The pharmaceutical industry is one of the most critical sectors of the economy with its production volume and trade capacity. Its importance grows even further when taking into account the direct impact on human life and health. In other words, the pharmaceutical industry, which puts human health at its center and is worth billions of dollars globally, is undoubtedly one of the most important sectors contributing to the sustainability of the world population. As a matter of fact, the total contribution of the biopharmaceutical industry to the World's GDP is $1.838 trillion, and it employs approximately 5.5 million people worldwide.
Unlike other products, medicines are indispensable. To be more precisely, instead of the necessary medicine, it is impossible to use anything else. Therefore, drugs with an exchange value are indispensable products regardless of their price. This feature of medicines is enough to show why the pharmaceutical industry is the most critical sector of the world economy today and that it will continue to be important regardless of the cyclical and structural trends in the world.
Population growth, global climate change and digitalization may affect the pharmaceutical industry. While population growth, dietary changes may increase the demand for medicines for chronic diseases, the need for vaccination against infectious diseases is also growing in developing countries due to the climate change. And digitalization, in turn, helps to increase the competitiveness of pharmaceutical companies.
These companies are investing heavily in research and development of more effective drugs to treat diseases. According to the IPFMA's Fact and Figures 2021 report, the annual R&D expenditures by the biopharmaceutical industry are 7.3 times higher than that of the aerospace and defense industries and 1.5 times more than that of the software and computer services industry. Such huge investments are made to develop new drugs. For the development of such original drugs, the pharmaceutical companies are granted the patent. The competitiveness of pharmaceutical companies is largely determined by the developed original drugs and the patents granted for these drugs.
In addition to original drugs, generic (equivalent) drugs are also produced in the pharmaceutical market. Generic drugs are produced and sold after the expiration of the patent protection period for the original drug. Such drugs must have the same pharmacological effects as the original drugs. Generic drugs constitute a very important part of the world pharmaceutical market. Generic drugs, which make up about a quarter of the world pharmaceutical market, have higher production and sales shares in emerging markets. As a result of the studies carried out by the original drug manufacturing companies, the rules for the production of generics were determined and put into action.
As a result, the pharmaceutical industry is a sector that is constantly growing both globally and locally, as it is focused on human health, and is therefore always open to investments. Phenomena such as global climate change can directly affect investment in this industry. The COVID-19 pandemic, which started at the end of 2019, also affected the merger and acquisition transactions in 2019 and 2020. Therefore, there is no doubt that the pharmaceutical industry will grow and develop in the future.
Nurmyrat Mommayev,
PhD Candidate at Marmara University's Department of Political Science and International Relations in Istanbul, Turkey
