medications affect everyone differently, new
Now, with the advance of science and technology and the understanding of both
the underlying mechanisms and the human response to disease, we have so many
more opportunities to target therapies in exciting ways and really improve the
care that we can offer and the effectiveness of treatments.” margaret hamburg, m.d.,
commissioner, fda, 2013
9
Figure 1: Medicines Are Transforming the Treatment of Many Difficult Diseases
1 • Advances in Treatment
Multiple Sclerosis
Oral and biologic
treatments approved over
the past 15 years have
dramatically improved
outcomes for MS patients,
slowing disability
progression and offering
fewer relapses.
HIV/AIDS
In the last two decades,
advances in treatment
have contributed to a
more than 80% decline
in death rates and
transformed the disease
from an acute, fatal
illness to a chronic
condition.
Medicines Are Transforming the Treatment of Many
Difficult Diseases
6
Sources: National Multiple Sclerosis Society5; Boston Healthcare6; CDC7; American Cancer Society8
Cancer
New therapies have
contributed to a 20%
decline in cancer deaths
since the 1990s. Today, 2
out of 3 people diagnosed
with cancer survive at
least 5 years.
Rheumatoid Arthritis
Therapeutic advances
have transformed the RA
treatment paradigm over
the last 20 years, from
focusing on symptom
management to now
aiming for slowed disease
progression and even
disease remission.
Profile--Figure 1
SOURCE: The National Multiple Sclerosis Society, “The MS Disease-modifying Medications: General Information.” Washington, DC: National Multiple Sclerosis Society, April 2013. Available at www.nationalmssociety.org/
NationalMSSociety/media/MSNationalFiles/Brochures/12-3-7_DiseaseModifyingDrugs.pdf; C. Augustyn, B. Walker, and T.F. Goss. “Recognizing the Value of Innovation in the Treatment of Rheumatoid Arthritis.” Boston,
MA: Boston Healthcare Associates, March 2013. Available at www.phrma.org/sites/default/files/1888/rawhitepaperfinal2.pdf; National Center for Health Statistics. “Health, United States, 2010: with Special Feature
on Death and Dying, table 35.” Hyattsville, MD: NCHS, 2011. Available at www.cdc.gov/nchs/data/hus/hus10.pdf#045 (accessed February 2014); American Cancer Society. “Cancer Treatment and Survivorship Facts
Figures 2012-2013.” Atlanta, GA: American Cancer Society, 2013.

options are especially important for the many
people who suffer from major depressive disorder,
which can be a very challenging disability. Access
to a wide variety of treatment options is crucial to
improving outcomes for these patients.13
PROGRESS AGAINST DISEASE
In addition to saving and extending lives, the
development of innovative medicines has
benefited the health and well-being of patients
by halting or slowing disease progression,
improving quality of life, preventing unnecessary
hospitalizations, reducing side effects, and
providing treatments for diseases where there
were few or no treatments. New medicines have a
transformative impact for patients across a broad
range of disease areas.
Extending Lives
Cancer: New medicines for the treatment of
various cancers have been a driving force behind
recent life expectancy gains. According to the
National Cancer Institute, the United States has
seen a 20% decline in cancer deaths since the
early 1990s14
(see Figure 2). Five-year survival
Figure 2: Cancers: Decline in Death Rates
Cancers: Decline in Death Rates
10
According to the American Cancer Society, improvements in treatment contributed to the increase in cancer
survival.13
Source: CDC14
4.7%
3.9%
-7.6%
-15.5%
-16%
-11%
-6%
-1%
4%
1970–1980 1980–1990 1990–2000 2000–2011
Percent Change by Decade in U.S. Death Rates from Cancer
Profile--Figure 2
SOURCE: R. Siegel, et al. “Cancer statistics, 2014.” CA: A Cancer Journal for Clinicians; 64(1): 9–29. Available at http://onlinelibrary.wiley.com/doi/10.3322/caac.21208/pdf (accessed March 2014); National Center for Health
Statistics. Health, United States, 2011 with Special Features on Socioeconomic Status and Health. Hyattsville, MD: NCHS, 2012; K.D. Kochanek, et al. Deaths: Final Data for 2009. National Vital Statistics Reports 2011;
60(3): 32. Available at www.cdc.gov/nchs/data/nvsr/nvsr60/nvsr60_03.pdf (accessed December 2012); D.L. Hoyert and J. Xu. Deaths: Preliminary Data for 2011. National Vital Statistics Reports 2012; 61(6): 28. Available at
www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf (accessed December 2012).
The decline in cancer rates over the past two decades signifies “real progress in
cancer control, reflecting a combination of primary prevention, early detection
and treatment.”12
national cancer institute
According to the American Cancer Society, improvements in treatment contributed to the increase
in cancer survival.

Chapter1
rates—meaning the chance that a cancer patient
will live five years or more—are also on the rise.
The survival rate increased from just 49% in the
mid-1970s to 68% in the most recent time period
(2002–2008)—representing a 39% increase across
all types of cancer.15
Research shows that 83% of
the life expectancy gains for cancer patients seen
over the past three decades are attributable to new
treatments, including medicines.16
Cardiovascular disease: The appropriate use
of medicines to treat cardiovascular disease
has contributed greatly to declines in mortality.
According to the American Heart Association (AHA),
over the past 10 years overall death rates from
cardiovascular disease have fallen by about 39%.17
AHA also reports the stroke death rate has fallen
by about 36% over the same period.18
The U.S.
Centers for Disease Control and Prevention cite new
medicines among the factors contributing to these
improving trends in cardiovascular disease.19
Slowing and Preventing Disease
Progression
Leukemia: Cancer once was considered one
monolithic disease. Today, we know cancer is at
least 200 to 300 different diseases. As researchers
gain a deeper understanding of these diseases on a
molecular and genetic level, they are able to develop
medicines targeting specific tumor pathways with
greater success and efficacy.20
In the case of chronic
myeloid leukemia, greater understanding of the
Then: A person diagnosed with chronic myeloid leukemia (CML) in 1999 would, in all likelihood, not be alive
today: just three out of ten patients survived for even five years. Patients then had two daunting treatment
options: a high-risk bone marrow transplant or daily injections of interferon, the side effects of which have
been compared to having a bad case of the flu every day of your life.21
Now: A new generation of targeted cancer medicines, known as tyrosine kinase inhibitors (TKIs), is improving
health outcomes for patients. Nearly 90% of CML patients taking the drug imatinib, for example, now live at
least five years. This daily medicine has resulted in remission for many patients as well as helped normalize
patients’ blood counts. The medicine targets CML on a molecular level, so it affects only the enzyme
responsible for the disease.22
Since the approval of imatinib, five additional TKIs have been approved to treat
CML. These medicines provide important options for patients who may have specific genetic mutations or for
patients who do not respond to or cannot tolerate existing treatments.23
Then and Now: Leukemia

disease has led, over the past decade, to a number
of new medicines that have for many halted the
disease in its tracks, allowing for many patients to
live close to normal life spans24
.
Preventing Unnecessary Hospitalizations
Diabetes: Many innovative medicines to treat
diabetes have emerged in the past few years.
These medicines have given patients new ways
to effectively manage their disease with lower
side effect profiles and more convenient dosing,
thereby improving patients’ health and quality
of life. A 2012 study found that diabetes patients
taking their medicines as directed were able to
avoid unnecessary hospitalizations. The study
showed that improved adherence to diabetes
medications was associated with a lower likelihood
of subsequent hospitalizations or emergency
department visits. Similarly, a loss of adherence
to these medicines was associated with a higher
likelihood of the same outcomes. Based on these
findings, the authors conclude that good adherence
to medications offers substantial opportunity to
prevent unnecessary hospitalizations for diabetes
patients, projecting that 341,000 hospitalizations
and 699,000 emergency department visits could be
avoided annually.25
Improving Quality of Life
Rheumatoid Arthritis: Disease-modifying biological
medicines have ushered in a new age of treatment
for rheumatoid arthritis (RA) (see Figure 3). By
targeting the cells involved in the progression of RA,
these medicines have dramatically slowed or even
Figure 3: Rheumatoid Arthritis: Medicines Are Transforming the Lives of Patients
Rheumatoid Arthritis: Medicines Are Transforming
the Lives of Patients
7
THEN:
Treatments for RA were effective at
reducing joint inflammation but were
limited to treating the symptoms of
the disease, allowing for steady
progression from disease onset to
disability fairly rapidly.
NOW:
Biologic disease-modifying
antirheumatic drugs (DMARDs) can
target the underlying sources of
inflammation, which improves
physical functioning and prevents
irreversible joint damage—making
disease remission possible.
Source: Boston Healthcare9
HEALTHY JOINTHAND WITH RA
Profile--Figure 3
SOURCE: C. Augustyn, B. Walker, and T.F. Goss. “Recognizing the Value of Innovation in the Treatment of Rheumatoid Arthritis.” Boston, MA: Boston Healthcare Associates, March 2013.
Available at www.phrma.org/sites/default/files/1888/rawhitepaperfinal2.pdf.

Chapter1
reversed the negative physical effects associated
with the disease26
and made clinical remission
possible for patients with severe RA.27
A recent
study found patients treated with combination
therapy consisting of both a new and an older
medicine had a 35% chance of complete clinical
remission over the course of 5 years, compared with
14% for those taking only the older medicine—more
than doubling remission rates for patients.28
Increasing Options for Patients with
Rare Diseases
Researchers have made tremendous progress in
recent years against rare diseases—those diseases
affecting fewer than 200,000 patients in the United
States.29
In fact, the FDA notes that approximately
one-third of all new medicines approved in the past
5 years have been designated as “orphan drugs”—
the term used to refer to medicines that treat
rare diseases. Although each of the nearly 7,000
identified rare diseases affects a small number of
people, this collective impact on public health is
anything but small: overall, rare diseases affect
more than 30 million Americans.30
Because 85% to 90% of rare diseases are serious
or life threatening, bringing new medicines to
patients is especially important.31
Just over 30
years ago, Congress passed the Orphan Drug Act.
This critical piece of legislation created incentives
for the development of new treatments for rare
diseases and transformed the lives of millions of
Americans. The success of the law is evident, with
450 medicines approved to treat rare diseases since
1983.32
In the 1970s, the FDA had approved fewer
than 10 orphan drugs.33,34
Today, there are more
than 450 in development.35
THE EVOLVING VALUE
OF MEDICINES
Advances against disease such as those cited
above are not typically driven by large, dramatic
developments. More commonly, they result from
a series of incremental gains in knowledge and
understanding over time. This incremental,
stepwise transformation in knowledge has led
to increased survival rates, improved patient
outcomes, and enhanced quality of life for many
patients. In fact, in recent years we have seen
the transformation of several diseases that were
once thought of as acute and sometimes fatal into
chronic, manageable conditions for patients.
Progress against HIV/AIDS, for example, did not
happen through one single breakthrough, but rather
through a series of stages, marked by both the
introduction of new treatment options and constant
learning about their optimal use and clinical value36
(see Figure 4).FDA approval, which is based on

rigorous clinical trials in controlled settings, marks
the starting point for the continuing evolution in our
understanding of a treatment’s full value for
patients. As is the case for HIV/AIDS, the
full value of new treatments is often
not fully known at the time of FDA
approval, but is realized over time
as new treatments build on one
another and real-world knowledge
is accumulated. Since 1987, more
than 30 treatment options for HIV
have been developed, giving physicians
a broad array of therapeutic options to
increase survival and improve quality of life.37
The ongoing introduction of new HIV/AIDS therapies,
and continuous research into their optimal use
in patient care, has revealed additional value for
treatments beyond what was known at the time they
were introduced. Researchers and clinicians have
found that many therapies are more effective when
used in combination than when used alone; they
have also found that initiating treatment
earlier in the disease process leads to
improved long-term outcomes and
stronger immunologic responses.
More recently, with improved
understanding of how HIV evolves
and progresses at the molecular
level, researchers are finding
ways that therapies can not only
treat the disease, but also prevent its
transmission. This has led to new uses
and indications for many HIV/AIDS medicines.
Over the past 20 years, these research advances in
HIV/AIDS have transformed the treatment standard
for many patients. HIV/AIDS was once an acute,
fatal illness and is now a manageable, chronic
disease for those who have access to medications.
Figure 4: HIV/AIDS: Treatment Advances Build over Time
1981
AIDS first
reported
2001
First nucleotide
analog approved
1991
AZT labeling
expanded
for dosing (IV),
earlier use,
and pediatric
use
1987
First treatment
(AZT) introduced
(a nucleoside
analog reverse-
transcriptase
inhibitor)
2006
Rates of transmission
from mother to infant
have dropped to less
than 2%
First one-pill-once-a-day
treatment approved
1994
AZT found
to reduce
the risk of
transmission
from mother
to infant
22000011
1995
First protease
inhibitors approved
1
A
e
f
e
a
1984
HIV identified
as the cause
of AIDS
2003
First fusion
inhibitors
approved
22
Fi
in
ap
HAART
combinations
introduced
1996
2007
First CCR-5 co-receptor
agonist approved
2011
U.S. HHS recommends
earlier initiation of
treatment to control
immunologic response
2012
U.S. death
rate has
dropped by
more than 80%
SOURCE: C. Augustyn, B. Walker, and T. F. Goss. “Recognizing the Value of Innovation in HIV/AIDS Therapy.” Boston Healthcare Associates, December 2012.

Chapter1
Dr. Linda Yu-Sing Fu is a general pediatrician at the Children’s National Medical
Center. She recently won a 2013 PhRMA Research and Hope Award for Patient and
Community Health for her team’s efforts to help parents understand why childhood
immunizations are so important and to improve the quality of immunization delivery
to an at-risk population in the District of Columbia. She has taken her work in the
District and applied it on a national level to make sure that a generation of children
is protected from a wide range of preventable diseases.40
To learn more about Dr.
Fu’s work, watch http://www.youtube.com/watch?v=dx9GNZkaGOo.
Protecting Children in Need with Immunizations
In the United States alone, death rates have fallen
more than 80 percent since 1995 as a result of the
development of multiple drugs and their use in
innovative combinations, known as highly active
antiretroviral therapy (HAART).38
Today, research
shows that 20-year-olds diagnosed with HIV can
expect to live into their early 70s—a life expectancy
close to that of the general population and a 10-year
increase in life expectancy from that seen just 10
years ago.39
For a personal look back at this extraordinary
journey, watch an interview with author and
activist David Mixner: http://www.youtube.com/
watch?v=JgN2vgZeBKQ.

REFERENCES
1
U.S. Food and Drug Administration. “New Drugs at FDA:
CDER’s New Molecular Entities and New Therapeutic Biological
Products of 2013.” Silver Spring, MD: FDA, 26 December 2013.
Available at www.fda.gov/drugs/developmentapprovalprocess/
druginnovation/default.htm#aria (accessed January 2014);
U.S. Food and Drug Administration. 2013 Biological License
Application Approvals. 26 March 2013. Available at www.fda.
gov/BiologicsBloodVaccines/DevelopmentApprovalProcess/
BiologicalApprovalsbyYear/ucm338259.htm.
2
U.S. Food and Drug Administration. “Novel New Drugs: 2013
Summary.” Op.cit.
3
U.S. Food and Drug Administration. “Novel New Drugs: 2013
Summary.” Silver Spring, MD: FDA, January 2014. Available at
www.fda.gov/downloads/drugs/developmentapprovalprocess/
druginnovation/ucm381803.pdf (accessed February 2014).
4
U.S. Food and Drug Administration. “FDA Approves Pomalyst
for Advanced Multiple Myeloma.” FDA press release, 8 February
2013. Available at www.fda.gov/newsevents/newsroom/
pressannouncements/ucm338895.htm.
5
U.S. Food and Drug Administration. “FDA Approves Imbruvica
for Rare Blood Cancer.” FDA press release, 13 November
pressannouncements/ucm374761.htm (accessed January 2014).
6
U.S. Food and Drug Administration. “FDA Approves Sovaldi
for Chronic Hepatitis C.” FDA press release, 6 December
7
Tufts Center for the Study of Drug Development. “Personalized
Medicine Is Playing a Growing Role in Development Pipelines.”
Impact Report 2010; 12(6).
8
Ibid.
9
M.E. Tucker. FDA Report Outlines Approach to Personalized
Medicine, Medscape Medical News. Oct. 29, 2013. Available at
www.medscape.com/viewarticle/813401.
10
U.S. Food and Drug Administration. “FDA Approves Two Drugs,
Companion Diagnostic Test for Advanced Skin Cancer.” FDA press
release, 29 May 2013. Available at www.fda.gov/newsevents/
newsroom/pressannouncements/ucm354199.htm (accessed
November 2013).
11
U.S. Food and Drug Administration. “FDA Approves New
Multiple Sclerosis Treatment: Tecfidera.” FDA press release, 27
March 2013. Available at www.fda.gov/newsevents/newsroom/
pressannouncements/ucm345528.htm (accessed November 2013).
12
B.A. Kohler, et al. “Annual Report to the Nation on the Status
of Cancer, 19752007, Featuring Tumors of the Brain and Other
Nervous System,” Journal of the National Cancer Institute, published
online, 31 March 2011. Available at http://jnci.oxfordjournals.org/
content/early/2011/03/31/jnci.djr077.full.pdf+html?sid=b29b2a49-
ab18-4fa3-9a12-06d82a225715.
13
U.S. Food and Drug Administration. “FDA Approves New Drug
to Treat Major Depressive Disorder.” FDA press release, 30
September 2013. Available at www.fda.gov/newsevents/newsroom/
pressannouncements/ucm370416.htm (accessed November 2013).
14
National Cancer Institute. “Surveillance Epidemiology and End
Results [SEER] Program: Fast Stats.” Available at http://seer.
cancer.gov/faststats/index.php (accessed June 2013).
15
American Cancer Society. “Cancer Facts Figures 2013.”
Atlanta, GA: American Cancer Society, 2013. Available at www.
cancer.org/acs/groups/content/@epidemiologysurveilance/
documents/document/acspc-036845.pdf.
16
E. Sun, et al. “The Determinants of Recent Gains in Cancer
Survival: An Analysis of the Surveillance, Epidemiology, and End
Results (SEER) Database.” Journal of Clinical Oncology 2008;
26(Suppl 15): Abstract 6616.
17
A.S. Go, et al. “Heart Disease and Stroke Statistics—2014
Update: A Report from the American Heart Association.”
Circulation, published online, 18 December 2013. Available
at http://circ.ahajournals.org/content/early/2013/12/18/01.
cir.0000441139.02102.80.
18
Ibid.
19
National Center for Health Statistics. “Health, United States, 2006,
with Chartbook on Trends in the Health of Americans.” Hyattsville,
MD: NCHS, 2006. Available at www.cdc.gov/nchs/hus.htm.
20
Pharmaceutical Research and Manufacturers of America.
“Medicines in Development: Leukemia Lymphoma.” Washington,
DC: PhRMA, 2013. Available at http://phrma.org/sites/default/files/
pdf/LeukemiaLymphoma2013.pdf (accessed December 2013).
21
L. Pray. “Gleevec: the Breakthrough in Cancer Treatment.” Nature
Education 2008; 1(1): 37.
22
A. Hochhaus, et al. “IRIS 6-Year Follow-Up: Sustained Survival
and Declining Annual rate of Transformation in Patients with Newly
Diagnosed Chronic Myeloid Leukemia in Chronic Phase (CML-CP)
Treated with Imatinib.” Blood 2007; 110(11) [abstract 25].
23
American Cancer Society. “Targeted Therapies for Chronic
Myeloid Leukemia.” Cancer.org. www.cancer.org/cancer/leukemia-
chronicmyeloidcml/detailedguide/leukemia-chronic-myeloid-
myelogenous-treating-targeted-therapies (accessed February 2014).
24
C. Gambacorti-Passerini, et al. Multicenter Independent
Assessment of Outcomes in Chronic Myeloid Leukemia Patients
Treated with Imatinib. Journal of the National Cancer Institute 2011;
103(7): 553–561.
25
A.K. Jha, et al. “Greater Adherence to Diabetes Is Linked to Less
Hospital Use and Could Save Nearly $5 Million Annually.” Health
Affairs 2012; 31(8): 1836–1846.
26
E. Zerhouni. “Transforming Health: Fulfilling the Promise of
Research,” Washington, DC. November 16, 2007. Keynote Address.
27
J.M. Kremer. “COMET’s Path, and the New Biologicals in
Rheumatoid Arthritis.” The Lancet 2008; 372(9636): 347–348.

