By the time a drug is approved for patient use, it has already gone through a development phase of many years: From initial concept to approval, the process takes on average over 13 years. From an original 5,000 to 10,000 active substances under consideration, only one active ingredient achieves approval in the end. Strictly controlled studies, some with thousands of patients worldwide, are used to prove whether a drug works – and is truly safe. This is why pharmaceutical research is complex and expensive: Each drug launched on the market costs companies between USD 1 and 1.6 billion. Despite the cost and effort, the supply of pharmaceuticals for treating patients grows each year by an average of 25 new drugs with new active ingredients. In Germany alone, research-based pharmaceutical companies spend around EUR 5 billion annually on research and development – or almost EUR 14 million a day. One fifth of our employees work in research. Of the 20 companies worldwide with the highest research expenditures, eight are in the pharmaceutical industry.

24 pharmaceuticals based on new NMEs (new substances known internationally as New Molecular Entities) were launched in the German market in 2012. Due to the global nature of the research process, the number of such substances launched in Germany is closely connected to the international development of pharmaceuticals. Unless they are of merely regional importance, most new NMEs receive marketing authorization as soon as possible in all key countries. This is the only way to balance the costs for research and development of an NME, which globally amount to USD 1 to 1.6 billion on average, within its limited patent term.

More than half of the costs in 2005 were for clinical development, especially on logistically expensive, multinational phase III studies.

A drug that reaches the market after many years of development must be ready to compete at an early stage with other drugs that target the same indication. After a drug loses its patent protection, any manufacturer who is able to do so may copy the drug (a so-called generic), which results in enormous loss of revenue for the original manufacturer.

Research expenditures of pharmaceutical manufacturers in Europe, Japan and the USA in 2012 were just under USD 90 billion. No fewer than eight pharmaceutical companies – all members of the vfa – are among the 20 companies with the world's highest research expenditures.

The Pharmaceutical Industry in Germany

Germany: The Perfect Location for Research, Production and Sales - a publication by GERMANY TRADE & INVEST and vfa
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