RAJALAKSHMI ENGINEERING COLLEGE Thandalam, Chennai – 602 105 - Biotechnology Engineering (BT) PDF Download

 Page 1


 
RAJALAKSHMI ENGINEERING COLLEGE 
Thandalam, Chennai – 602 105 
 
NOTES ON LESSON  
 
 
Faculty Name : T.BABU(Lecturer) 
/Mr.K.Selvaraj(Lecturer) 
Code : 
BT 106/BT84 
Subject Name : 
 
BIOPHARMACEUTICAL TECHNOLOGY 
Code : BT2040 
Year : IV Semester : VII 
Degree & Branch : B TECH ,BIOTECH Section : A /B 
 
UNIT 1 
Development of Drug and Pharmaceutical Industry and Regulatory 
Aspects 
The pharmaceutical industry develops, produces, and markets drugs licensed for use as 
medications. Pharmaceutical companies can deal in generic and/or brand medications. 
They are subject to a variety of laws and regulations regarding the patenting, testing and 
marketing of drugs. 
History 
The earliest drugstores date back to the Middle Ages. The first known drugstore was 
opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating 
throughout the medieval Islamic world and eventually medieval Europe. By the 19th 
century, many of the drug stores in Europe and North America had eventually developed 
into larger pharmaceutical companies. 
Most of today's major pharmaceutical companies were founded in the late 19th and early 
20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, 
became mass-manufactured and distributed. Switzerland, Germany and Italy had 
particularly strong industries, with the UK, US, Belgium and the Netherlands following 
suit. 
Legislation was enacted to test and approve drugs and to require appropriate labelling. 
Prescription and non-prescription drugs became legally distinguished from one another as 
the pharmaceutical industry matured. The industry got underway in earnest from the 
Page 2


 
RAJALAKSHMI ENGINEERING COLLEGE 
Thandalam, Chennai – 602 105 
 
NOTES ON LESSON  
 
 
Faculty Name : T.BABU(Lecturer) 
/Mr.K.Selvaraj(Lecturer) 
Code : 
BT 106/BT84 
Subject Name : 
 
BIOPHARMACEUTICAL TECHNOLOGY 
Code : BT2040 
Year : IV Semester : VII 
Degree & Branch : B TECH ,BIOTECH Section : A /B 
 
UNIT 1 
Development of Drug and Pharmaceutical Industry and Regulatory 
Aspects 
The pharmaceutical industry develops, produces, and markets drugs licensed for use as 
medications. Pharmaceutical companies can deal in generic and/or brand medications. 
They are subject to a variety of laws and regulations regarding the patenting, testing and 
marketing of drugs. 
History 
The earliest drugstores date back to the Middle Ages. The first known drugstore was 
opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating 
throughout the medieval Islamic world and eventually medieval Europe. By the 19th 
century, many of the drug stores in Europe and North America had eventually developed 
into larger pharmaceutical companies. 
Most of today's major pharmaceutical companies were founded in the late 19th and early 
20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, 
became mass-manufactured and distributed. Switzerland, Germany and Italy had 
particularly strong industries, with the UK, US, Belgium and the Netherlands following 
suit. 
Legislation was enacted to test and approve drugs and to require appropriate labelling. 
Prescription and non-prescription drugs became legally distinguished from one another as 
the pharmaceutical industry matured. The industry got underway in earnest from the 
1950s, due to the development of systematic scientific approaches, understanding of 
human biology (including DNA) and sophisticated manufacturing techniques. 
Numerous new drugs were developed during the 1950s and mass-produced and marketed 
through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, 
blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine 
(Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric 
medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and 
rapidly became the most prescribed drug in history, prior to controversy over dependency 
and habituation. 
Attempts were made to increase regulation and to limit financial links between 
companies and prescribing physicians, including by the relatively new U.S. Food and 
Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide 
tragedy came to light, in which the use of a new tranquilizer in pregnant women caused 
severe birth defects. In 1964, the World Medical Association issued its Declaration of 
Helsinki, which set standards for clinical research and demanded that subjects give their 
informed consent before enrolling in an experiment. Phamaceutical companies became 
required to prove efficacy in clinical trials before marketing drugs. 
Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary 
center of pharmaceutical production without patent protection. 
The industry remained relatively small scale until the 1970s when it began to expand at a 
greater rate.Legislation allowing for strong patents, to cover both the process of 
manufacture and the specific products, came in to force in most countries. By the mid-
1980s, small biotechnology firms were struggling for survival, which led to the formation 
of mutually beneficial partnerships with large pharmaceutical companies and a host of 
corporate buyouts of the smaller firms. Pharmaceutical manufacturing became 
concentrated, with a few large companies holding a dominant position throughout the 
world and with a few companies producing medicines within each country. 
The pharmaceutical industry entered the 1980s pressured by economics and a host of new 
regulations, both safety and environmental, but also transformed by new DNA 
chemistries and new technologies for analysis and computation. Drugs for heart disease 
and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a 
faster approval process. 
Managed care and Health maintenance organizations (HMOs) spread during the 1980s as 
part of an effort to contain rising medical costs, and the development of preventative and 
maintenance medications became more important. A new business atmosphere became 
institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic 
increase in the use of contract research organizations for clinical development and even 
for basic R&D. The pharmaceutical industry confronted a new business climate and new 
regulations, born in part from dealing with world market forces and protests by activists 
in developing countries. Animal Rights activism was also a problem. 
Page 3