Chapter1
28
D. Van der Heijde, et al. “Disease Activity, Physical Function,
and Radiographic Progression After Longterm Therapy with
Adalimumab Plus Methotrexate: 5-year results of PREMIER.”
Journal of Rheumatology 2010; 37(11): 2237–2246.
29
U.S. Food and Drug Administration. “FY 2012 Innovative Drug
Approvals: Bringing Life-saving Drugs to Patients Quickly and
Efficiently.” Silver Spring, MD: FDA, December 2012. Available
at www.fda.gov/AboutFDA/ReportsManualsForms/Reports/
ucm276385.htm (accessed December 2013).
30
U.S. Food and Drug Administration. “Helping Rare Disease
Patients Find Their Voice,” 27 February 2011. FDA.gov. www.fda.
gov/ForConsumers/ConsumerUpdates/ucm293213.htm (accessed
December 2013).
31
U.S. Food and Drug Administration, Office of Orphan Products
Development. “Food and Drug Administration Fiscal Year 2011
Justification of Budget.” Silver Spring, MD: FDA, 2011. Available
at www.fda.gov/downloads/AboutFDA/ReportsManualsForms/
Reports/BudgetReports/UCM205391.pdf (accessed February
2013).
32
U.S. Food and Drug Administration, Office of Orphan Product
Development. “Orphan Drug Designations and Approvals
Database.” Available at www.accessdata.fda.gov/scripts/
opdlisting/oopd/index.cfm (accessed January 2014).
33
Ibid.
34
U.S. Food and Drug Administration. “Developing Products for
Rare Diseases Conditions.” FDA.gov. www.fda.gov/forindustry/
developingproductsforrarediseasesconditions/default.htm
(accessed December 2013).
35
“Medicines in Development: Rare Diseases.” Washington, DC:
PhRMA, 2013. Available at www.phrma.org/sites/default/files/pdf/
Rare_Diseases_2013.pdf.
36
C. Augustyn, B. Walker, and T.F. Goss. “Recognizing the Value of
Innovation in HIV/AIDS Therapy.” Boston, MA: Boston Healthcare
Associates, December 2012. Available at www.phrma.org/
sites/default/files/flash/phrma_innovation_value.pdf (accessed
December 2013).
37
U.S. Department of Health and Human Services. “Overview
of HIV Treatments.” AIDS.gov. http://aids.gov/hiv-aids-basics/
just-diagnosed-with-hiv-aids/treatment-options/overview-of-hiv-
treatments/ (accessed February 2014).
38
National Center for Health Statistics. “Health, United States,
2012 with Special Feature on Socioeconomic Status and Health,”
Table 31. Hyattsville, MD: NCHS, 2013. Available at www.cdc.gov/
nchs/data/hus/hus12.pdf.
39
H. Samji, et al. “Closing the Gap: Increases in Life Expectancy
among Treated HIV-Positive Individuals in the United States and
Canada” PLOS ONE, December 18, 2013. Available at www.plosone.
org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0081355;jsessio
nid=13B02C0B1D51F789C26E04085D6CB98.
40
Pharmaceutical Research and Manufacturers of America. “2013
Research and Hope Award for Patient and Community Health.”
Washington, DC: PhRMA, 2013. Available at www.phrma.org/
research-hope-award-patient-community-health (accessed
December 2013).

Improving Patient
Care and Outcomes
15 The Health Impact of Better Use of Medicines
16 Savings Resulting from Better Use of Medicines
19 Gaps in Appropriate Use of Medicines
21 Improving Use of Medicines

Improving Patient Care and Outcomes14
Chapter2
T
oday we face a growing aging population—
many of whom are suffering from multiple
chronic conditions. Given this reality, the
health of Americans and our economy depend
greatly on improving outcomes for patients.
Working toward this imperative must come with the
recognition of the role that prescription medicines
play in achieving this goal, as well as the potential
for medicines to reduce overall costs to the health
care system.
Evidence demonstrates the ability of medicines to
improve health outcomes and reduce the need for
costly health care services such as emergency room
admissions, hospitalizations, surgeries and long-
term care. Such improvements in health are also
shown to lead to gains in employee productivity.
Recognizing this growing evidence, in 2012 the
Congressional Budget Office (CBO) announced a
revision to the methodology it uses to estimate the
federal budget impact of policy changes related
ImprovingPatientCare
andOutcomes

Improving Patient Care and Outcomes 15
to Medicare. The CBO now incorporates into its
estimates savings in medical spending associated
with increased use of medicines among Medicare
beneficiaries.2
As more Americans gain access to health care
in the coming years, it is important to ensure
they have access to the medicines they need.
Appropriate medication use allows patients to live
healthier lives and avoid unnecessary medical
expenditures, yet suboptimal use of medicines
and gaps in care remain significant challenges.
Fortunately, patients and their health care providers
can do much to improve the quality and efficiency of
the health care system.
THE HEALTH IMPACT OF
BETTER USE OF MEDICINES
In order for patients to derive the full value
of their medicines, therapies must be taken
appropriately and as recommended by a health
care professional. This means appropriate
and timely diagnosis and prescribing, prompt
initiation of therapy and adherence to a prescribed
therapy regimen, and should also involve periodic
review by a health care professional to address
any medication-related issues. Appropriate
use of medicines can improve patient health
outcomes and in many instances prevent
disease progression and reduce unnecessary
hospitalizations, especially for those with chronic
conditions. Research shows that patients who take
medicines appropriately and as prescribed achieve
better health than patients who do not adhere to
prescribed therapy regimens:
Hospitalizations: Poor adherence to prescribed
medicines is associated with increased use of
medical services, such as hospital and emergency
room (ER) visits, and medical expenditure.3,4,5
One
study showed, for example, that patients who
did not consistently take their diabetes medicine
were 2.5 times more likely to be hospitalized than
were patients who took their medicine as directed
more than 80% of the time.6
Another study showed
that children with low adherence to prescribed
long-term control asthma medications experience
a 21% greater likelihood of ER visits and a
70% greater likelihood of hospital admissions,
compared to children who better adhered to
prescribed treatment regimens.7
Development or Progression of Disease and
Death: Adherence can delay the development
or progression of disease. For example, one
study found that patients who did not take
antihypertensive medicines as instructed were,
over 3 years, 7%, 13%, and 42% more likely to
develop coronary heart disease, cerebrovascular
disease, and chronic heart failure, respectively,
than were patients who took the medicines as
directed.8
Adherence to prescribed therapies can
also reduce mortality risk. Poor adherence to
statins was found to be associated not only with
a 1.2 to 5.3 increase in risk of cardiovascular
disease, but also with a 1.3 to 2.5 increase in
mortality compared to adherent patients.9
Pharmaceuticals have the effect of improving or maintaining an individual’s
health.... Adhering to a drug regimen for a chronic condition such as
diabetes or high blood pressure may prevent complications…. Taking the
medication may also avert hospital admissions and thus reduce the use of
medical services.”1
Congressional Budget Office

Chapter2
SAVINGS RESULTING FROM
BETTER USE OF MEDICINES
When used appropriately, medicines can not only
result in better clinical outcomes, but can also
reduce the use of medical services, leading to
savings for patients and the health care system
(see Figure 5). It is estimated that the cost of
poor medication use, including nonadherence,
undertreatment, administration errors, and
underdiagnosis, is between $100 billion and $300
billion annually.10,11,12,13
The link between better use of prescription
medicines and economic benefits has been
demonstrated in a growing number of economic
and epidemiological research studies. The CBO’s
recent methodological change supports this link,
and emerging research continues to support the
value of appropriate use of medicines in reducing
medical expenditures. A 2013 study published in
the American Journal of Managed Care examined
patients with congestive heart failure (CHF) and
found significant economic benefit associated with
improved access to medicines. For CHF alone,
the study reported that improved medication
adherence associated with increased access
to medicines under Medicare Part D reduced
medical expenditures by nearly $2.6 billion
among beneficiaries with prior limited or no drug
coverage; approximately $2.3 billion of that amount
was savings to Medicare. Further improvements
in adherence were estimated to potentially save
Medicare another $1.9 billion annually, generating
upwards of $22.4 billion in federal savings over 10
years.14
Several examples illustrate the savings in medical
spending that result from better use of medicines:
Chronic Conditions: Improved adherence
increases prescription drug spending, but these
costs are often more than offset by reductions
in other health care spending, as shown by
one recent study of patients with diabetes,
dyslipidemia, hypertension, and congestive heart
failure (see Figure 5). For each additional dollar
spent on prescriptions, patients who had better
adherence to prescribed medicines experienced
savings of $3 to $10 in nondrug spending. This
represented a net savings of $1,200 to $7,800 per
patient per year.15
Congestive heart failure is the most common, and the most costly, diagnosis among
elderly Medicare patients.16
CHF patients represent 14% of the population and 43%
of Medicare Parts A and B spending.17
More than 3.5 million Part D enrollees were
diagnosed with CHF in 2010, and the condition accounts for 55,000 deaths annually.18
A new medicine now in the late stages of development can relieve symptoms and
protect vital organs against damage during an acute heart failure episode.19
Given
the immense potential for reductions in medical expenditures associated with CHF,20
this new medicine not only may improve outcomes for patients, but may also produce substantial savings for the
health care system.
Potential New Treatment for Congestive Heart Failure

High Cholesterol: Patients whose adherence
declines from a high to a low level over one
year experience a 2.3 greater likelihood of a
cardiovascular event.21
Studies have shown that
statin therapy reduces low-density lipoprotein
(LDL) cholesterol levels by an average of 19%. In
the United States, over one year, this reduction
in LDL levels was associated with about 40,000
fewer deaths, 60,000 fewer hospitalizations for
heart attacks, and 22,000 fewer hospitalizations
for strokes. These prevented hospitalizations
represented gross savings of nearly $5 billion.22
Diabetes: Improving adherence to diabetes
medicines would result in an estimated reduction
of more than 1 million emergency room visits and
hospitalizations annually, for potential savings of
$8.3 billion each year.23
High Blood Pressure: Treating patients with
high blood pressure in accordance with clinical
guidelines would result in fewer strokes and
heart attacks, preventing up to 89,000 deaths and
420,000 hospitalizations annually and saving $15.6
billion a year.24
In addition to improving health outcomes, the
appropriate use of medicines also leads to improved
productivity in the workplace through reduced
Figure 5: Prescription Medicines Are Part of the Solution to Reducing Medical Spending
4 • Outcomes and Savings
Prescription Medicines Are Part of the Solution to
Reducing Medical Spending
Better use of medicines reduces use of avoidable medical care, resulting in reductions in medical spending.
66
Source: M.C. Roebuck, et al.8
$1,058
‐$8,881
$656
‐$4,413
$429
‐$4,337
$601
‐$1,860
‐$10,000
‐$8,000
‐$6,000
‐$4,000
‐$2,000
$0
$2,000
Drug Spending Medical Spending
Congestive Heart Failure Diabetes Hypertension Dyslipidemia
Adherence to Medicines Lowers Total Health Spending for Chronically Ill Patients
Difference in Annual Spending Between
Adherent and NonadherentPatients
SOURCE: M.C. Roebuck, et al. “Medication Adherence Leads to Lower Health Care Use and Costs Despite Increased Drug Spending.” Health Affairs 2011; 30(1): 91–99.
Better use of medicines reduces use of avoidable medical care, resulting in reductions in medical spending.

Chapter2
absenteeism and disability leave. These reductions
benefit both the individual patient and society as a
whole. For example:
Rheumatoid Arthritis: Examining claims data
across 17 employers, researchers at the Integrated
Benefit Institute estimated that cost shifting
to employees for rheumatoid arthritis (RA)
medications decreased adherence and led to a
higher incidence and longer duration of short-term
disability, costing $17.2 million in lost productivity.
The researchers demonstrated that with lower
copayments and higher adherence to medicines,
savings in productivity could be more than twice as
large as increases in pharmacy costs.
Multiple Chronic Conditions: One study found
that patients with diabetes, hypertension, high
cholesterol, asthma, or chronic obstructive
pulmonary disease (COPD) who consistently took
medicines as prescribed missed fewer days of
work and experienced less short-term disability
than nonadherent patients. For example, patients
with asthma or COPD on average missed 9.8
fewer days from work and took 3.6 fewer days of
short-term disability per year. For these patients,
the productivity enhancement resulting from
adhering to their medication regimen amounted
to an annual average of $3,149 per worker25
(see
Figure 6).
Figure 6: Improving Adherence Increases Productivity
4 • Outcomes and Savings
Improving Adherence Increases Productivity
-6
-3.6
-6.3
-9.8
-3.6
-3.1
-2.7
-3.6
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
Diabetes Hypertension High Cholesterol Asthma/COPD
MissedDaysPerYear
Absenteeism Short-Term Disability
72
Fewer Days of Absence and Short Term Disability for
Adherent Patients as Opposed to Nonadherent Patients
Adherent patients miss fewer days of work and experience less short-term disability. For workers with
Asthma/COPD alone, adherence averages over $3100 in savings per worker annually.
Source: G.S. Carls, et al.24
Profile--Figure 6
SOURCE: G.S. Carls, et al. Impact of Medication Adherence on Absenteeism and Short-Term Disability for Five Chronic Diseases. Journal of Occupational and Environmental Medicine 2012; 54(7): 792–805.
Adherent patients miss fewer days of work and experience less short-term disability.

GAPS IN APPROPRIATE USE
OF MEDICINES
Undertreatment and poor use of prescription
medicines is a significant problem throughout
the health care system. A National Community
Pharmacists Association poll showed that
nearly 75% of adults do not follow their doctors’
prescription orders, including not filling the
prescription in the first place or taking less than
the recommended dose.26
Patients may fail to
adhere to their doctor’s instructions regarding their
medications for a number of reasons. Sometimes
patients do not understand their illness or do not
comprehend their need for treatment. Often patients
suffer from cognitive or physical impairments that
can exacerbate this situation and result in poor
adherence to treatment regimens. Complexity
of treatment regimens, limited access to or poor
coverage of medicines, and poor relationships
between prescribers and patients may also
contribute to gaps in appropriate use of medicines.
For example, patients with multiple chronic
conditions often encounter difficulty in managing
complicated treatment regimens. In fact,
approximately 50 percent of medications for chronic
diseases are not taken as prescribed.27
Medication
therapy management (MTM) programs are offered
to Medicare Part D beneficiaries who have multiple
Figure 7: Diabetes: An Example of Underdiagnosis and Undertreatment
26million
Americans
have
D I A B E T E S
7million are
UNDIAGNOSED
16million
are
T R E A T E D
3million are
UNTREATED
8million are
SUCCESSFULLY
T R E A T E D
8million are
UNSUCCESSFULLY
T R E A T E D
8million have
CONTROLLED
D I A B E T E S
18million
have
UNCONTROLLED
D I A B E T E S
19million
are
DIAGNOSED
TREATMENT*D I AG N O S I S CONTROLPREVALENCE
* Treatment includes blood sugar control (medicines, diet, and exercise) and tesƟng to prevent complicaƟons.
SOURCE: Centers for Disease Control and Prevention. National Diabetes Fact Sheet: National Estimates and General Information on Diabetes and Prediabetes in the United States,
2011. Atlanta, GA: CDC, 2011. Available at www.cdc.gov/diabetes/pubs/pdf/ndfs_2011.pdf (accessed March 2014); IHS Global Insight Analysis based on 2010 National Health and Nutrition
Examination Survey (NHANES).

Chapter2
chronic diseases and high drug costs to help manage
their medication use. A recent Health Affairs study
analyzed spending for Medicare Part D enrollees
with chronic diseases and found that patients who
adhered poorly to their medication regimens had
higher health care costs—ranging from $49 to $840
per month for beneficiaries with diabetes, heart
failure, and chronic obstructive pulmonary disease.
Unfortunately, not all these patients were found to
be uniformly more likely than others to be eligible
for MTM services, which could have improved the
quality of their care and reduced overall health care
spending.28
MTM services represent a significant
opportunity for improving patient outcomes.
Similarly, certain vulnerable patient groups find
it particularly challenging to adhere to their
medicines—especially among elderly patients,
where underuse of recommended medicines
outweighs overuse by about 17 to 1.29
Medication
adherence among mental health patients is also
difficult. A study examining health outcomes
among patients with schizophrenia found that
approximately 60 percent of patients were not
adherent to medicines early in treatment, and were
even less likely to be adherent several months later.
For these patients, poor adherence resulted in more
hospitalizations, with greater length of stay and
cost of care.30
While there are many barriers to the
optimal use of medicines among patients, there are
also many opportunities for improvement in patient
care and outcomes.

