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If one looks at the world's suppliers of pharmaceuticals, one may categorise countries involved in production into three groups, according to the stages of their manufacturing capability: Almost 90 per cent of the total value of world pharmaceutical production was accounted for by high income countries.15 The figure shows that the high-income developed countries dominate in world pharmaceutical production. The share of those countries in the value of world pharmaceutical output increased gradually from 89.1 per cent in 1985 to 92.9 per cent in 1999. By contrast, the figures of the world drug production in countries from middle- and low-income countries dropped from 7 and 3.9 per cent in 1985 to 4.5 and 2.6 percent in 1999 respectively.16 Among the high-income countries, the majority of world pharmaceutical production is accounted for by five major countries. The United States has been the biggest producer, accounting for almost one-third of total production (31 per cent), followed by Japan (16 per cent), France (8 per cent), Germany (6 per cent) and the United Kingdom (6 per cent).17 International trade in pharmaceuticals One of the main features of the pharmaceutical industry is its international operation. Pharmaceutical products can be exported worldwide in various forms: bulk pharmaceuticals for dosage formulations, tablets or capsules in bulk for packaging, or finished packed products ready for use. Many drug companies establish manufacturing subsidiaries, or sales agencies, or both in foreign countries in order to enlarge their market and increase profitability. This characteristic, however, is generally exclusive to large companies. Small firms are inclined to limit their operations within a domestic market. However, in recent years more innovative firms from developing countries have appeared. Generic companies in India and China can now produce active ingredients, and have become the world's most important suppliers of some active ingredients and finished products.18 Despite the emergence of India and China, the world exports of pharmaceutical have been dominated by a few large exporting countries. For instance, Germany, Switzerland, the United States, the United Kingdom and France together accounted for more than one-half of world exports during the last decade.19 Typically, there are two types of companies operating in the pharmaceutical business: research-based and non-research-based companies. The former are large companies, mainly transnational corporations (TNCs). The large companies are carrying out research programmes. Medicines sold by these companies are largely newly invented products arising from successful R&D. Patents will be applied for worldwide as soon as an NME is discovered. Unlike the multinationals, the non-research-based companies, or generally known as generic companies, have a small size. These firms are normally not engaged in R&D, but selling cheaply-priced drugs, so-called generics, which are unable to enjoy patent protection or whose legal protection has expired. Generic firms used to operate within the country of residence, but the situation has been changing recently. India and China have now expanded their operation and become multinational to take advantage of economies of scale. The world pharmaceutical industry has been dominated by a small number of large TNCs. Although there are many pharmaceutical companies around the world, less than 100 of them make up for the bulk of global drug production and international marketing TABLE 1 world's largest pharmaceutical companies by value of sales 1977-2001 |
Footnotes 14. C.C. Tarabusi and G. Vickery, "Globalization in the Pharmaceutical Industry", International Journal of Health Services, Vol.28, No.1, 1998, pp.67- 105. 15. This is based on the World Bank classification of countries according to the level of income as follow: (i) High-income: GNP per capita of US$9,361 or more, (ii) Middle-income: GNP per capita of US$761-9,360, and (iii) Low-income GNP per capita of US$76 or less in 1999. 16. World Health Organisation, The World Medicines Situation, WHO/EDM/PAR/2004.5, 2004. 18. B. Dhar and C. Rao, "Transfer of Technology for Successful Integration in the Global Economy: A Case Study of Pharmaceutical Industry in India", UNCTAD Investment Policy and Capacity-Building Branch, UNCTAD/ITE/IPRC/Misc.22, 2002. 19. World Health Organisation, The World Medicines Situation, cited above. |
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