 
RAJALAKSHMI ENGINEERING COLLEGE 
Thandalam, Chennai – 602 105 
 
NOTES ON LESSON  
 
 
Faculty Name : T.BABU(Lecturer) 
/Mr.K.Selvaraj(Lecturer) 
Code : 
BT 106/BT84 
Subject Name : 
 
BIOPHARMACEUTICAL TECHNOLOGY 
Code : BT2040 
Year : IV Semester : VII 
Degree & Branch : B TECH ,BIOTECH Section : A /B 
 
UNIT 1 
Development of Drug and Pharmaceutical Industry and Regulatory 
Aspects 
The pharmaceutical industry develops, produces, and markets drugs licensed for use as 
medications. Pharmaceutical companies can deal in generic and/or brand medications. 
They are subject to a variety of laws and regulations regarding the patenting, testing and 
marketing of drugs. 
History 
The earliest drugstores date back to the Middle Ages. The first known drugstore was 
opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating 
throughout the medieval Islamic world and eventually medieval Europe. By the 19th 
century, many of the drug stores in Europe and North America had eventually developed 
into larger pharmaceutical companies. 
Most of today's major pharmaceutical companies were founded in the late 19th and early 
20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, 
became mass-manufactured and distributed. Switzerland, Germany and Italy had 
particularly strong industries, with the UK, US, Belgium and the Netherlands following 
suit. 
Legislation was enacted to test and approve drugs and to require appropriate labelling. 
Prescription and non-prescription drugs became legally distinguished from one another as 
the pharmaceutical industry matured. The industry got underway in earnest from the 
1950s, due to the development of systematic scientific approaches, understanding of 
human biology (including DNA) and sophisticated manufacturing techniques. 
Numerous new drugs were developed during the 1950s and mass-produced and marketed 
through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, 
blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine 
(Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric 
medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and 
rapidly became the most prescribed drug in history, prior to controversy over dependency 
and habituation. 
Attempts were made to increase regulation and to limit financial links between 
companies and prescribing physicians, including by the relatively new U.S. Food and 
Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide 
tragedy came to light, in which the use of a new tranquilizer in pregnant women caused 
severe birth defects. In 1964, the World Medical Association issued its Declaration of 
Helsinki, which set standards for clinical research and demanded that subjects give their 
informed consent before enrolling in an experiment. Phamaceutical companies became 
required to prove efficacy in clinical trials before marketing drugs. 
Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary 
center of pharmaceutical production without patent protection. 
The industry remained relatively small scale until the 1970s when it began to expand at a 
greater rate.Legislation allowing for strong patents, to cover both the process of 
manufacture and the specific products, came in to force in most countries. By the mid-
1980s, small biotechnology firms were struggling for survival, which led to the formation 
of mutually beneficial partnerships with large pharmaceutical companies and a host of 
corporate buyouts of the smaller firms. Pharmaceutical manufacturing became 
concentrated, with a few large companies holding a dominant position throughout the 
world and with a few companies producing medicines within each country. 
The pharmaceutical industry entered the 1980s pressured by economics and a host of new 
regulations, both safety and environmental, but also transformed by new DNA 
chemistries and new technologies for analysis and computation. Drugs for heart disease 
and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a 