IMPROVING USE OF MEDICINES
Health care stakeholders—health plans,
pharmacists, biopharmaceutical companies, and
others in the health care system—are pursuing
a diverse array of strategies to improve the
appropriate use of medicines and strengthen the
health system overall. For example:
Plans and providers offer medication therapy
management to patients in order to improve the
quality of chronic care management by providing
counseling and reviewing drug regimens to
improve adherence and detect adverse events.31
Multiple medications in a treatment regimen
can contribute to additional patient burden,
leading to reduced adherence. Pharmacists are
using advances in information technology to
synchronize refills for patients who have multiple
prescriptions. Some pharmacies now even send
out reminders to patients when they need to pick
up a prescription. This helps reduce the number of
trips to the pharmacy, enabling patients to better
manage their therapy regimens.
Biopharmaceutical companies continue to develop
new therapies, including subsequent-generation and
combination products that simplify dosing regimens,
provide more convenient routes of administration, or
reduce side effects. These strategies make it easier
for patients to take medicines.
In recent years, better access to medicines has
improved health outcomes and provided savings to the
health system by reducing spending on other nondrug
medical expenses, such as for hospitalizations and
skilled nursing home care. The introduction of the
Medicare Part D program contributed greatly to these
achievements. (See the accompanying sidebar on the
10th anniversary of Part D).
Ten years ago, Congress passed
the law authorizing the Medicare
prescription drug program (Part
D). Today, more than 35 million
people, or almost two-thirds of
all Medicare beneficiaries, are
enrolled in a Part D plan,32
and the
program’s accomplishments are
significant:
The overwhelming majority
of beneficiaries rate their
coverage highly.33
A recent
survey reported that 96% of
respondents were satisfied with
their Medicare drug coverage,
and 96% said their coverage
worked well.
Part D has improved access to
medicines, leading to declines
in costly hospitalizations and
the need for skilled nursing
care, providing an overall
savings of $13.4 billion in the
first full year of the program
alone.34
A 2011 study in The Journal of
the American Medical Association
found that beneficiaries with
limited or no prior drug coverage
who subsequently enrolled in
Part D had an average savings of
$1,200 in total nondrug medical
costs in both 2006 and 2007.35
The current estimates for
total spending over the first 10
years of the program are $348
billion (45%) lower than initial
projections.36
To learn more about the
successes of Medicare’s Part D
program, visit www.phrma.org/
issues/medicare.
The 10th
Anniversary of Medicare Part D

Chapter2
Ensuring the appropriate use of medicines requires
that patients are able to maintain access to those
medicines. The Partnership for Prescription
Assistance (PPA) serves as a single point of access to
more than 475 public and private programs, including
nearly 200 offered by biopharmaceutical companies,
that help qualified patients get the medicines they
need for free or nearly free. The PPA has helped
nearly 8 million patients gain free and confidential
access to these programs,37
and PPA member
programs are available for more than 2,500 brand-
name medicines and generic drugs. More than 1,300
major national, state, and local organizations have
joined the PPA, including the American Academy for
Family Physicians, the American Cancer Society, the
American College of Emergency Physicians, Easter
Seals, the National Association of Chain Drug Stores,
United Way, and the Urban
League. For more information
about the PPA, please visit
www.pparx.org.
Expansion of prescription drug
coverage over the past two decades has improved
access to medicines for many Americans. While more
patients are expected to gain access to prescription
medicines through the implementation of the
Affordable Care Act, high cost sharing may mean
that some patients will still be unable to afford the
medicines they need. As patients gain insurance
coverage through the implementation of the law, every
effort needs to be made to ensure that this coverage
provides access to a broad choice of medicines.

REFERENCES
1
Congressional Budget Office. “Offsetting Effects of Prescription
Drug Use on Medicare’s Spending for Medical Services.”
Washington, DC: CBO, November 2012. Available at www.
cbo.gov/sites/default/files/cbofiles/attachments/43741-
MedicalOffsets-11-29-12.pdf (accessed December 2013).
2
Ibid.
3
J.F. Van Boven, et al. Clinical and Economic Impact of Non-
Adherence in COPD: A Systematic Review. Respiratory Medicine
2013; 108(1): 103–113.
4
P.C. Heaton, et al. U.S. Emergency Departments Visits Resulting
from Poor Medication Adherence: 2005–07. Journal of the
American Pharmacists Association 2013; 53(5): 513–519.
5
A. Bitton, et al. The Impact of Medication Adherence on Coronary
Artery Disease Costs and Outcomes: A Systematic Review.
American Journal of Medicine 2013; 126(4): 357.e357–357.e327.
6
D.T. Lau and D.P. Nau. “Oral Antihyperglycemic Medication
Nonadherence and Subsequent Hospitalization Among Individuals
with Type 2 Diabetes.” Diabetes Care 2004; 27(9): 2149–2153.
7
G. Rust, et al. “Inhaled Corticosteroid Adherence and Emergency
Department Utilization Among Medicaid-enrolled Children with
Asthma.” Journal of Asthma, 2013; 50(7):769–775
8
A. Dragomir, et al. “Impact of Adherence to Antihypertensive
Agents on Clinical Outcomes and Hospitalization Costs.” Medical
Care 2010; 48(5): 418–425.
9
M.A. De Vera, et al. “Impact of Statin Adherence on Cardiovascular
Disease and Mortality Outcomes: A Systematic Review” British
Journal of Clinical Pharmacology, in press.
10
L. Osterberg and T. Blaschke. “Adherence to Medication.” The
New England Journal of Medicine 2005; 353: 487–497.
11
New England Healthcare Institute. “Thinking Outside the
Pillbox: A System-wide Approach to Improving Patient Medication
Adherence for Chronic Disease.” Cambridge, MA: NEHI, August
2009.
12
M.R. DiMatteo, “Variation in Patients’ Adherence to Medical
Recommendations: A Qualitative Review of 50 Years of Research,”
Medical Care 2004; 42(3): 200–209.
13
IMS Institute “Responsible Use of Medicines Report 2012.”
Danbury, CT: IMS, 2013. Available at www.imshealth.com/portal/
site/imshealth/menuitem.762a961826aad98f53c753c71ad8c22a/?v
gnextoid=faf9ee0a8e631410VgnVCM10000076192ca2RCRD.
14
T.M. Dall, et al. The Economic Impact of Medicare Part D on
Congestive Heart Failure.” American Journal of Managed Care 2013;
19: S97–S100.
15
M.C. Roebuck, et al. “Medical Adherence Leads to Lower Health
Care Use and Costs Despite Increased Drug Spending.” Health
Affairs 2011; 30(1): 91–99.
16
A. Linden, et al. “Medicare Disease Management in Policy
Context.” Health Care Finance Review 2008; 29(3): 1–11.
17
G. Marrufo, et al. “Medication Therapy Management in a
Chronically Ill Population: Interim Report.” Burlingame, CA:
Acumen LLC, January 2013. Available at http://innovation.cms.gov/
Files/reports/MTM-Interim-Report-01-2013.pdf (accessed March
2013).
18
Cleveland Clinic. “Top 10 Innovations for 2014: #7 Relaxin for
Acute Heart Failure.” Cleveland, OH: Cleveland Clinic, October
2013. Available at www.clevelandclinic.org/innovations/summit/
topten/2014/seven.html (accessed November 2013).
19
Ibid.
20
T.M. Dall, et al. The Economic Impact of Medicare Part D on
Congestive Heart Failure.” American Journal of Managed Care 2013;
19: S97–S100.
21
J.F. Slejko, et al. “Adherence to Statins in Primary Prevention:
Yearly Adherence Changes and Outcomes.” Journal of Managed
Care Pharmacy 2014; 20(1): 51–57.
22
D.C. Grabowski, et al. “The Large Social Value Resulting from
Use of Statins Warrants Steps to Improve Adherence and Broaden
Treatment.” Health Affairs 2012; 31(10): 2276–2285.
23
A.K. Jha, et al. “Greater Adherence to Diabetes Drugs is Linked
to Less Hospital Use and Could Save Nearly $5 Billion Annually.”
Health Affairs 2012; 31(8): 1836–1846.
24
D.M. Cutler, et al. “The Value of Antihypertensive Drugs: A
Perspective on Medical Innovation.” Health Affairs 2007; 26(1):
97–110.
25
C.M. Roebuck, et al. “Impact of Medication Adherence on Worker
Productivity: An Instrumental Variables Analysis of Five Chronic
Diseases.” Presented at AcademyHealth Annual Research
Meeting, Seattle, WA, June 13, 2011.
26
National Community Pharmacists Association. “Take as Directed:
A Prescription Not Followed.” Research conducted by The Polling
Company™. Alexandria, VA: National Community Pharmacists
Association, December 16, 2006.
27
R.B. Haynes, et al. “Interventions for Enhancing Medication
Adherence.” Cochrane Database of Systematic Reviews 2008; 16(2):
CD000011.
28
B. Stuart, et al. “Increasing Medicare Part D Enrollment in
Medication Therapy Management Could Improve Health and Lower
Costs.” Health Affairs 2013; 32(7): 1212–1220.
29
T. Higashi, et al. “The Quality of Pharmacologic Care for
Vulnerable Older Patients.” Annals of Internal Medicine 2004;
140(9): 714–720.
30
S. Offord, et al. “Impact of Early Nonadherence to Oral
Antipsychotics on Clinical and Economic Outcomes Among
Patients with Schizophrenia.” Advances in Therapy 2013; 30(3):
286–297.

Chapter2
31
America’s Health Insurance Plans. “Innovations in Medication
Therapy Management: Effective Practices for Diabetes Care and
Other Chronic Conditions.” Washington, DC: AHIP, December
2013. Available at http://ahip.org/Innovations-in-Medication-
Therapy-Management/.
32
J. Hoadley, et al. Medicare Part D Prescription Drug Plans: The
Marketplace in 2013 and Key Trends, 2006–2013. Washington,
DC: Kaiser Family Foundation, December 11, 2013. Available at
http://kff.org/medicare/issue-brief/medicare-part-d-prescription-
drug-plans-the-marketplace-in-2013-and-key-trends-2006-
2013/#footnote-95057-1.
33
KRC Research. “Seniors’ Opinions About Medicare Rx: 7th Year
Update.” Washington, DC: KRC, September 2012.
34
C.C. Afendulis and M.E. Chernew. “State-level Impacts of
Medicare Part D.” American Journal of Managed Care 2011;
17(Suppl 12): S.
35
J.M. McWilliams, A.M. Zaslavsky, and H.A. Huskamp.
“Implementation of Medicare Part D and Nondrug Medical
Spending for Elderly Adults with Limited Prior Drug Coverage.”
Journal of the American Medical Association 2011; 306(4): 402–409.
36
Congressional Budget Office baseline spending estimates for
Medicare. Available at www.cbo.gov.
37
The Partnership for Prescription Assistance. “Facts About PPA.”
www.pparx. At www.pparx.org/en/about_us/facts_about_ppa

28 Supporting State and Regional Economies
Growing the
U.S. Economy
29 Supporting the Broader Life Sciences Ecosystem
34 Leading the World in Medical Research

Growing the U.S. Economy26
Chapter3
T
he innovative biopharmaceutical industry
is recognized as a “dynamic and innovative
business sector generating high-quality jobs
as well as powering economic output and exports for
the U.S. economy.”1
The sector supports nearly 3.4
million jobs across the economy, including more than
810,000 direct jobs, and contributes nearly $790 billion
in economic output on an annual basis when direct,
indirect, and induced effects are considered.2
These
outsized economic impacts are fueled by the industry’s
research and development (RD) enterprises. As
part of the industry’s commitment to bringing new
medicines to patients, the sector is the single largest
funder of domestic business RD, according to data
from the National Science Foundation,accounting for
more than 20% of all domestic RD funded by U.S.
Growing the U.S.
Economy

Growing the U.S. Economy 27
businesses.4
The industry spends more than ten times
the amount of RD per employee as manufacturing
industries overall.5
In 2013 alone, PhRMA member
companies invested an estimated $51.1 billion
in RD6
(see Figure 8). This investment not only
supports broad economic contributions, but also
helps the U.S. lead the world in biopharmaceutical
RD, fueling competitiveness in an increasingly
knowledge-based economy.
To support these RD efforts, the biopharmaceutical
industry employs a workforce with diverse skills
and educational levels in a range of high-quality,
high-wage jobs, particularly in science, technology,
engineering and math (STEM). For all occupations
involved in the biopharmaceutical sector, the average
wage is higher than across all other private-sector
industries. In 2011, the average total compensation
per direct biopharmaceutical employee was
The pharmaceutical industry is one of the most research-intensive industries
in the United States. Pharmaceutical firms invest as much as five times more
in research and development, relative to their sales, than the average U.S.
manufacturing firm.” congressional budget office3
Figure 8: PhRMA Member Company RD Investment
2 • Research and Development
PhRMA Member Company RD Investment
The pharmaceutical industry is one of the most research-intensive industries in the United States.
Pharmaceutical firms invest as much as five times more in research and development, relative to
their sales, than the average U.S. manufacturing firm.
— Congressional Budget Office14
31
$15.2
$16.9
$19.0
$21.0
$22.7
$26.0
$29.8$31.0
$34.5
$37.0
$39.9
$43.4
$47.9$47.4$46.4
$50.7
$48.6 $49.6
$51.1*
$0
$10
$20
$30
$40
$50
$60
Expenditures(BillionsofDollars)
PhRMA Member Company RD Expenditures: 1995–2013
Profile--Figure 8
“ “
*Estimated FY 2013. Source: PhRMA15
SOURCE: Pharmaceutical Research and Manufacturers of America. PhRMA Annual Membership Survey, 1996–2014.

Chapter3
$110,490, twice the average compensation per
U.S. worker of $54,455.7
The industry is a “jobs
multiplier,” meaning that each biopharmaceutical-
sector job supports a total of more than four jobs
across the economy, ranging from biopharmaceutical
manufacturing jobs and construction to business
services and child care providers.
Biopharmaceutical companies have roots in
communities across the country, supporting a
broad range of jobs directly related to clinical
research and testing as well as manufacturing and
distribution, and through vendors and suppliers.
Companies and their corporate foundations also
have established robust assistance programs and
collaborations with public schools and others to
improve STEM education and STEM teacher quality.
SUPPORTING STATE AND
REGIONAL ECONOMIES
The RD process, which includes clinical trials,
can take between 10 and 15 years, at an average
cost of $1.2 billion, to develop a new medicine—
including the cost of failures—with recent
estimates suggesting the costs are even higher.8
Clinical trials are an essential part of the drug
development process (see Chapter 4). Because
of their cost and length, clinical trials represent
a large investment in communities all across the
country, helping to create jobs and boost local
economies. Industry-funded clinical trials typically
are conducted in collaboration with a range of
local institutions—including academic medical
research centers, contract research organizations,
university medical and pharmacy schools,
hospitals, and foundations.
To help raise awareness of the importance of
participation in clinical trials and their contribution
to local and state economies, PhRMA recently
launched the Research in Your Backyard series.
The program involves collaborative forums and
the development of materials focused on various
aspects of clinical trials within individual states.
To date, more than 25 state reports have been
developed that describe clinical trials targeting six
of the nation’s most debilitating diseases: asthma,
cancer, diabetes, heart disease, mental illness and
stroke. Since 1999, biopharmaceutical companies
working with local research institutions have
conducted, or are conducting:
Nearly 7,850 clinical trials in Florida, including
3,840 for six major chronic diseases.9
More than 3,400 clinical trials in Michigan,
including 1,725 for six major chronic diseases.10
More than 3,700 clinical trials in Tennessee,
including nearly 2,100 for six major chronic
diseases.11
Nearly 8,240 clinical trials in Texas, including
almost 4,400 for six major chronic diseases.12
At the helm of each state’s economic center is
a governor squarely focused on job creation,
economic development, and competitive advantage.
While the task of educating elected officials on
innovation has always been a challenge, the
Research in Your Backyard program has been
central to PhRMA’s overall education effort,
successfully combining important messages related
to innovation, economic development and patient
care. Last year alone, there were 19 Research in
Your Backyard events in 17 different states, many
of which were attended by governors, business
leaders, patient advocacy organizations and
university officials.

Academic
Research
Institutions
Start-
Ups
Venture
Capital
Clinical
Research
Orgs
Pharmacists,
Providers
Health Systems
Clinical
Trial Sites
New Medicines
to Patients
Nonprofits
Biopharma
Research
Companies
FDA
NIH
SUPPORTING THE BROADER
LIFE SCIENCES ECOSYSTEM
The drug discovery and development enterprise
is increasingly characterized by an ecosystem of
partnerships and collaborations that bring together
industry and academic institutions, government
agencies, nonprofit foundations, venture capital,
and patients into a support system for the pursuit
of novel science and therapeutics (see Figure 9). As
the largest funder and conductor of drug research
and development, innovative biopharmaceutical
companies play a central role in this ecosystem,
dovetailing their core competencies with the strengths
of these other stakeholders. These efforts are not
only sustaining productivity in medical research,
but benefiting local, state and national economies,
sustaining productivity in medical research,
and ensuring U.S. competitiveness in the global
SOURCE: PhRMA 2014
Figure 9: Innovative Biopharmaceutical Companies Sit at the Heart of a Dynamic RD Ecosystem in the U.S.

Chapter3
marketplace. The industry is engaged in a broad
range of efforts to support a thriving ecosystem—
including, but not limited to, encouraging STEM
education, pursuing precompetitive research
collaborations and partnerships, and establishing
corporate venture capital funds to support startup
and emerging companies.
STEM Education
Continued scientific and technological innovations
are critical to fostering sustained economic
growth and global competitiveness and, most
importantly, helping patients live longer, healthier,
and more productive lives. The U.S. innovative
biopharmaceutical industry is committed to building
on new scientific discoveries and technological
advances, relying on a workforce with education
and skills in STEM. Around the world, an increasing
number of countries have recognized that a robust,
STEM-skilled workforce is needed to fuel continued
economic growth. STEM workers have been
shown to be key drivers of innovation, and thus to
contribute significantly to economic productivity.
To maintain U.S. global competition in
biopharmaceutical RD, ensuring a supply of
highly skilled STEM workers is critical to continued
medical progress. STEM jobs range from production
technicians with high school degrees to engineers,
mathematicians, and scientists with advanced
degrees, who are involved in every stage of the RD
and manufacturing processes that result in new
treatments and cures against our most costly and
challenging diseases. Developing and maintaining
a highly skilled STEM workforce is of particular
concern for the innovative biopharmaceutical sector,
as nearly one-third of workers in the industry’s
manufacturing component alone are employed in
STEM-related occupations—roughly five times higher
than the average share of STEM-related employment
across the economy.14
Biopharmaceutical companies
are engaged in a broad range of initiatives throughout
the United States to support STEM education, and
in the process helping to pave the way for a globally
competitive workforces (see sidebar, “Advancing
STEM Education in the United States.”)
I’ve seen the lives of patients transformed as a result of new medicines we’ve
discovered, developed and manufactured—and I’ve seen the unrelenting passion
of scientists who work on those kinds of therapies. It’s shown me how rewarding
it can be to pursue science as a career—and the broad-based benefits that
science, technology, engineering, and math (STEM) disciplines can provide.
The danger we face today is the possibility that fewer people will enter highly
technical fields in the decades ahead, at a time when demand for individuals
with these kinds of skills is on the rise.”13
robert bradway, ceo, amgen

According to a recent report by the President’s Council of Advisors on Science and Technology, the United States
will need to produce one million additional STEM graduates over the next decade to maintain its position as the
world’s leader in science and technology innovation.15
But while the demand for STEM workers has increased
for high-RD industries, U.S. rankings on key STEM measures have experienced marked declines in recent
years. Recent global rankings of high school student performance on science and math proficiency exams point
to a growing gap in STEM talent: U.S. students now rank in the bottom half of 65 participating countries, while
countries such as China and Singapore lead the world in both subjects.
The innovative biopharmaceutical industry is not sitting idly by, but rather is actively working with local school
systems and others to improve STEM education and STEM teacher quality. A new report prepared for PhRMA
by the Battelle Technology Partnership Practice16
describes the range of efforts supported by PhRMA member
companies and their corporate foundations to help improve STEM education in the United States. Among the
key findings of the report:
Over the past 5 years, the 24 PhRMA member companies responding to the survey funded more than 90
individual initiatives focused on students and/or teachers in STEM-related fields, impacting more than 1.6
million students and 17,500 teachers across the United States.
In total, the 24 PhRMA member companies and their foundations have invested more than $100 million in
STEM education–related initiatives since 2008, including awarding nearly 600 individual STEM education-
related grants.
Innovative biopharmaceutical companies and their corporate foundations are making significant contributions
across the U.S. through a broad range of local-, state-, and national-level programs and initiatives aimed at
elementary through postsecondary education, including 14 national-level programs and additional local-level
programs being supported in 26 states, the District of Columbia, and Puerto Rico. (See Figure 10.)
In addition to financial contributions, the report found PhRMA member companies are making significant in-
kind contributions by leveraging the talents of nearly 4,500 industry employees who have collectively volunteered
almost 27,000 hours over the past 5 years. Other in-kind contributions include equipment donations and the use of
company laboratory facilities, particularly at the K–12 levels, at a time when public school budgets are shrinking.
A large majority (85%) of industry-supported STEM education programs focus on the K–12 levels and are
aimed at improving the preparation of both students and teachers. This suggests that PhRMA member
companies are focused on systemic changes in the way STEM education is taught in the United States, by
engaging younger students and early education teachers.
More than 30 PhRMA member programs are focusing on increasing diversity in STEM fields by providing
students of all backgrounds, particularly women and minorities, experience with hands-on, inquiry-based
scientific learning opportunities.
Advancing STEM Education in the United States

Chapter3
Collaboration Across the RD Ecosystem
Effectively harnessing new scientific learnings and
technological breakthroughs requires bringing
together the best and the brightest across various
components of the RD ecosystem. Increasingly,
biopharmaceutical companies are working in
partnership with researchers in government,
academia, smaller companies, and other sectors.
According to a recent study of more than 3,000
such partnerships by the Tufts Center for the Study
of Drug Development, collaborations between
industry and academia benefit industry as well
All adults, especially teachers, parents and mentors, must foster excitement in
young children about the wonders of science. All kids are naturally curious, and we
should encourage them to explore and ask big questions.… We can’t wait until kids
are in high school to do this. We must start earlier, and that has guided much of our
thinking on STEM related programming.”17
john lechleiter, ph.d., ceo, eli lilly and company
Figure 10: Geographic Coverage of U.S. STEM Education Programs Supported by the
Biopharmaceutical Industry18
10 or more STEM programs
4-9 STEM programs
1-3 STEM programs
Covered by national STEM programs
Source: PhRMA-Battelle“STEM: Building a 21st Century Workforce to Develop Tomorrow’s New Medicines,”January 2014.
SOURCE: PhRMA-Battelle “STEM: Building a 21st Century Workforce to Develop Tomorrow’s New Medicines,” January 2014.

as academia by providing opportunities for the
sectors to explore promising new technologies
together and to address tough scientific problems
that may lead to advances against our most costly
and challenging diseases.19
These relationships
vary significantly, and are continually evolving.
Common partnership models include unrestricted
research support; academic drug discovery centers;
and precompetitive research centers, which bring
together various institutions that ordinarily are
commercial competitors to collaborate in early-
stage research.
One exciting example of a precompetitive
research collaboration is the Alzheimer’s Disease
Neuroimaging Initiative (ADNI). This initiative,
which includes federal agencies, nonprofit
organizations and industry members, aims to use
neuroimaging to identify physical changes in the
brain before the onset of Alzheimer’s disease and
then to track the progression of these changes.
ADNI also will establish quality standards for
imaging data collection and sharing, and will
validate biomarkers to be used in clinical trials.20
Data collected from ADNI are made available at no
cost to other researchers to analyze and use when
designing Alzheimer’s disease clinical trials and
research projects.21
Corporate Venture Capital Investments
In recent years, traditional venture capital
investment in the biosciences has continued to
decline. Biopharmaceutical companies are helping
to fill this funding gap. Companies are developing
their own corporate venture capital (CVC) funds
and investing in venture capital funds, providing
vital funding for promising RD projects. Between
2010 and 2013, the corporate venture arms of large
biopharmaceutical companies contributed more
than $1.7 billion in support of biotech startups.22
In a recent analysis, the Boston Consulting Group
found that participation in corporate venture capital
investment by the 30 largest biopharmaceutical
In times of major disaster, maintaining access to medicines is a critical priority for
many people. The absence of even a single link in the biopharmaceutical supply chain
can become a serious problem if it means that people cannot get their medicines.
Rx Response is a unique collaborative initiative that brings together
biopharmaceutical companies, distributors, and dispensers, along with the
American Red Cross, to help ensure that medicines continue to be available
following a major disaster. In the 7 years since its inception, Rx Response has
become an indispensable homeland security and public health asset. In 2013, Rx
Response was recognized by the National Hurricane Conference and the National
Lieutenant Governor’s Association for their assistance to patients and federal, state, and local emergency
responders. Among Rx Response’s resources is Rx Open. This online resource maps the locations of open
pharmacies in disaster-stricken areas. For additional disaster planning resources and more information, visit
RxResponse at www.rxresponse.org.
Rx Response—Collaborating to Bring Medicines to Patients in Need

Chapter3
Corporate Venture Capital Helping to Fill Early-Stage
Funding Gap
Biotech venture capital investments dropped 22% from 2007 to 2013, with the most rapid declines seen in first-
round deals. The corporate venture capital (CVC) arms of established biopharmaceutical companies are helping
fill this growing gap. The share of early-stage biotech companies receiving CVC investment has doubled since
2007.
Source: PwC and National Venture Capital Association13
Share of Early-Stage Biotech Deals
Involving CVC Funds, 2007 vs. 2012
15%
30%
0%
5%
10%
15%
20%
25%
30%
2007 2012
30
Profile--Figure 11 (include gray text)
companies rose from 50% in 2007 to 63% in
2013.24
Innovative biopharmaceutical companies
are particularly focusing their investment efforts
on early-stage startups, which have experienced
the largest declines in funding. Since 2010, CVC
investment in early-stage biotech startups has
steadily increased, while traditional venture funds
have moved investments toward later-stage
companies. In fact, the share of early stage biotech
companies receiving CVC investment has doubled
since 2007 (see Figure 11).
LEADING THE WORLD IN
MEDICAL RESEARCH: BRINGING
NEW MEDICINES TO PATIENTS
The United States is the global leader in
biopharmaceutical innovation. There are more
than 5,000 medicines in clinical trials globally with
the potential to aid U.S. patients.25
This leadership
continues even as emerging global economic
competitors around the world are recognizing the
economic and social benefits of biomedical research.
An increasing number of countries are focused on
attracting and growing innovative biopharmaceutical
environment and related sectors as part of their
Figure 11: Corporate Venture Capital Helping to Fill Early-Stage Funding Gap
SOURCE: PricewaterhouseCoopers and the National Venture Capital Association, 2013 MoneyTree™ National Data, 2014.
Corporate venturing by multinational pharmaceutical and large biotech companies
is playing an increasingly important role in financing the development of early
stage innovation…[and] an essential role in the sustainability of the biotech
ecosystem, advancing the future of pharmaceutical innovation and biotech
entrepreneurship.” g. von krogh, et al. in nature biotechnology23
Venture capital investments in emerging biotech companies have dropped 22% from 2007 to 2013, with
the most rapid declines seen in first-round deals. The corporate venture capital (CVC) arms of established
biopharmaceutical companies are helping fill this growing gap.

economic development plans.26
Ensuring a favorable
environment for innovation requires strong
intellectual property protections to support the
substantial time and RD investments needed
to develop tomorrow’s new treatments. As the
costs and complexities related to clinical trials
continue to grow and the uncertainty regarding
how new medicines will be used and valued
increases, strong intellectual property rights are
needed to recognize the substantial time, financial
investments and intellectual capital involved in
bringing medicines to patients.
Many of the recent treatment advances today, which
are driven by lengthy and costly scientific research,
would not have been possible without a system
of laws that provide the structured and stable
environment necessary to foster the investments
needed to develop life-saving medicines.

Chapter3
REFERENCES
1
Battelle Technology Partnership Practice. “The Economic Impact
of the U.S. Biopharmaceutical Industry.” Columbus, OH: Battelle
Memorial Institute, July 2013.
2
Ibid.
3
Congressional Budget Office. “Research and Development in the
Pharmaceutical Industry.” Washington, DC: CBO, October 2006.
Available at www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/
doc7615/10-02-drugr-d.pdf (accessed December 2013).
4
Based on PhRMA calculation of data from the National Center for
Science and Engineering Statistics. National Science Foundation.
“Business RD Performance Remained Virtually Unchanged in
2010,” Table 2 (NSF 13-324). Arlington, VA: NSF, 2013. Available at
www.nsf.gov/statistics/infbrief/nsf13324/nsf13324.pdf.
5
Pham, N. “The Impact of Innovation and the Role of Intellectual
Property Rights on U.S. Productivity, Competitiveness, Jobs,
Wages, and Exports.” Washington, DC: NDP Consulting, 2010.
6
PhRMA Annual Membership Survey. 2013.
7
8
J.A. DiMasi and H.G. Grabowski. “The Cost of Biopharmaceutical
RD: Is Biotech Different?” Managerial and Decision Economics
2007; 28(4–5): 469–479. More recent estimates range from
$1.5 billion to more than $1.8 billion. See J. Mestre-Ferrandiz,
J. Sussex, and A. Towse. “The RD Cost of a New Medicine.”
London: Office of Health Economics, 2012; S.M. Paul, et al. “How
to Improve RD Productivity: The Pharmaceutical Industry’s Grand
Challenge.” Nature Reviews Drug Discovery 2010; 9: 203–214.
9
“Research in Your Backyard: Developing Cures, Creating Jobs:
Pharmaceutical Clinical Trials in Florida.” Washington, DC:
PhRMA, 2012. Available at http://phrma.org/sites/default/files/
pdf/2013_Florida_RIYB.pdf (accessed December 2013).
10
Pharmaceutical Clinical Trials in Michigan.” Washington, DC:
PhRMA, 2012. Available at www.phrma.org/sites/default/files/
pdf/phrmaresearchinyourbackyardmichigan2012.pdf (accessed
December 2013).
11
Pharmaceutical Clinical Trials in Tennessee.” Washington, DC:
tennesseeresearchinyourbackyard.pdf (accessed December 2013).
12
Pharmaceutical Clinical Trials in Texas.” Washington, DC:
texasresearchinyourbackyard2013.pdf (accessed December 2013).
13
Battelle Technology Partnership Practice. “STEM: Building
a 21st Century Workforce to Develop Tomorrow’s New
Medicines.” Columbus, OH: Battelle Memorial Institute, January
2014. Available at www.phrma.org/sites/default/files/pdf/
stemeducation-report-2014.pdf.
14
Ibid.
15
President’s Council of Advisors on Science and Technology.
“Engage to Excel: Producing One Million Additional College
Graduates with Degrees in Science, Technology, Engineering, and
Mathematics.” Washington, DC: PCAST, February 2012.
16
Battelle Technology Partnership Practice. “STEM: Building a
21st Century Workforce to Develop Tomorrow’s New Medicines.”
Columbus, OH: Battelle Memorial Institute, January 2014.
Available at www.phrma.org/sites/default/files/pdf/stem-
education-report-2014.pdf.
17
Ibid.
18
Ibid.
19
C.P. Milne and A. Malins. “Academic–Industry Partnerships for
Biopharmaceutical Research Development: Advancing Medical
Science in the U.S.” Boston, MA: Tufts Center for the Study of Drug
Development, April 2012.
20
National Institutes of Health. “Alzheimer’s Disease Neuroimaging
Initiative Enters Next Phase of Research.” Bethesda, MD: NIH, 21
October 2010.
21
Foundation for the National Institutes of Health. “Alzheimer’s
Disease Neuroimaging Initiative (ADNI).” Available at www.fnih.org/
work/areas/chronic-disease/adni (accessed December 10, 2012).
22
PricewaterhouseCoopers LLP National Venture
Capital Association. “2013 MoneyTree Report.” New York:
PricewaterhouseCoopers LLP, January 2014.
23
F. Bielesch, et al. “Corporate Venture Capital: Avoid the Risk, Miss
the Rewards.” Boston: Boston Consulting Group, October 2012.
24
G. Von Krogh, et al., “The Changing Face of Corporate Venturing
in Biotechnology.” Nature Biotechnology 2012; 30(10): 911–915.
25
G. Long and J. Works. Innovation in the Biopharmaceutical
Pipeline: A Multidimensional View. Boston, MA: Analysis Group,
January 2013. Available at www.analysisgroup.com/uploadedFiles/
Publishing/Articles/2012_Innovation_in_the_Biopharmaceutical_
Pipeline.pdf (accessed January 2013).
26

39 Examining the Pipeline
45 Overview of the RD Process
RD: Bringing
Hope to Patients
49 The Prescription Drug Lifecycle
50 The Evolving RD Process

RD: Bringing Hope to Patients38
Chapter4
N
ovel scientific strategies, along with the
mapping of the human genome, have
opened up new understanding and expanded
possibilities for treating disease. Over the past
20 years, advancements in our knowledge of the
molecular and genetic basis of disease have led to the
development of a vast array of scientific tools to target
diseases more precisely. The application of these
tools is resulting in a particularly robust pipeline, as
there are more than 5,000 medicines in development
globally with the potential to aid U.S. patients—many
treating rare diseases or conditions for which there
are currently few or no treatments available.1
The
immense potential in the pipeline represents not only
an unprecedented opportunity to change the lives of
patients, but also the tireless efforts of researchers to
translate science into medicines.
Yet with incredible advancements in science comes
greater complexity in research and development. The
road to developing new medicines is a rigorous, long
and costly one. In total, it takes about 10 to 15 years to
develop a new medicine.2,3,4
In many cases, the process
begins with advanced screening of voluminous
RD:Bringing Hope
to Patients

RD: Bringing Hope to Patients 39
compound libraries in order to identify a handful
that have therapeutic potential. Despite advanced
screening processes, only one viable candidate is
likely to emerge and receive ultimate approval from
the Food and Drug Administration (FDA). Between
1999 and 2004, the clinical approval success rate was
estimated at 16%—or just one in six compounds.5
Despite these challenges, biopharmaceutical
researchers are dedicated to their mission of
advancing the science and bringing innovative new
medicines to patients. Researchers are continuing
to adapt to the growing complexity and rapidly
evolving nature of the drug development enterprise,
knowing that the work can result in new medicines
that save lives, expand treatment options, and
improve patients’ quality of life. In service of this
mission, in 2013 PhRMA launched the BioMedical
Advisory Council, composed of heads of research and
development (RD) and chief medical officers from
member companies to set the vision and provide
direction to help promote a sustainable life sciences
ecosystem and enable the industry to deliver on the
promise of the biopharmaceutical enterprise.
EXAMINING THE PIPELINE
Recent advancements in science, combined
with the commitment of biopharmaceutical
researchers, is opening up immense opportunity
in the development of new medicines.6
A
recent report examining innovation in the
drug development pipeline found that 70% of
the more than 5,000 new molecular entities
being investigated are potential first-in-class
medicines, or medicines that are in a unique
pharmacologic class distinct from any other
marketed drugs7
(see Figure 12). First-in-class
Figure 12: Potential First-in-Class Medicines in the Pipeline
Potential First-in-Class Medicines in the Pipeline
An average of 70% of drugs across the pipeline are potential first-in-class medicines.
25
Source: Analysis Group6
Percentage of Projects in Development that Are Potentially
First-in-Class Medicines in Selected Therapeutic Areas, 2011
57%
69%
71%
72%
79%
80%
81%
84%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Infections
HIV/AIDS
Diabetes
Immunology
Psychiatry
Cancer
Cardiovascular
Neurology
Profile--Figure 12
SOURCE: G. Long and J. Works. Innovation in the Biopharmaceutical Pipeline: A Multidimensional View. Boston, MA: Analysis Group, January 2013. Available at www.analysisgroup.com/uploadedFiles/Publishing/
Articles/2012_Innovation_in_the_Biopharmaceutical_Pipeline.pdf (accessed March 2014).
An average of 70% of drugs across the pipeline are potential first-in-class medicines.