faster approval process. 
Managed care and Health maintenance organizations (HMOs) spread during the 1980s as 
part of an effort to contain rising medical costs, and the development of preventative and 
maintenance medications became more important. A new business atmosphere became 
institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic 
increase in the use of contract research organizations for clinical development and even 
for basic R&D. The pharmaceutical industry confronted a new business climate and new 
regulations, born in part from dealing with world market forces and protests by activists 
in developing countries. Animal Rights activism was also a problem. 
Marketing changed dramatically in the 1990s, partly because of a new consumerism. The 
Internet made possible the direct purchase of medicines by drug consumers and of raw 
materials by drug producers, transforming the nature of business. In the US, Direct-to-
consumer advertising proliferated on radio and TV because of new FDA regulations in 
1997 that liberalized requirements for the presentation of risks. The new antidepressants, 
the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for 
additional disorders. 
Drug development progressed from a hit-and-miss approach to rational drug discovery in 
both laboratory design and natural-product surveys. Demand for nutritional supplements 
and so-called alternative medicines created new opportunities and increased competition 
in the industry. Controversies emerged around adverse effects, notably regarding Vioxx 
in the US, and marketing tactics. Pharmaceutical companies became increasingly accused 
of disease mongering or over-medicalizing personal or social problems.  
There are now more than 200 major pharmaceutical companies, jointly said to be more 
profitable than almost any other industry, and employing more political lobbyists than 
any other industry. Advances in biotechnology and the human genome project promise 
ever more sophisticated, and possibly more individualized, medications. 
Research and development 
Drug discovery is the process by which potential drugs are discovered or designed. In 
the past most drugs have been discovered either by isolating the active ingredient from 
traditional remedies or by serendipitous discovery. Modern biotechnology often focuses 
on understanding the metabolic pathways related to a disease state or pathogen, and 
manipulating these pathways using molecular biology or Biochemistry. A great deal of 
early-stage drug discovery has traditionally been carried out by universities and research 
institutions. 
Drug development refers to activities undertaken after a compound is identified as a 
potential drug in order to establish its suitability as a medication. Objectives of drug 
development are to determine appropriate Formulation and Dosing, as well as to establish 
safety. Research in these areas generally includes a combination of in vitro studies, in 
vivo studies, and clinical trials. The amount of capital required for late stage development 
has made it a historical strength of the larger pharmaceutical companies. Often, large 
multinational corporations exhibit vertical integration, participating in a broad range of 
drug discovery and development, manufacturing and quality control, marketing, sales, 
and distribution. Smaller organizations, on the other hand, often focus on a specific 
aspect such as discovering drug candidates or developing formulations. Often, 
collaborative agreements between research organizations and large pharmaceutical 
companies are formed to explore the potential of new drug substances. 
The cost of innovation 
Page 4


 
RAJALAKSHMI ENGINEERING COLLEGE 
Thandalam, Chennai – 602 105 
 
NOTES ON LESSON  
 
 
Faculty Name : T.BABU(Lecturer) 
/Mr.K.Selvaraj(Lecturer) 
Code : 
BT 106/BT84 
Subject Name : 
 
BIOPHARMACEUTICAL TECHNOLOGY 
Code : BT2040 
Year : IV Semester : VII 
Degree & Branch : B TECH ,BIOTECH Section : A /B 
 