Chapter4
medicines offer new potential treatment options
for patients, particularly for those who have not
responded to existing therapies or for whom no
treatment options are available. Increasingly,
scientists are developing therapies to treat
diseases for which no new medicines have been
approved in the last 10 years. Researchers are
currently investigating over 400 such medicines—
including 158 to treat ovarian cancer, 41 to treat
small-cell lung cancer, 28 to treat cervical cancer,
27 to treat anthrax, and 26 to treat septic shock.8
Rare diseases are another area that has seen
significant progress in recent years, with FDA
designations of orphan drugs in development
showing a significant increase. An average of 140
drugs have been designated as orphan drugs
each year over the past decade, compared with
64 in the previous 10 years.9
Currently, America’s
biopharmaceutical research companies are
developing 452 medicines and vaccines to treat rare
diseases. In particular, researchers are focusing
on rare cancers, genetic disorders, neurological
conditions, infectious diseases, and autoimmune
disorders.10
Many of these diseases are serious
or life threatening, and patients who have them
frequently have few or no treatment options.
Unfortunately, while in recent years we have seen
great progress in the development of medicines
to treat rare diseases, fewer than 10 percent
of patients with rare diseases have treatments
available today, and the development of medicines
in this area is particularly challenging.11
Despite
great progress, the development of medicines
to provide treatment options for these patients
remains critically important.
Innovation in Scientific Platforms
It often takes years, and sometimes decades, to
translate scientific discoveries into new therapeutic
approaches, but these discoveries provide a platform
that allows researchers to pursue a range of never-
before-possible options for treating a disease.12
Innovative scientific platforms are often explored
in the development of biologic medicines, which
are complex medicines made by or from living
cells to prevent, treat, diagnose, or cure disease in
humans.13
There are currently 907 biologic medicines
in development, many of which are making use of a
broad range of new technologies to harness scientific
It’s a long journey, very challenging, but at the end of the day once we get there,
to have a new treatment for patients, it makes all the difference.” olof larsson,
chief scientific officer, pain, eli lilly
Learn more about Dr. Larsson’s work at: www.youtube.com/watch?v=PWxwGByHwrI.

Dr. Pat Scannon leads a team of researchers who are searching
for therapies that target cancer cells while leaving healthy
cells undamaged. One of the most exciting parts of his work is
watching his team members make progress
individually as well as through dedicated
teamwork. To learn more about the values
that drive Dr. Scannon in his work and
personal life, watch: www.youtube.
com/watch?v=NO3HsCcskiI.
A Look at the People Behind the Science
“We’re looking for novel therapeutics for
diseases that have no alternatives. What we’re
interested in is not just killing cancer cells…
the idea is to kill the cancer cells without killing
the other tissue so that person ultimately is
able to get rid of the cancer and live a healthy
life afterwards…There is a great amount of
satisfaction and joy in taking your knowledge
and using it to help other people.”
Dr. Sean Pintchovski is fascinated by the brain in all its complexity. He is
working on developing medicines that might slow or reverse the damage
caused by neurodegenerative diseases such as Alzheimer’s. Though
unsuccessful attempts to find treatments far outnumber
successes, the knowledge gained is invaluable, because
it often points scientists in new and more fruitful
directions. To learn more about Dr. Pintchovski’s work,
watch: www.youtube.com/watch?v=d0MxtyLyN38.
“We’re trying to understand how to reverse
those changes in the biology [of the brain]
to help people who are suffering from a
range of different diseases, and chances
are that you or someone you care about will
develop one of these diseases. There are a
lot of challenges, so it’s more frustrating in
that way, but it’s also more rewarding.”
Dr. Sophie Biernaux, and her company’s malaria vaccine team, were 2013 recipients of a
PhRMA Research and Hope Award. Dr. Biernaux leads her company’s RD efforts to develop
a malaria vaccine. She manages all of the phase III vaccine trials across sub-Saharan Africa
and collaborates closely with governmental and nongovernmental organizations working
to eradicate this devastating disease, which affects millions across the
continent: more than 600,000 African children die of malaria each year.
If the vaccine candidate is successful, it could be the first ever vaccine
developed to prevent malaria or any parasitic disease.14
To learn more
about this work, watch: www.youtube.com/watch?v=CJTiKdOxfj8.
“I feel extremely
honored on behalf of
the team to get this
award. Because for
us that vaccine is
really a great hope
that we have for
Africa and African
children.”
The biopharmaceutical industry’s greatest strength is its scientific leadership, personified by the researchers
who dedicate themselves to this endeavor, committing their lives and expertise to translate scientific and
technological breakthroughs into new treatments for patients. Here are just a few of the researchers who are
applying new knowledge to a range of different diseases and conditions and, as a result, opening new doors to
improvements in human health around the world.

Chapter4
progress across a variety of disease areas (see
Figure 13). Select examples include:
Antisense RNAi therapy. Most drugs target
proteins, such as enzymes and cellular receptors.
RNAi therapy takes a different approach by
targeting RNA, which carries genetic information
to create proteins in the cell. RNA interference
(RNAi) therapy can help silence harmful gene
expression. In the past 20 years, this work has
advanced from cutting-edge laboratory research
to the development of actual treatment options
for patients, with two RNAi therapies having been
approved as of 2012, and over 127 more RNAi
therapies in the pipeline.15
Therapeutic cancer vaccines. In the late 1990s,
scientists began experimenting with new vaccines
that could harness the power of the immune
system to fight cancer rather than to prevent
it. The first therapeutic cancer vaccine was
approved in 2010, and now there are more than 20
therapeutic vaccines for cancer in development.16,17
Cell Therapy. This regenerative approach
introduces new cells into tissue in order to treat a
disease. Currently there are 245 cell therapies in
the pipeline.18
Gene Therapy. This strategy is designed to treat
patients with a number of genetic diseases. It
Figure 13: More than 900 Biologic Medicines in Development in 2013
58
13
30
38
39
34
176
30
25
26
28
58
43
71
0 50 100 150 200 250 300 350
Other
Transplantation
Skin Diseases
Respiratory Disorders
Neurologic Disorders
Musculoskeletal Disorders
Infectious Diseases
Genetic Disorders
Eye Conditions
Digestive Disorders
Diabetes/Related Conditions
Cardiovascular Disease
Cancers/Related Conditions
Blood Disorders
Autoimmune Disorders
More than 900 Biologic Medicines in Development in 2013
Biologic medicines — large, complex molecules derived from living cells — frequently represent novel strategies
that have the potential to transform the clinical treatment of disease.
23
Source: PhRMA2
Source: Biotechnology Research Continues to Bolster Arsenal Against Disease with 633 Medicines in Development. PhRMA, 2008.
*Some medicines are being explored in more than one therapeutic category.
338
Profile--Figure 13
SOURCE: Pharmaceutical Research and Manufacturers of America. Medicines in Development: Biologics—Overview. Washington, DC: PhRMA, 2013.
Biologic medicines—large, complex molecules derived from living cells—frequently represent novel strategies
that have the potential to transform the clinical treatment of disease.
*Some medicines are being explored in more than one therapeutic category.

Hepatitis C is a devastating viral liver disease affecting five times as many people as HIV—
amounting to more than 3 to 4 million people in the United States and approximately
180 million people worldwide.19
The virus is a leading cause of liver transplantation and
liver cancer and is directly linked to 15,000 deaths per year.20,21
Hepatitis C will have an
increasing impact on health care in the coming years, as baby boomers maintain the
highest infection rates of hepatitis C. Because the symptoms of the disease are slow to
appear, the aging of this population poses a growing threat to human health and to the health system.
Until recently, existing treatments for the disease were able to cure only about half of patients, and many
discontinued treatment due to debilitating side effects.22
A new era in the treatment of hepatitis C has begun with
a new wave of medicines approved and in development that seek to act on targets in the virus lifecycle to directly
inhibit viral production. These drugs—referred to as direct-acting antiviral (DAA) agents—are specifically targeted
antiviral therapies for hepatitis C that act on virtually every stage in the viral lifecycle.23
The first of these oral medicines was approved beginning in 2011 to treat patients with the most common form
of the disease—those with genotype 1, accounting for more than 70 percent of patients. Up until this time, there
were no proven medicines for patients who didn’t respond to traditional hepatitis C therapy. These medicines not
only provided much-needed treatment options for chronically ill patients, but marked a major advance toward the
ultimate goal of providing more potent therapies with fewer side effects, and over a shorter course of treatment.
A second wave of oral DAAs, working through a different mechanism, is currently in the pipeline and expected
to significantly reduce side effects and offer even higher cure rates. One of these medicines was already
approved in 2013.24
In addition to treating genotype 1, these medicines treat patients with genotypes 2 and 3
of the disease (which account for 20 to 25 percent of patients). Early evidence suggests improvements in cure
rates reaching 90 percent or higher.25,26
In recognition of the progress made in cure rates, treatment duration, and the promising medicines in the pipeline,
the Cleveland Clinic named the emerging DAAs for hepatitis C a Top 10 Medical Innovation for 2014 for its potential
impact on patients.27
As these new treatments are approved over the next several years, we will see expanded
treatment options for various subpopulations, including increased potential for cures with shorter treatment times.
In consideration of the growing number of baby boomers infected with hepatitis C, Dr. Camilla Graham of
Beth Israel Deaconness Medical Center in Boston points out, “We have a narrow window of time to find as
many people as possible to cure them as quickly as possible, if we want to make a substantial impact on their
disease progression, as well as on those very expensive complications in the future.”28
Dr. David Thomas,
a liver specialist at Johns Hopkins University, seconds Dr. Graham’s caution, adding: “If we fail to provide
treatment to an expanding population of persons at risk of cirrhosis and liver cancer, then we’ll have even
greater costs…and they won’t all be economic.”29
A Revolution in the Treatment of Hepatitis C

Chapter4
A decade ago, a medicine known as imatinib produced a paradigm
shift in the treatment of chronic myeloid leukemia (CML), taking
it from a standard of chemotherapy treatment to an era of more
targeted medicines designed to interfere with the underlying
cellular processes causing a particular cancer—effectively
treating the cancer while also minimizing side effects.30
In the years that followed, researchers learned that the B-cell
receptor pathway tightly controls the growth of infection-fighting
B cells; when this pathway becomes unregulated, it can contribute
to the development of certain cancers. As a result, a number of novel therapies called B-cell receptor pathway
inhibitors have been designed to inhibit this overactive pathway. In clinical trials over the past year, these
agents have been found to be particularly effective in the treatment of low-grade B-cell lymphomas and
leukemias over long periods of time, and with very few side effects.31
In particular, the B-cell pathway inhibitors in clinical trials are showing great success in the treatment of
chronic lymphocytic leukemia (CLL)—so much so that experts are anticipating another major shift in treatment
for these patients similar to that seen in CML. Dr. Richard Furman, director of the CLL Research Center at
Weill Cornell Medical College, proclaimed at a 2013 meeting of the American Society of Hematology that these
medicines “herald a dawn of a new age for CLL patients,” noting that “people who should have died 5 years
ago are alive and well and in complete remission. It’s a huge paradigm shift.”32
Also this year, the Cleveland
Clinic, at their annual medical innovation summit, named B-cell receptor pathway inhibitors a Top 10 Medical
Innovation for these medicines’ potential impact on health care in 2014—noting the impressive success seen
with these agents in clinical trials for the treatment of CLL.
Describing the manner in which science builds upon previous advances, and how this process paves the way
for future advances, experts at the Cleveland Clinic noted:
“The B-cell receptor pathway inhibitors are innovative because they help fulfill the initial promise of imatinib.
They will help patients who are no longer responsive to chemotherapy live longer, provide an alternative to
chemotherapy in the future, and will stimulate additional research to find similar advances for other cancers.”33
To learn more, watch: www.clevelandclinic.org/innovations/summit/topten/2014.html.
A recent report found there are more than 240 medicines in development, including B-cell receptor pathway
inhibitors, to treat a broad range of blood cancers—including 98 medicines to treat lymphomas, 97 to treat a
variety of leukemias, and 52 to treat myelomas.34
These potential medicines offer great hope for patients and
families affected by these diseases.
Spotlight on B-Cell Receptor Pathway Inhibitors

involves the insertion, alteration, or removal
of genes within cells and tissue—frequently to
counteract genetic defects. There are 99 gene
therapies in development.35
Conjugated Monoclonal Antibodies (mAbs).
Conjugated mAbs utilize the selectivity of
antibodies to deliver cytotoxic agents directly
to tumor cells while sparing healthy cells. This
approach offers to provide more targeted cancer
therapies with reduced side effects. There are 102
conjugated mAbs in development.36
Many of these scientific strategies are showing
particular promise in late-stage clinical trials and
offer hope for patients who suffer from extremely
difficult and complex diseases. A few examples of
how biopharmaceutical researchers are applying
these innovative scientific strategies to the
development of new medicines are highlighted below.
RNAi Therapy to Treat Duchenne Muscular
Dystrophy (DMD). DMD is a fatal muscle wasting
disorder caused by mutations in the dystrophin
gene. It is caused by deletions in the genetic
code that encodes a protein found in normal
muscle and causes muscle fibers to disintegrate
faster than they can be regenerated. An RNAi
therapy in development targets the restoration
of this protein. In clinical trials, the medicine has
shown improved protein expression as well as
improvement in patients’ ability to walk.37
Therapeutic Cancer Vaccine to Treat Melanoma.
A virus-based therapeutic vaccine in development
for the treatment of melanoma is genetically
modified to replicate selectively in tumor cells and
express a gene for an immune-stimulating protein.
The vaccine is injected directly into the tumor,
where it replicates and spreads within the tumor,
causing the death of cancer cells and stimulating
the immune system to destroy cancer cells.38
OVERVIEW OF THE
RD PROCESS
The difficulty of drug development can be hard to
grasp without an understanding of the length of
time and the many steps involved in developing a
medicine, the daunting odds that researchers face
in producing a viable candidate, and the immense
investment required to see the process through.
On average, it takes about 10 to 15 years for a
new medicine to complete the journey from initial
discovery to patients.39,40,41
Tens of thousands of compounds may be screened
early in development, but only one ultimately
receives approval. Even medicines that reach clinical
trials have only a 16% chance of being approved.42
The development process is costly and complex. The
average RD investment for each new medicine
was estimated to average $1.2 billion, including
the cost of failures, in 2007,43
with more recent
studies estimating the costs to be even higher44
The requirements associated with the review and
approval process have steadily increased over time,
as have the uncertainties regarding whether the new
medicines ultimately approved will be fully valued by
payers and made available to patients.

Chapter4
Drug
Discovery Clinical Trials
FDA
Review
Scale-Up to
Manufacturing
Phase IV/Ongoing
Research
and Monitoring
INDSUBMITTED
NDASUBMITTED
3−6 YEARS 6−7 YEARS 0.5−2 YEARS INDEFINITE
20–100 100–500 1,000–5,000
PHASE I PHASE II PHASE III
NUMBER OF VOLUNTEERS
PRE-DISCOVERY:
BASICRESEARCHANDSCREENING
Discovery Clinical Trials Review Man
INDSUBMITTED
NDASUBMITTED
3−6 YEARS 6−7 YEARS 0 5−2 YE
20–100 100–500 1,000–5,000
PHASE I PHASE II PHASE III
NUMBER OF VOLUNTEERS
ONEFDA-
APPROVED
MEDICINE
6
TENS OF
THOUSANDS
OF COMPOUNDS
The numerous lengthy steps each potential new
medicine must take in order to make its way to patients
are outlined in Figure 14. Despite these challenges,
biopharmaceutical researchers are dedicated to the
mission of advancing science and producing medicines
that improve and save the lives of patients.
Drug Discovery
In the United States, we are fortunate to have a
dynamic, collaborative research ecosystem that
includes researchers from government, industry,
academia, nonprofit organizations and patient
advocacy groups that contribute to this body of
knowledge (see Chapter 3). Even at these early
stages of drug discovery, this collaborative ecosystem
stands out as a great strength of the U.S. biomedical
research system, and it enables the U.S. to stand out
as a world leader in biopharmaceutical innovation.
Basic research provides clues that help researchers
identify biological targets for a potential medicine.
Researchers conduct studies in cells, tissues, and
animal models to determine whether a particular
target implicated in disease can be influenced by a
compound being investigated.
Next, researchers look for a lead compound—a
promising molecule that could influence the target
and potentially become a medicine. Researchers do
this in various ways, including creating a molecule,
using high-throughput screening techniques to
select a few promising possibilities from among
thousands of potential candidates, finding
compounds from nature, and using biotechnology
to genetically engineer living systems to produce
disease-fighting molecules.
Figure 14: The Research and Development Process
SOURCE: Pharmaceutical Research and Manufacturers of America. Drug Discovery and Development: Understanding the RD Process. Washington, DC: PhRMA, 2014.
Developing a new medicine takes an average of 10 to 15 years.

Even this early on in the drug discovery process,
investigators already are thinking about the
final product. The formulation (or “recipe”) for
manufacturing a medicine, and the form in which it
is delivered to patients (for example, whether it is
taken in pill form, injected, or inhaled) are among
the critical elements that need to be considered
early on in the process.
Preclinical Testing
The drug discovery stage involves narrowing
down thousands of compounds to a few hundred
promising possibilities that are ready for preclinical
testing. At this point, in order to determine whether
a compound is suitable for human testing, scientists
conduct laboratory and animal studies. At the end
of this process, which can take several years, only
a handful of compounds move to the next stage of
testing, which occurs in humans. The company then
files an Investigational New Drug Application with
the FDA to begin clinical trials.
Clinical Trials
Upon reaching the clinical trial stage, a compound is
tested in human volunteers. The clinical trials process
occurs in several phases and takes many years.
Before a medicine is submitted to the FDA for review,
a potential medicine must successfully complete each
phase. (See Chapter 3 for a discussion of the impacts
of clinical trials on state and local economies.)
As this process involves a great deal of potential
benefit but also inherent risks to clinical trial
participants, companies are careful to protect the
safety of trial participants and to ensure that they
are thoroughly informed about the trial and its
potential risks so that they can provide informed
consent to participate, as required by federal
regulations. Companies also ensure that trials
are conducted with integrity and that clinical trial
results are appropriately disclosed.
A study’s design and informed consent process
are reviewed, approved, and monitored by an
Institutional Review Board (IRB). The IRB, which is
made up of physicians, researchers, and members
of the community, ensures that the study is ethical
and that the rights and welfare of participants are
protected. This includes ensuring that research

Chapter4
risks are minimized and are reasonable in relation
to any potential benefits.45
Clinical trials have three main phases:
Phase I trials test a compound in a small group
(e.g., 20 to 100) of healthy volunteers to determine
the safety of the compound.
Phase II trials test the compound in a somewhat
larger group (e.g., 100 to 500) of volunteers who
have the disease or condition the compound is
designed to treat. Phase 2 trials determine the
effectiveness of the compound, examine possible
short-term side effects and risks, and identify
optimal dose and schedule.
Phase III trials test the compound in a much
larger group (e.g., 1,000 to 5,000) of participants to
generate statistically significant information about
safety and efficacy and to determine the overall
benefit-risk ratio.
FDA Review and Approval
Upon completion of the clinical trials, providing the
compound has demonstrated safety and efficacy,
the company submits a New Drug Application
or Biologics License Application to the FDA for
approval to market the new medicine.
Upon careful review of all the data from all of
the studies on the compound, and after weighing
the benefits and risks of the potential medicine,
FDA scientists decide whether to grant approval.
Occasionally the FDA will ask for additional
research before granting approval, or convene
an independent expert panel to consider data
presented by the FDA and the company. The panel
will then advise the agency on whether to approve
the application and under what conditions.
Manufacturing
Medicines can be used by many millions of people
or sometimes by a small, select population, and
often they are on the market for many years.
Consequently, manufacturing facilities must
be carefully designed so that medicines can be
consistently and efficiently produced at the highest
level of quality and meet the needs of patients.
Accordingly, manufacturing facilities must be
constructed to the highest of standards to ensure
that safety and quality are built into each step of the
manufacturing process.46
Companies must adhere to
FDA’s Good Manufacturing Practices regulations, and
they also must constantly update, overhaul, or even
rebuild facilities when new medicines are approved,
since each new medicine is manufactured differently.
Phase IV and Other Post-Approval
Research and Monitoring
Research on a new medicine does not end upon
approval, when a medicine reaches patients. On the
contrary, companies conduct extensive post-approval
research to monitor safety and long-term side effects
in patients using the medicine, as well as phase IV
clinical trials that evaluate long-term safety and
efficacy in specific patient subgroups. Under certain
circumstances, the FDA may also require companies
to conduct risk evaluation and mitigation strategies
to ensure that the benefits continue to outweigh the
risks of a particular medicine.
Companies may also conduct post-approval studies
to assess the benefits of a medicine for different
populations or in other disease areas. In some cases,
they may also develop improved delivery systems or
dosage forms. Post-approval research is critical to
improving researchers’ and clinicians’ understanding
of a medicine’s potential uses and full benefits to
patients. In many cases, a medicine may reveal

itself over time to have an even greater impact on
outcomes when used earlier in the progression of
a disease, in combination with other medicines,
in different disease indications, or in combination
with specific biomarkers. The RD process is a
continuous, stepwise journey; additional research
and clinical use provide new knowledge that can
shape the way a product is used in future years (see
the example of HIV/AIDS medicines in “The Evolving
Value of Medicines” in Chapter 1, page 8).
THE PRESCRIPTION DRUG
LIFECYCLE
The RD process is just one part of a larger
prescription drug lifecycle in which innovative new
medicines bring long-term savings to the health
care system. This lifecycle begins with the initial
development of a medicine, and it ends with a
generic version of that medicine. Generics provide
low-cost access to effective medicines for patients
for many years to come 2000 (see Figure 15). But
the benefits of generic medicines and, in the future,
biosimilar medicines, would not be possible if
innovator companies did not commit the incredible
amount of time, resources, and investment to
research and develop new, innovative medicines to
save and improve the lives of patients.
After FDA approval, the average effective patent life
of an innovative brand-name medicine is about 12.6
Figure 15: The U.S. Prescription Drug Lifecycle Promotes Innovation and Affordability
3 • Spending and Costs
Innovator pharmaceutical companies produce medical advances through pioneering scientific work and large-
scale investments. The innovators’ work and investment lead both to new medicines and, over time, to generics
that consumers use at low cost for many years.
49
*Ten therapeutic classes most commonly used by Part D enrollees in 2006 were: lipid regulators, ACE inhibitors, calcium
channel blockers, beta blockers, proton pump inhibitors, thyroid hormone, angiotensin II, codeine and combination products,
antidepressants, and seizure disorder medications.
Source: M. Kleinrock6
Daily Cost of Top 10 Therapeutic Classes* Most Commonly Used by Medicare Part D Enrollees
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
CostPerDay($)
$1.00
$0.47
$1.50
Actual
Estimated
The U.S. Prescription Drug Lifecycle Promotes
Innovation and Affordability
Profile--Figure 15
SOURCE: M. Kleinrock. Daily Cost of Medicare Part D December 2013 Update. December 2013. IMS Institute for Healthcare Informatics.
Innovator pharmaceutical companies produce medical advances through pioneering scientific work and
large-scale investments. The innovators’ work and investment lead both to new medicines and, over time, to
generics that consumers use at low cost for many years.
*Ten therapeutic classes most commonly used by Part D enrollees in 2006 were: lipid regulators, ACE inhibitors, calcium channel blockers, beta blockers, proton pump inhibitors, thyroid hormone, angiotensin II, codeine
and combination products, antidepressants, and seizure disorder medications.

Chapter4
years.47
During the period of patent protection, the
medicine must earn enough revenue to fund the
drug development pipeline for other candidates that
may someday become new drugs. Only 2 of every 10
brand-name medicines earn sufficient revenues to
recoup average RD costs.48
Patent challenges from
generic manufacturers (Paragraph IV filings) also
impact the ability to earn a return on investment,
and research shows that patent challenges are
increasing and being filed relatively early in the
brand-name drug life cycle—within 7 years after
brand launch, on average.49
Prior to the expiry of patent protection, innovator
medicines face competition from other innovative
medicines entering the class, expanding the
treatment options for patients. After patent
protection expires, generic versions of the innovator
medicines quickly enter the market. In fact, the rate
at which a generic medicine captures the market
of a branded medicine has increased significantly
over the past decade. For brand medicines facing
generic entry in 2011–2012, generics captured an
average of 84% percent of the market within a year
of entry, compared with just 56% in 1999–2000.50
In
other words, brand medicines retained an average
of only 16% of market share at 1 year post-generic
entry in 2011–2012, compared with brand medicines
maintaining a market share of 44% in 1999–2000.51
Today we estimate that 84% of all drug prescriptions
are filled with a generic product,52
yielding a savings
of $1.1 billion over the past decade.53
As biosimilars
enter the market, increased competition is expected
on both price and clinical effects.
As noted throughout this report, the RD process
is lengthy, costly, and complex; and harnessing the
scientific challenges and opportunities to bring
new treatments to patients requires the dedication
of a range of stakeholders working collaboratively
with biopharmaceutical companies over the course
of the prescription drug lifecycle. The end result
is medicines that save and improve patients’ lives,
reduce health care costs, and benefit local and
national economies (see Chapter 3).
THE EVOLVING RD PROCESS
The biopharmaceutical pipeline offers great hope for
patients, but it also reflects increased complexity.
The reality is that the biology of many diseases is
complex, and the countless variables that must be
considered make the process of discovering new
medicines particularly challenging and uncertain. As
science advances and provides new opportunities,
the industry is continually innovating and adapting
the RD process in order to meet this challenge.
Here are a few examples of the forces that
are contributing to the growing complexity of
biopharmaceutical research:
Focusing on the molecular level: A deepening
understanding of the molecular and genetic
underpinnings of disease has brought unparalleled
research opportunities and dramatically changed
many aspects of drug development.
Researching increasingly complex diseases:
Clinical investigators are increasingly exploring
treatment options for complex diseases such
as neurological disorders, cancer, and many
rare diseases for which there are few or no
treatments. For example, the number of medicines
in development for Alzheimer’s disease jumped
from 26 in 2003 to 125 today.54,55
New scientific
opportunities make these avenues of exploration
possible, but the complexities of these uncharted
areas in the short term often mean an increased
opportunity for failure.

Advancing personalized medicine: The emergence
of personalized medicine has also made the RD
process more complex, as drug developers must
now coordinate research on a new medicine with
the development of a corresponding diagnostic that
can help determine whether a patient will respond
well to a medicine.
This increasingly complicated research scheme
demands a greater understanding of how each
patient may respond to a therapy, while also keeping
pace with expanding regulatory requirements. As
a result, the burden of executing a clinical trial is
growing, with more procedures required, more data
collected, more numerous and complex eligibility
criteria for study enrollment, and longer study
duration,57
(see Figure 16).
Patient recruitment for clinical trials also is an
ongoing and growing challenge for researchers. On
average, difficulty recruiting volunteers can nearly
double the original timeline of phases I, II, III, and
IV trials.58
The increased complexity of the research
environment, combined with frequent failures
The science of drug discovery is hard. And it’s just getting harder. In fact purely
on a scientific level, taking a drug all the way from initial discovery to market is
considered harder than putting a man on the moon.”56
ashutosh jogalekar, scientific
american, 2014
Figure 16: Complexity of Clinical Trials Has Increased
Complexity of Clinical Trials Has Increased
During the last decade, clinical trial designs and procedures have become much more complex, demanding more
staff time and effort, and discouraging patient enrollment and retention.
33
Source: K.A. Getz, et al. and Tufts CSDD19
2000–2003 2008–2011
Increase in
Complexity
Total Procedures per Trial Protocol (median)
(e.g., bloodwork, routine exams, x-rays, etc.)
105.9 166.6 57%
Total Investigative Site Work Burden
(median units)
28.9 47.5 64%
Total Eligibility Criteria 31 46 58%
Clinical Trial Treatment Period
(median days)* 140 175 25%
Number of Case Report Form Pages per
Protocol (median)
55 171 227%
*These numbers reflect only the “treatment duration” of the protocol.
Trends in Clinical Trial Protocol Complexity
Profile--Figure 16
*These numbers reflect only the “treatment duration” of the protocol.
SOURCE: K.A. Getz, R.A. Campo, and K.I. Kaitin. “Variability in Protocol Design Complexity by Phase and Therapeutic Area.” Drug Information Journal 2011; 45(4): 413–420; updated data provided through correspondence
with Tufts Center for the Study of Drug Development.
During the last decade, clinical trial designs and procedures have become much more complex, demanding
more staff time and effort, and discouraging patient enrollment and retention.

Chapter4
Drug Development Costs Have Increased
According to a 2007 study, it costs an average of $1.2 billion to develop one new drug.16 More recent studies
estimate the costs to be even higher.17
32
Sources: J.A. DiMasi and H.G. Grabowski16; J. Mestre‐Ferrandiz, et al.17; J.A. DiMasi, et al.18
$140M
$320M
$800M
$1.2B
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
mid‐1970s mid‐1980s late 1990s early 2000s
Billions (Constant Dollars, Year 2000)
The Average Cost to Develop One New Approved Drug — Including the Cost of Failures
and setbacks, has contributed to the rising costs
of clinical research.59
In fact, the average cost of
developing a drug—including the cost of failures—
grew from $800 million in the late 1990s to about
$1.2 billion in the early 2000s (see Figure 17). More
recent studies have estimated the average costs to
be much greater.
Adapting and Evolving
To produce innovative treatments more efficiently,
biopharmaceutical companies must continually
change, adapt, and build on prior knowledge to
create new knowledge. Researchers are exploring
new approaches that reduce development times and
increase the odds of success, including adaptive
designs which allow for modifications to trial
and statistical procedures. Researchers are also
developing and exploring new research tools, such
as modeling and simulation, new approaches to
patient recruitment—including the use of social
media—and sophisticated methods of analyzing
data to increase the efficiency and effectiveness of
the RD process.
Biopharmaceutical companies are looking to harness
the potential of big data and real-world evidence
Figure 17: Drug Development Costs Have Increased
SOURCE: J.A. DiMasi and H.G. Grabowski. The Cost of Biopharmaceutical RD: Is Biotech Different? Managerial and Decision Economics 2007; 28: 469–479; More recent estimates range from $1.5 billion to more than
$1.8 billion. See J. Mestre-Ferrandiz, J. Sussex, and A. Towse. “The RD Cost of a New Medicine.” London: Office of Health Economics, 2012; S.M. Paul, et al. “How to Improve RD Productivity: The Pharmaceutical
Industry’s Grand Challenge.” Nature Reviews Drug Discovery 2010; 9: 203–214; J.A. DiMasi, et al. “The Price of Innovation: New Estimates of Drug Development Costs.” Journal of Health Economics 2003; 22: 151–185.
Study findings originally reported in 2005 dollars. Based on correspondence with the study author, these figures were adjusted to 2000 dollars.
According to a 2007 study, it costs an average of $1.2 billion to develop one new drug. More recent studies estimate
the costs to be even higher.
The Average Cost to Develop One New Approved Drug—Including the Cost of Failures

to better identify new potential drug candidates
and develop them into effective, approved and
reimbursed medicines more quickly.60
To facilitate
collaboration in this area, PhRMA collaborated this
year with physicians and other experts through
the Harvard Multi-Regional Clinical Trial Center
to outline different models for responsible clinical
trial data sharing. (For details regarding the models
proposed, go to www.nejm.org/doi/full/10.1056/
NEJMhle1309073.) Also this year, PhRMA and the
European Federation of Pharmaceutical Industries
and Associations demonstrated a commitment
to advance clinical research and innovation
by developing a governing set of principles on
clinical data sharing amongst biopharmaceutical
researchers. (For more on these principles,
go to www.phrma.org/sites/default/files/pdf/
PhRMAPrinciplesForResponsibleClinicalTrialDataSharing.
pdf.) Partnerships and collaborative relationships
with researchers in academia, government nonprofit
organizations and other companies are also
becoming increasingly important. Precompetitive
partnerships, which seek to advance basic research,
are a growing area of collaboration.61
(For more
Accelerating RD through Public-Private Partnerships
To address the most challenging scientific and technological challenges, partnerships
and other forms of collaboration are becoming increasingly common among
researchers from biopharmaceutical companies, academic medical research centers,
nonprofit organizations, patient advocacy groups and others. Partners generally share
certain risks and exchange intellectual, financial, and in-kind or human resources as
mutually agreed upon. The close and synergistic relationships among these sectors is critical to ensuring a
robust national biomedical research capacity in the United States. A recent study by the Tufts University Center
for the Study of Drug Development found that these relationships frequently involve company and academic
medical center scientists and other researchers working side by side on cutting-edge science with advanced
tools and resources.62
Collaborations like these enable researchers to tackle today’s most challenging and
complex diseases for which there are often few or no treatment options.
Precompetitive public-private partnerships to accelerate drug discovery and development are also an
increasingly important approach to improve RD efficiency and effectiveness and bring new medicine to
patients. As just one example, in 2014 a groundbreaking new partnership was announced called the Accelerating
Medicines Partnership (AMP). The collaboration among the National Institutes of Health, several nonprofit
disease foundations, 10 biopharmaceutical companies and PhRMA aims to transform the current model for
developing new diagnostics and treatments by joining forces to identify and validate promising biological targets
of disease. AMP represents a new, integrated approach to treatment discovery and seeks to increase the
number of new diagnostics and therapies for patients while reducing the time and cost associated with their
development. The initiative will begin with three- to five-year pilot projects focused on three disease areas:
Alzheimer’s; type 2 diabetes; and autoimmune disorders, including rheumatoid arthritis and lupus.
Accelerating RD through Public-Private Partnerships

Chapter4
REFERENCES
1
G. Long and J. Works. “Innovation in the Biopharmaceutical
Pipeline: A Multidimensional View.” Boston, MA: Analysis
Group, Inc., January 2013. Available at www.analysisgroup.com/
uploadedFiles/Publishing/Articles/2012_Innovation_in_the_
Biopharmaceutical_Pipeline.pdf (accessed December 2013).
2
PAREXEL International. “PAREXEL Biopharmaceutical RD
Statistical Sourcebook 2010/2011.” Waltham, MA: PAREXEL
International, 2010.
3
M. Dickson and J.P. Gagnon. “Key Factors in the Rising Cost of
New Drug Discovery and Development.” Nature Reviews Drug
Discovery 2004; 3(5): 417–429.
4
J.A. DiMasi, R.W. Hansen, and H.G. Grabowski. “The Price of
Innovation: New Estimates of Drug Development Costs.” Journal of
Health Economics 2003; 22(2): 151–185.
5
J.A. DiMasi, et al. “Trends in Risks Associated with New Drug
Development: Success Rates for Investigational Drugs.” Clinical
Pharmacology and Therapeutics 2010; 87(3): 272−277.
6
G. Long and J. Works. Op. cit.
7
Ibid.
8
Ibid.
9
Ibid.
10
“Medicines in Development: Rare Diseases.” Washington, DC:
Rare_Diseases_2013.pdf.
11
M.J. Field and T.F. Boat, eds. Rare Diseases and Orphan Products:
Accelerating Research and Development. Washington DC: National
Academies Press, 2011.
12
13
“Biologic Medicines in Development: A Report on Biologic
Therapies.” Washington, DC: PhRMA (2013).
14
“2013 Research and Hope Award Bios: GlaxoSmithKline Malaria
Vaccine Team.” Washington, DC: PhRMA, 2013. Available at www.
phrma.org/glaxosmithkline-malaria-vaccine-team-bio (accessed
December 2013).
15
16
Ibid.
17
T. Gryta. “Enlisting the Body to Fight Cancer.” Wall Street Journal,
14 June 2011. Available at http://online.wsj.com/article/SB100014
24052702304778304576377892911572686.html?mod=googlenews_
wsj (accessed December 2013).
18
19
A.B. Jazwinski and A.J. Muir. “Direct-Acting Antiviral Medications
for Chronic Hepatitis C Virus Infection.” Journal of Gastroenterology
and Hepatology 2011; 7(3): 154–162. Available at www.ncbi.nlm.nih.
gov/pmc/articles/pmc3079144.
20
Centers for Disease Control and Prevention. “Hepatitis C: Why
Baby Boomers Should Get Tested.” Atlanta, GA: CDC, March
2013. Available at www.cdc.gov/knowmorehepatitis/Media/PDFs/
FactSheet-boomers.pdf (accessed February 2014).
21
Centers for Disease Control and Prevention. “Hepatitis C:
Information on Testing and Diagnosis.” Atlanta, GA: CDC, October
2013. Available at www.cdc.gov/hepatitis/hcv/pdfs/hepctesting-
diagnosis.pdf (accessed February 2014).
22
G. L. Davis, et al. “Early Virologic Response to Treatment with
Peginterferon Alfa-2b Plus Ribavirin in Patients with Chronic
Hepatitis C.” Hepatology 2003 38(3):645−52.
23
A.B. Jazwinski and A.J. Muir. “Direct-Acting Antiviral Medications
for Chronic Hepatitis C Virus Infection.” Journal of Gastroenterology
and Hepatology 2011; 7(3): 154–162. Available at www.ncbi.nlm.nih.
gov/pmc/articles/pmc3079144.
details on these partnerships see “Accelerating RD
Through Public-Private Partnerships.”)
Although initial approval by the FDA is a crucial
step, the approval of a new medicine is not the end
of a medicine’s journey through the RD process.
Approval often lays the foundation for additional
learning and research that will shape the way a
product is used in years to come (see “The Evolving
Value of Medicines” in Chapter 1). The complexities
of the RD process and ecosystem are many, and
increased collaboration among various elements of
the ecosystem have become the norm rather than
the exception, providing increased hope for patients
that the promise of potential new treatments in the
pipeline will continue to revolutionize the treatment
of disease.

24
U.S. Food and Drug Administration. “FDA approves Sovaldi
for chronic hepatitis C.” FDA press release, 6 December
25
A.B. Jazwinski and A.J. Muir. Op. cit.
26
E. Lawitz, et al. “Sofosbuvir in Combination with Peginterferon
Alfa-2a and Ribavirin for Non-cirrhotic, Treatment-Naive Patients
with Genotypes 1, 2, and 3 Hepatitis C Infection: a Randomised,
Double-Blind, Phase 2 Trial.” The Lancet Infectious Diseases 2013;
13(5): 401−408.
27
Cleveland Clinic. “Top 10 Medical Innovations for 2014—#4 New
Era in Hepatitis C Treatment.” Cleveland, OH: Cleveland Clinic,
October 2013. Available at http://summit.clevelandclinic.org/Top-
10-Innovations/Top-10-for-2014.aspx (accessed February 2014).
28
R. Knox. “$1,000 Pill for Hepatitis C Spurs Debate over Drug
Prices,” 30 December 2013. Shots: Health News from NPR (blog). At
www.npr.org/blogs/health/2013/12/30/256885858/-1-000-pill-for-
hepatitis-c-spurs-debate-over-drug-prices.
29
R. Knox. “FDA Expected To Approve New, Gentler Cure For
Hepatitis C,” 5 December 2013. Shots: Health News from NPR
(blog). At www.npr.org/blogs/health/2013/12/05/248934833/
fda-set-to-approve-hepatitis-drug?ft=1f=1128utm_
content=socialflowutm_campaign=nprhealthutm_
source=healthutm_medium=twitter.
30
Cleveland Clinic. “Top 10 Medical Innovations for 2014—#10
B-Cell Receptor Pathway Inhibitors.” Cleveland, OH: Cleveland
Clinic, October 2013. Available at http://summit.clevelandclinic.
org/Top-10-Innovations/Top-10-for-2014/Top-10-Articles/10-B-
Cell-Receptor-Pathway-Inhibitors.aspx.
31
Ibid.
32
M. Tirrell. “New Leukemia Medicines Bring Chemotherapy-Free
Potential,” 9 December 2013. Bloomberg Personal Finance.
Bloomberg.com. At www.bloomberg.com/news/2013-12-09/
new-leukemia-drugs-bring-chemotherapy-free-treatment-
potential.html.
33
Cleveland Clinic. “Top 10 Medical Innovations for 2014—#10
B-Cell Receptor Pathway Inhibitors.” Cleveland, OH: Cleveland
Clinic, October 2013. Available at http://summit.clevelandclinic.
org/Top-10-Innovations/Top-10-for-2014/Top-10-Articles/10-B-
Cell-Receptor-Pathway-Inhibitors.aspx.
34
“Medicines in Development. Leukemia Lymphoma, 2013.”
Washington, DC: PhRMA, 2013. Available at http://phrma.org/
sites/default/files/pdf/LeukemiaLymphoma2013.pdf (accessed
December 2013).
35
36
Ibid.
37
“Medicines in Development: Biologics—Overview. Washington,
DC: PhRMA, 2013. Available at www.phrma.org/sites/default/files/
pdf/biologicsoverview2013.pdf.
38
Ibid.
39
PAREXEL International. Op. cit.
40
M. Dickson and J.P. Gagnon. “Key Factors in the Rising Cost
of New Drug Discovery and Development.” Nature Reviews Drug
Discovery 2004; 3(5): 417–429.
41
42
Tufts Center for the Study of Drug Development. “Large Pharma
Success Rate for Drugs Entering Clinical Trials in 1993–2004:
16%.” Impact Report 2009; 11(4).
43
2007; 28(4–5): 469–479.
44
Note: More recent estimates range from $1.5 billion to more than
$1.8 billion. See, for example: J. Mestre-Ferrandiz, J. Sussex, and
A. Towse. “The RD Cost of a New Medicine.” London: Office of
Health Economics, 2012 and S.M. Paul, et al. “How to Improve RD
Productivity: The Pharmaceutical Industry’s Grand Challenge.”
Nature Reviews Drug Discovery 2010; 9: 203–214.
45
National Institutes of Health. “ClinicalTrials.gov.” Clinicalttrials.
gov. At www.clinicaltrials.gov (accessed December 2013).
46
U.S. Food and Drug Administration. “Facts About Current
Good Manufacturing Practices (cGMPs).” Silver Spring,
MD: FDA, 25 June 2009. Available at www.fda.gov/drugs/
developmentapprovalprocess/manufacturing/ucm169105.htm
47
H. Grabowksi, G. Long, and R. Mortimer. “Recent Trends
in Brand-Name and Generic Drug Competition.” Journal of
Medical Economics 2014; 17(3): 207–214. Available at http://
informahealthcare.com/doi/abs/10.3111/13696998.2013.873723.
48
J.A. Vernon, et al. “Drug Development Costs when Financial Risk
is Measured Using the Fama-French Three-factor Model.” Health
Economics 2009; 19(8): 1002–1005.
49
Ibid.
50
H. Grabowksi, G. Long, R. Mortimer, “Recent Trends in
Brand-Name and Generic Drug Competition.” Journal of
Medical Economics 2014; 17(3): 207–214. Available at http://
informahealthcare.com/doi/abs/10.3111/13696998.2013.873723.
51
Ibid.
52
IMS Health. “National Prescription AuditTM
.” Danbury, CT: IMS
Health, December 2012.
53
Generic Pharmaceutical Association. “Generic Drug Savings in
the U.S.” (Fourth Annual Edition, 2012). Washington, DC: Generic
Pharmaceutical Association, 2012.

Chapter4
54
“Medicines in Development for Neurological Disorders.”
Washington, DC: PhRMA, 2003.
55
Pharmaceutical Research and Manufacturers of America. “The
Biopharmaceutical Pipeline: Evolving Science, Hope for Patients.”
Washington, DC: PhRMA, January 2013. Available at www.phrma.
org/sites/default/files/pdf/phrmapipelinereportfinal11713.pdf.
56
A. Jogalekar. “Why Drugs Are Expensive: It’s the Science,
Stupid.” 6 January 2014. Scientific American Blogs: The Curious
Wavefunction (blog). At http://blogs.scientificamerican.com/the-
curious-wavefunction/2014/01/06/why-drugs-are-expensive-its-
the-science-stupid/.
57
K.A. Getz, R.A. Campo, and K.I. Kaitin. “Variability in Protocol
Design Complexity by Phase and Therapeutic Area.” Drug
Information Journal 2011; 45(4): 413–420.
58
Tufts Center for the Study of Drug Development. “89% of Trials
Meet Enrollment, but Timelines Slip, Half of Sites Under-Enroll.”
Impact Report 2013; 15(1).
59
M. Allison. “Reinventing Clinical Trials.” Nature Biotechnology
2012; 30(1): 41–49.
60
J. Cattell, S. Chilukuri, and M. Levy. “How Big Data can
Revolutionize Pharmaceutical RD.” Washington, DC: McKinsey
Center for Government, October 2013. Available at www.mckinsey.
com/insights/health_systems_and_services/how_big_data_can_
revolutionize_pharmaceutical_r_and_d.
61
C.P. Milne and A. Malins. “Academic-Industry Partnerships for
Biopharmaceutical Research Development: Advancing Medical
Science in the U.S.” Boston, MA: Tufts Center for the Study of Drug
Development, April 2012.
62
Ibid.

The Outlook for Innovation58
Conclusion
T
he 2014 Biopharmaceutical Research
Industry Profile provides just a glimpse of
the tremendous potential in the pipeline.
Fully realizing this potential and the ability for new
prescription medicines to transform the treatment
of disease will require increased collaboration and
convergence across a range of sectors and fields,
such as biology, computer science and the physical
sciences, to harness novel scientific approaches.
These new approaches include gene and cell
therapies, increased understanding of human
genomics, leveraging massive amounts of data
and computational capabilities, and a range of new
technologies. Encouragingly, the scope of scientific
and technological challenges and opportunities is
heralding a new era of precompetitive partnerships
across a range of stakeholders.
TheOutlookforInnovation

The Outlook for Innovation 59
Despite the promising pipeline, the policy and
regulatory environment in the United States has
become increasingly difficult at a time when
other countries are increasingly recognizing the
economic and other benefits of an innovative
biopharmaceutical sector and are making
substantial investments to increase their global
competitiveness. The benefits that a strong,
innovative biopharmaceutical research sector
brings to patients and the U.S. economy can be lost
to competition, overregulation, and a failure to take
the long-term view required to foster a favorable
environment for innovation.
OPPORTUNITIES FOR FOSTERING
CONTINUED INNOVATION
Strengthen the science base to meet 21st-century
challenges. The drug development process is
becoming more costly and complex. In part, this
is due to today’s need for medicines to treat
increasingly challenging chronic diseases such as
arthritis, cancer, diabetes and neurodegenerative
disorders—and the scientific opportunities that
are leading researchers to focus on new, targeted
approaches such as personalized medicine.
This sophisticated science requires equally
sophisticated tools, technologies and expertise as
well as a regulatory process that is timely, science-
based, and transparent and that appropriately
balances benefits and risks.
Encourage access to new medicines. Coverage
and payment policies must recognize the role
and value of prescription medicines in improving
patient outcomes and reducing health care costs,
as evidenced by the Congressional Budget Office’s
recognition of the beneficial impact medicines have
on reducing other health care spending. Medicines
can play a key role, not only in the treatment
of disease, but also in prevention and early
intervention, resulting in substantial improvements
in patient outcomes. No nation, no matter how
wealthy, can provide innovative health care for its
citizens unless it values wellness, prevention and
disease management at least as much as it values
acute care—we cannot afford to disincentivize
investment in the new medicines that can help
reduce those costs.
Maintain intellectual property protections
that provide incentives for continued medical
innovation. Substantial resource and time
investments are necessary to bring the promise
of the pipeline to patients. A company’s decision
to make these costly investments hinges on the
availability of strong intellectual property rights
such as patents and data protection. As other
countries are implementing industrial and other
policies to attract and grow biopharmaceutical
RD investment, the United States needs to
embrace forward-looking policies that recognize
the economic contributions and value of
knowledge-based industries like the innovative
biopharmaceutical industry. Such a policy mindset
is paramount to preserving U.S. global leadership in
biopharmaceutical RD.

The Outlook for Innovation60
Conclusion
America’s biopharmaceutical companies are
adapting and seeking creative solutions to meet
growing economic, scientific, business, regulatory,
and policy challenges. For example, companies
are working to make the clinical trials process as
efficient as possible and are focusing on diseases
with the greatest unmet needs. They are developing
partnerships and unique collaborations to expand
the capacity to address complex disease targets.
Companies are also working with the U.S. Food
and Drug Administration, the National Institutes of
Health and related research agencies, as well as
with nonprofits and academic research institutions,
to advance regulatory science and to foster the
integration of real-word evidence and emerging
technologies into the development and review of
new medicines.
The nation’s innovative biopharmaceutical industry
is committed to the ongoing search for disease
solutions that work best for patients. However, the
industry’s ability to succeed requires a scientific,
regulatory, investment, and economic ecosystem
that fosters collaborative innovation and provides
broad patient access to new medicines.

62 PhRMA: Who We Are
Appendix
63 PhRMA Leadership
65 PhRMA Member Companies
67 PhRMA Annual Membership Survey
68 List of Tables

Appendix62
Appendix
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading
biopharmaceutical companies, which are committed to discovering and developing medicines that save and
improve lives. The work of the biopharmaceutical research sector brings hope to millions of patients, allowing
them to live longer, healthier lives, while helping to manage health care costs. PhRMA member companies
have invested more than $500 billion in research and development into medical innovations since 2000, and an
estimated $51.1 billion in 2013 alone. This investment also helps drive the industry’s significant contributions
to the U.S. economy, including the generation of hundreds of thousands of American jobs and vital support for
local communities.
PhRMA: Who We Are
Our Mission
PhRMA’s mission is to conduct effective advocacy for public policies that encourage discovery of important
new medicines for patients by pharmaceutical and biotechnology research companies. To accomplish this
mission, PhRMA is dedicated to achieving these goals in Washington, D.C., the states, and the world:
Broad patient access to safe and effective medicines through a free market, without price controls
Strong intellectual property incentives
Transparent, efficient regulation and a free flow of information to patients
To learn more about PhRMA, go to www.PhRMA.org/about.
o r

Appendix 63
PhRMA Leadership
John J. Castellani
President CEO
PhRMA
Robert J. Hugin
Chairman of the Board
Chairman CEO,
Celgene Corporation
Ian Read
Chairman-Elect of the
Board
Chairman CEO, Pfizer Inc
Kenneth C. Frazier
Treasurer of the Board
Chairman, President
CEO, Merck Co., Inc.
Board Leadership
Mark Altmeyer
President CEO
Otsuka America
Pharmaceutical, Inc.
Lamberto Andreotti
CEO
Bristol-Myers Squibb
Company
Philip Blake
President
Bayer Corporation
Michael Bonney
President CEO
Cubist Pharmaceuticals, Inc.
Robert A. Bradway
Chairman CEO
Amgen
Lonnel Coats
President CEO
Eisai Inc.
Deirdre P. Connelly
President, North American
Pharmaceuticals
GlaxoSmithKline
Joaquin Duato
Worldwide Chairman
Pharmaceuticals Group
Johnson Johnson
Paul R. Fonteyne
President CEO
Boehringer Ingelheim
USA Corporation
Belen Garijo
President CEO
Merck Serono / EMD Serono
Richard Gonzalez
Chairman CEO
AbbVie
GlennJ.Gormley,M.D.,Ph.D.
Senior Executive Officer
and Global Head, RD,
Daiichi Sankyo CO., LTD.
President CEO,
Daiichi Sankyo Inc
Board Membership

Appendix64
Appendix
Joseph Jimenez
CEO
Novartis AG
John Johnson
President CEO
Dendreon
John C. Lechleiter, Ph.D.
Chairman, President CEO
Eli Lilly and Company
Dave Lemus
CEO
Sigma-Tau
Pharmaceuticals, Inc.
Frank Morich, M.D., Ph.D.
Chief Commercial Officer
Takeda Pharmaceuticals
USA, Inc.
Michael A. Narachi
President CEO
Orexigen Therapeutics, Inc.
Hiroshi Nomura
Vice Chair, Executive Vice
President Chief Financial
Officer
Sunovion Pharmaceuticals,
Inc.
Richard F. Pops
Chairman CEO
Alkermes
James Robinson
President
Astellas Pharma US, Inc.
George A. Scangos, Ph.D.
CEO
Biogen Idec Inc.
Lars Rebien Sørensen
President CEO
Novo Nordisk Inc.
Pascal Soriot
Executive Director, CEO
AstraZeneca
Daniel Tassé
Chairman CEO
Ikaria, Inc.
Mark Timney
President CEO
Purdue Pharma L.P.
Christopher Viehbacher
CEO
Sanofi
Ulf Wiinberg
President CEO
Lundbeck, Inc.
Board Membership (continued)

Appendix 65
PhRMA Member Companies
Full Members Research Associate Members
Members Subsidiaries
AbbVie
North Chicago, IL
Alkermes plc
Waltham, MA
Amgen Inc.
Thousand Oaks, CA
Onyx Pharmaceuticals, Inc.
Astellas Pharma US, Inc.
Northbrook, IL
AstraZeneca Pharmaceuticals
LP
Wilmington, DE
Bayer Corporation
Wayne, New Jersey
Biogen Idec Inc.
Weston, MA
Boehringer Ingelheim
Pharmaceuticals, Inc.
Ridgefield, CT
Bristol-Myers Squibb Company
New York, NY
Celgene Corporation
Summit, NJ
Cubist Pharmaceuticals, Inc.
Lexington, MA
Daiichi Sankyo, Inc.
Parsippany, NJ
Dendreon Corporation
Seattle, WA
Eisai Inc.
Woodcliff Lake, NJ
Eli Lilly and Company
Indianapolis, IN
EMD Serono
Rockland, MA
GlaxoSmithKline
Research Triangle Park, NC
Johnson Johnson
New Brunswick, NJ
Lundbeck Inc.
Deerfield, IL
Merck Co., Inc.
Whitehouse Station, NJ
Merck Human Health
Division - U.S. Human
Health
Merck Research
Laboratories
Merck Vaccine Division
Novartis Pharmaceuticals
Corporation
New York, NY
Novo Nordisk, Inc.
Plainsboro, NJ
Otsuka America
Pharmaceutical, Inc. (OAPI)
Princeton, NJ
Otsuka America
Pharmaceutical (OAP)
Otsuka Maryland Medicinal
Laboratories (OMML)
Otsuka Pharmaceutical
Development
Commercialization, Inc.
(OPDC)
Pfizer Inc
New York, NY
Purdue Pharma L.P.
Stamford, CT
Sanofi
Bridgewater, NJ
Sanofi Pasteur
Sigma-Tau Pharmaceuticals, Inc.
Gaithersburg, MD
Sunovion Pharmaceuticals Inc.
Marlborough, MA
Takeda Pharmaceuticals
U.S.A., Inc.
Deerfield, IL

Appendix66
Appendix
Research Associate
Members
Arena Pharmaceuticals, Inc.
San Diego, CA
Auxilium Pharmaceuticals, Inc.
Chesterbrook, PA
BioMarin Pharmaceutical, Inc.
Novato, CA
CSL Behring, L.L.C.
King of Prussia, PA
Ferring Pharmaceuticals, Inc.
Parsippany, NJ
Grifols USA, LLC
Los Angeles, CA
Horizon Pharma, Inc.
Deerfield, IL
Ikaria, Inc.
Hampton, NJ
Ipsen Biopharmaceuticals, Inc.
Basking Ridge, NJ
Orexigen Therapeutics, Inc.
La Jolla, CA
Shionogi Inc.
Florham Park, NJ
Sucampo Pharmaceuticals, Inc.
Bethesda, MD
Theravance, Inc.
South San Francisco, CA
Vifor Pharma
Basking Ridge, NJ
VIVUS, Inc.
Mountain View, CA
XOMA Corporation
Berkeley, CA

Appendix 67
PhRMA Annual Membership Survey
Research and Development
Expenditure Definitions
RD Expenditures: Expenditures within PhRMA member
companies’ U.S. and/or foreign research laboratories plus
research and development (RD) funds contracted or
granted to commercial laboratories, private practitioners,
consultants, educational and nonprofit research
institutions, manufacturing and other companies, or other
research-performing organizations located inside/outside
of the U.S. Includes basic and applied research, as well
as developmental activities carried on or supported in the
pharmaceutical, biological, chemical, medical, and related
sciences, including psychology and psychiatry, if the
purpose of such activities is concerned ultimately with the
utilization of scientific principles in understanding diseases
or in improving health. Includes the total cost incurred
for all pharmaceutical RD activities, including salaries,
materials, supplies used, and a fair share of overhead, as
well as the cost of developing quality control. However,
it does not include the cost of routine quality control
activities, capital expenditures, or any costs incurred for
drug or medical RD conducted under a grant or contract
for other companies or organizations.
Domestic RD: Expenditures within the United States
by all PhRMA member companies.
RD Abroad: Expenditures outside the United States
by U.S.-owned PhRMA member companies and RD
conducted abroad by the U.S. divisions of foreign-
owned PhRMA member companies. RD performed
abroad by the foreign divisions of foreign-owned
PhRMA member companies is excluded.
Prehuman/Preclinical Testing: From synthesis to first
testing in humans.
Phase I/II/III Clinical Testing: From first testing in
designated phase to first testing in subsequent phase.
Approval Phase: From New Drug Application (NDA)/
Biologic License Application (BLA) submission to
NDA/BLA decision.
Phase IV Clinical Testing: Any post-marketing RD
activities performed.
Uncategorized: Represents data for which detailed
classifications were unavailable.
Sales Definitions
Sales: Product sales calculated as billed, free on board
(FOB) plant or warehouse less cash discounts, Medicaid
rebates, returns, and allowances. These include all
marketing expenses except transportation costs. Also
included is the sales value of products bought and resold
without further processing or repackaging, as well as
the dollar value of products made from the firm’s own
materials for other manufacturers’ resale. Excluded are
all royalty payments, interest, and other income.
Domestic Sales: Sales generated within the United
States by all PhRMA member companies.
Private Sector: Sales through regular marketing
channels for end use other than by government
agency administration or distribution.
Public Sector: Sales or shipments made directly
to federal, state, or local government agencies,
hospitals, and clinics.
Sales Abroad: Sales generated outside the United
States by U.S.-owned PhRMA member companies, and
sales generated abroad by the U.S. divisions of foreign-
owned PhRMA member companies. Sales generated
abroad by the foreign divisions of foreign-owned
PhRMA member companies are excluded.
Definition of Terms

Appendix68
Appendix
List of Tables
Domestic RD and RD
Abroad: 1980–2013.............. 69
Detailed Results from the PhRMA Annual Membership Survey
RD, PhRMA Member Companies
Sales, PhRMA Member Companies
RD as a Percentage of Sales:
1980–2013........................... 70
Domestic RD and RD
Abroad: 2012...................... 71
RD by Function: 2012........ 71 RD by Geographic Area:
2012................................... 72
Domestic Sales and Sales
Abroad: 1980–2013..............73
Sales by Geographic Area:
2012....................................74

Appendix 69
(dollar figures in millions)
*
RD Abroad includes expenditures outside the United States by U.S.-owned PhRMA member companies and RD conducted abroad by the U.S. divisions
of foreign-owned PhRMA member companies. RD performed abroad by the foreign divisions of foreign-owned PhRMA member companies are excluded.
Domestic RD, however, includes RD expenditures within the United States by all PhRMA member companies.
**
Estimated.
***
RD Abroad affected by merger and acquisition activity.
Note: All figures include company-financed RD only. Total values may be affected by rounding.
SOURCE: Pharmaceutical Research and Manufacturers of America, PhRMA Annual Membership Survey, 2014.
Year
Domestic
RD
Annual Percentage
Change
RD
Abroad*
Annual Percentage
Change
Total
RD
Annual Percentage
Change
2013**
$40,087.4 6.9% $10,972.7 -9.1% $51,060.1 3.0%
2012 37,510.2 3.1 12,077.4 -1.6 49,587.6 1.9
2011 36,373.6 -10.6 12,271.4 22.4 48,645.0 -4.1
2010 40,688.1 15.1 10,021.7 -9.6 50,709.8 9.2
2009 35,356.0 -0.6 11,085.6 -6.1 46,441.6 -2.0
2008 35,571.1 -2.8 11,812.0 4.6 47,383.1 -1.1
2007 36,608.4 7.8 11,294.8 25.4 47,903.1 11.5
2006 33,967.9 9.7 9,005.6 1.3 42,973.5 7.8
2005 30,969.0 4.8 8,888.9 19.1 39,857.9 7.7
2004 29,555.5 9.2 7,462.6 1.0 37,018.1 7.4
2003 27,064.9 5.5 7,388.4 37.9 34,453.3 11.1
2002 25,655.1 9.2 5,357.2 -13.9 31,012.2 4.2
2001 23,502.0 10.0 6,220.6 33.3 29,772.7 14.4
2000 21,363.7 15.7 4,667.1 10.6 26,030.8 14.7
1999 18,471.1 7.4 4,219.6 9.9 22,690.7 8.2
1998 17,127.9 11.0 3,839.0 9.9 20,966.9 10.8
1997 15,466.0 13.9 3,492.1 6.5 18,958.1 12.4
1996 13,627.1 14.8 3,278.5 -1.6 16,905.6 11.2
1995 11,874.0 7.0 3,333.5 *** 15,207.4 ***
1994 11,101.6 6.0 2,347.8 3.8 13,449.4 5.6
1993 10,477.1 12.5 2,262.9 5.0 12,740.0 11.1
1992 9,312.1 17.4 2,155.8 21.3 11,467.9 18.2
1991 7,928.6 16.5 1,776.8 9.9 9,705.4 15.3
1990 6,802.9 13.0 1,617.4 23.6 8,420.3 14.9
1989 6,021.4 15.0 1,308.6 0.4 7,330.0 12.1
1988 5,233.9 16.2 1,303.6 30.6 6,537.5 18.8
1987 4,504.1 16.2 998.1 15.4 5,502.2 16.1
1986 3,875.0 14.7 865.1 23.8 4,740.1 16.2
1985 3,378.7 13.3 698.9 17.2 4,077.6 13.9
1984 2,982.4 11.6 596.4 9.2 3,578.8 11.2
1983 2,671.3 17.7 546.3 8.2 3,217.6 16.0
1982 2,268.7 21.3 505.0 7.7 2,773.7 18.6
1981 1,870.4 20.7 469.1 9.7 2,339.5 18.4
1980 1,549.2 16.7 427.5 42.8 1,976.7 21.5
Average 10.6% 13.6% 10.9%
Domestic RD and RD Abroad, PhRMA Member Companies: 1980–2013
Table 1

Appendix70
Appendix
*
Estimated.
**
Revised in 2007 to reflect updated data.
SOURCE: Pharmaceutical Research and Manufacturers of America,
PhRMA Annual Membership Survey, 2014.
Year
Domestic RD
as a Percentage
of Domestic Sales
Total RD
as a Percentage
of Total Sales
2013* 22.7% 17.8%
2012 21.0 17.3
2011 19.4 15.9
2010 22.0 17.4
2009 19.5 16.8
2008 19.4 16.6
2007 19.8 17.5
2006 19.4 17.1
2005 18.6 16.9
2004 18.4 16.1**
2003 18.3 16.5**
2002 18.4 16.1
2001 18.0 16.7
2000 18.4 16.2
1999 18.2 15.5
1998 21.1 16.8
1997 21.6 17.1
1996 21.0 16.6
1995 20.8 16.7
1994 21.9 17.3
1993 21.6 17.0
1992 19.4 15.5
1991 17.9 14.6
1990 17.7 14.4
1989 18.4 14.8
1988 18.3 14.1
1987 17.4 13.4
1986 16.4 12.9
1985 16.3 12.9
1984 15.7 12.1
1983 15.9 11.8
1982 15.4 10.9
1981 14.8 10.0
1980 13.1 8.9
RD as a Percentage of Sales, PhRMA Member Companies: 1980–2013
Table 2

Appendix 71
RD Expenditures
for Human-use Pharmaceuticals
Dollars Share
Domestic $37,058.0 74.7%
Abroad* $11,800.1 23.8%
Total Human-use RD $48,858.2 98.5%
RD Expenditures
for Veterinary-use Pharmaceuticals
Domestic $452.1 0.9%
Abroad* $277.3 0.6%
Total Vet-use RD $729.4 1.5%
TOTAL RD $49,587.6 100.0%
*
RD abroad includes expenditures outside the United States by U.S.-owned PhRMA member companies and
RD conducted abroad by the U.S. divisions of foreign-owned PhRMA member companies. RD performed
abroad by the foreign divisions of foreign-owned PhRMA member companies are excluded. Domestic RD,
however, includes RD expenditures within the United States by all PhRMA member companies.
Function Dollars Share
Prehuman/Preclinical $11,816.3 23.8%
Phase I 3,823.3 7.7
Phase II 5,756.2 11.6
Phase III 15,926.8 32.1
Approval 3,834.6 7.7
Phase IV 6,776.5 13.7
Uncategorized 1,653.8 3.3
TOTAL RD $49,587.6 100.0%
Domestic RD and RD Abroad, PhRMA Member Companies: 2012
Table 3
RD by Function, PhRMA Member Companies: 2012
Table 4

Appendix72
Appendix
*
RD abroad includes
expenditures outside
the United States by
U.S.-owned PhRMA
member companies and
RD conducted abroad
by the U.S. divisions of
foreign-owned PhRMA
member companies. RD
performed abroad by the
foreign divisions of foreign-
owned PhRMA member
companies are excluded.
Domestic RD, however,
includes RD expenditures
within the United States
by all PhRMA member
companies.
Note: All figures include
company-financed RD
only. Total values may be
affected by rounding.
SOURCE: Pharmaceutical
Research and
Manufacturers of
America, PhRMA Annual
Membership Survey, 2014.
Geographic Area* Dollars Share
Africa
Egypt $6.4 0.0%
South Africa 56.3 0.1
Other Africa 7.9 0.0
Americas
United States $37,510.2 75.6%
Canada 696.1 1.4
Mexico 124.8 0.3
Brazil 155.4 0.3
Argentina 135.3 0.3
Venezuela 11.3 0.0
Columbia 33.8 0.1
Chile 21.9 0.0
Peru 15.9 0.0
Other Latin America (Other South America, Central America, and all Caribbean nations) 80.6 0.2
Asia-Pacific
Japan $1,127.1 2.3%
China 387.3 0.8
India 59.7 0.1
Taiwan 58.1 0.1
South Korea 55.4 0.1
Other Asia-Pacific 158.8 0.3
Australia
Australia and New Zealand $300.3 0.6%
Europe
France $406.9 0.8%
Germany 721.3 1.5
Italy 225.5 0.5
Spain 232.0 0.5
United Kingdom 1,850.9 3.7
Other Western European 4,458.9 9.0
Czech Republic 64.7 0.1
Hungary 41.6 0.1
Poland 93.7 0.2
Turkey 34.5 0.1
Russia 92.4 0.2
Central and Eastern Europe(Cyprus, Estonia, Slovenia, Bulgaria, Lithuania, Latvia, Romania,
Slovakia, Malta, and other Eastern European countries and the Newly Independent States)
289.7 0.6
Middle East
Saudi Arabia $3.3 0.0%
Middle East (Yemen, United Arab Emirates, Iraq, Iran, Kuwait, Israel, Jordan, Syria, Afghanistan, and Qatar) 69.8 0.1
Uncategorized — 0.0%
TOTAL RD $49,587.6 100.0%
RD by Geographic Area, PhRMA Member Companies: 2012
Table 5

Appendix 73
*
Sales Abroad includes sales generated outside the United States by U.S.-owned PhRMA member companies and sales generated abroad by the U.S.
divisions of foreign-owned PhRMA member companies. Sales generated abroad by the foreign divisions of foreign-owned PhRMA member companies are
excluded. Domestic sales, however, includes sales generated within the United States by all PhRMA member companies.
**
Estimated.
***
Revised in 2007 to reflect updated data.
****
Sales abroad affected by merger and acquisition activity.
Note: Total values may be affected by rounding.
Domestic Sales and Sales Abroad, PhRMA Member Companies: 1980–2013
Table 6
Year
Domestic
Sales
Annual Percentage
Change
Sales
Abroad*
Annual Percentage
Change
Total
Sales
Annual Percentage
Change
2013** $176,839.4 -0.9% $110,699.7 2.8% $287,539.1 0.5%
2012 178,437.6 -5.0 107,677.8 -8.1 286,115.4 -6.2
2011 187,870.7 1.7 117,138.5 9.9 305,009.2 4.7
2010 184,660.3 2.0 106,593.2 12.0 291,253.5 5.4
2009 181,116.8 -1.1 95,162.5 -7.5 276,279.3 -3.4
2008 183,167.2 -1.1 102,842.4 16.6 286,009.6 4.6
2007 185,209.2 4.2 88,213.4 14.8 273,422.6 7.4
2006 177,736.3 7.0 76,870.2 10.0 254,606.4 7.9
2005 166,155.5 3.4 69,881.0 0.1 236,036.5 2.4
2004*** 160,751.0 8.6 69,806.9 14.6 230,557.9 10.3
2003*** 148,038.6 6.4 60,914.4 13.4 208,953.0 8.4
2002 139,136.4 6.4 53,697.4 12.1 192,833.8 8.0
2001 130,715.9 12.8 47,886.9 5.9 178,602.8 10.9
2000 115,881.8 14.2 45,199.5 1.6 161,081.3 10.4
1999 101,461.8 24.8 44,496.6 2.7 145,958.4 17.1
1998 81,289.2 13.3 43,320.1 10.8 124,609.4 12.4
1997 71,761.9 10.8 39,086.2 6.1 110,848.1 9.1
1996 64,741.4 13.3 36,838.7 8.7 101,580.1 11.6
1995 57,145.5 12.6 33,893.5 **** 91,039.0 ****
1994 50,740.4 4.4 26,870.7 1.5 77,611.1 3.4
1993 48,590.9 1.0 26,467.3 2.8 75,058.2 1.7
1992 48,095.5 8.6 25,744.2 15.8 73,839.7 11.0
1991 44,304.5 15.1 22,231.1 12.1 66,535.6 14.1
1990 38,486.7 17.7 19,838.3 18.0 58,325.0 17.8
1989 32,706.6 14.4 16,817.9 -4.7 49,524.5 7.1
1988 28,582.6 10.4 17,649.3 17.1 46,231.9 12.9
1987 25,879.1 9.4 15,068.4 15.6 40,947.5 11.6
1986 23,658.8 14.1 13,030.5 19.9 36,689.3 16.1
1985 20,742.5 9.0 10,872.3 4.0 31,614.8 7.3
1984 19,026.1 13.2 10,450.9 0.4 29,477.0 8.3
1983 16,805.0 14.0 10,411.2 -2.4 27,216.2 7.1
1982 14,743.9 16.4 10,667.4 0.1 25,411.3 9.0
1981 12,665.0 7.4 10,658.3 1.4 23,323.3 4.6
1980 11,788.6 10.7 10,515.4 26.9 22,304.0 17.8
Average 9.0% 9.6% 9.1%

Appendix74
Appendix
Geographic Area* Dollars Share
Africa
Egypt $384.7 0.1%
South Africa 771.6 0.3
Other Africa 1,346.1 0.5
Americas
United States $178,437.6 62.4%
Canada 6,564.0 2.3
Mexico 2,294.1 0.8
Brazil 3,864.2 1.4
Argentina 1,046.0 0.4
Venezuela 1,646.2 0.6
Columbia 852.5 0.3
Chile 335.3 0.1
Peru 161.2 0.1
Other Latin America (Other South America, Central America, and all Caribbean nations) 1,118.7 0.4
Asia-Pacific
Japan $16,828.4 5.9%
China 4,839.8 1.7
India 794.4 0.3
Taiwan 1,043.1 0.4
South Korea 1,579.0 0.6
Other Asia-Pacific 3,191.3 1.1
Australia
Australia and New Zealand $3,587.6 1.3%
Europe
France $8,778.4 3.1%
Germany 8,100.7 2.8
Italy 5,542.3 1.9
Spain 4,973.7 1.7
United Kingdom 5,650.8 2.0
Other Western European 10,215.1 3.6
Czech Republic 576.2 0.2
Hungary 390.6 0.1
Poland 730.9 0.3
Turkey 1,366.8 0.5
Russia 1,674.1 0.6
Central and Eastern Europe (Cyprus, Estonia, Slovenia, Bulgaria, Lithuania, Latvia,
Romania, Slovakia, Malta, and other Eastern European countries and the Newly Independent States)
5,243.9 1.8
Middle East
Saudi Arabia $756.6 0.3%
Middle East (Yemen, United Arab Emirates, Iraq, Iran, Kuwait, Israel, Jordan, Syria,
Afghanistan, and Qatar)
1,429.4 0.5
Uncategorized – 0.0%
TOTAL SALES $286,115.4 100.0%
Sales by Geographic Area, PhRMA Member Companies: 2012
Table 7
*Sales abroad include
expenditures outside
the United States by
U.S.-owned PhRMA
member companies and
sales generated abroad
by the U.S. divisions of
foreign-owned PhRMA
member companies. Sales
generated abroad by the
foreign divisions of foreign-
owned PhRMA member
companies are excluded.
Domestic sales, however,
include sales generated
within the United States
by all PhRMA member
companies.
Note: Total values may be
affected by rounding.
SOURCE: Pharmaceutical
Research and
Manufacturers of
America, PhRMA Annual
Membership Survey, 2013.

(continued from inside front cover)
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(accessed March 2014).

PHARMACEUTICAL RESEARCH
AND MANUFACTURERS OF AMERICA
950 F STREET, NW
WASHINGTON, DC 20004
www.phrma.org APRIL 2014

2014 Profile: Biopharmaceutical Research Industry

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2014 Profile: Biopharmaceutical Research Industry