UNIT 1 
Development of Drug and Pharmaceutical Industry and Regulatory 
Aspects 
The pharmaceutical industry develops, produces, and markets drugs licensed for use as 
medications. Pharmaceutical companies can deal in generic and/or brand medications. 
They are subject to a variety of laws and regulations regarding the patenting, testing and 
marketing of drugs. 
History 
The earliest drugstores date back to the Middle Ages. The first known drugstore was 
opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating 
throughout the medieval Islamic world and eventually medieval Europe. By the 19th 
century, many of the drug stores in Europe and North America had eventually developed 
into larger pharmaceutical companies. 
Most of today's major pharmaceutical companies were founded in the late 19th and early 
20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, 
became mass-manufactured and distributed. Switzerland, Germany and Italy had 
particularly strong industries, with the UK, US, Belgium and the Netherlands following 
suit. 
Legislation was enacted to test and approve drugs and to require appropriate labelling. 
Prescription and non-prescription drugs became legally distinguished from one another as 
the pharmaceutical industry matured. The industry got underway in earnest from the 
1950s, due to the development of systematic scientific approaches, understanding of 
human biology (including DNA) and sophisticated manufacturing techniques. 
Numerous new drugs were developed during the 1950s and mass-produced and marketed 
through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, 
blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine 
(Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric 
medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and 
rapidly became the most prescribed drug in history, prior to controversy over dependency 
and habituation. 
Attempts were made to increase regulation and to limit financial links between 
companies and prescribing physicians, including by the relatively new U.S. Food and 
Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide 
tragedy came to light, in which the use of a new tranquilizer in pregnant women caused 
severe birth defects. In 1964, the World Medical Association issued its Declaration of 
Helsinki, which set standards for clinical research and demanded that subjects give their 
informed consent before enrolling in an experiment. Phamaceutical companies became 
required to prove efficacy in clinical trials before marketing drugs. 
Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary 
center of pharmaceutical production without patent protection. 
The industry remained relatively small scale until the 1970s when it began to expand at a 
greater rate.Legislation allowing for strong patents, to cover both the process of 
manufacture and the specific products, came in to force in most countries. By the mid-
1980s, small biotechnology firms were struggling for survival, which led to the formation 
of mutually beneficial partnerships with large pharmaceutical companies and a host of 
corporate buyouts of the smaller firms. Pharmaceutical manufacturing became 
concentrated, with a few large companies holding a dominant position throughout the 
world and with a few companies producing medicines within each country. 
The pharmaceutical industry entered the 1980s pressured by economics and a host of new 
regulations, both safety and environmental, but also transformed by new DNA 
chemistries and new technologies for analysis and computation. Drugs for heart disease 
and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a 
faster approval process. 
Managed care and Health maintenance organizations (HMOs) spread during the 1980s as 
part of an effort to contain rising medical costs, and the development of preventative and 
maintenance medications became more important. A new business atmosphere became 
institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic 
increase in the use of contract research organizations for clinical development and even 
for basic R&D. The pharmaceutical industry confronted a new business climate and new 
regulations, born in part from dealing with world market forces and protests by activists 
in developing countries. Animal Rights activism was also a problem. 
Marketing changed dramatically in the 1990s, partly because of a new consumerism. The 
Internet made possible the direct purchase of medicines by drug consumers and of raw 
materials by drug producers, transforming the nature of business. In the US, Direct-to-
consumer advertising proliferated on radio and TV because of new FDA regulations in 
1997 that liberalized requirements for the presentation of risks. The new antidepressants, 
the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for 
additional disorders. 
Drug development progressed from a hit-and-miss approach to rational drug discovery in 
both laboratory design and natural-product surveys. Demand for nutritional supplements 
and so-called alternative medicines created new opportunities and increased competition 
in the industry. Controversies emerged around adverse effects, notably regarding Vioxx 
in the US, and marketing tactics. Pharmaceutical companies became increasingly accused 
of disease mongering or over-medicalizing personal or social problems.  
There are now more than 200 major pharmaceutical companies, jointly said to be more 
profitable than almost any other industry, and employing more political lobbyists than 
any other industry. Advances in biotechnology and the human genome project promise 
ever more sophisticated, and possibly more individualized, medications. 
Research and development 
Drug discovery is the process by which potential drugs are discovered or designed. In 
the past most drugs have been discovered either by isolating the active ingredient from 
traditional remedies or by serendipitous discovery. Modern biotechnology often focuses 
on understanding the metabolic pathways related to a disease state or pathogen, and 
manipulating these pathways using molecular biology or Biochemistry. A great deal of 
early-stage drug discovery has traditionally been carried out by universities and research 
institutions. 
Drug development refers to activities undertaken after a compound is identified as a 
potential drug in order to establish its suitability as a medication. Objectives of drug 
development are to determine appropriate Formulation and Dosing, as well as to establish 
safety. Research in these areas generally includes a combination of in vitro studies, in 
vivo studies, and clinical trials. The amount of capital required for late stage development 
has made it a historical strength of the larger pharmaceutical companies. Often, large 
multinational corporations exhibit vertical integration, participating in a broad range of 
drug discovery and development, manufacturing and quality control, marketing, sales, 
and distribution. Smaller organizations, on the other hand, often focus on a specific 
aspect such as discovering drug candidates or developing formulations. Often, 
collaborative agreements between research organizations and large pharmaceutical 
companies are formed to explore the potential of new drug substances. 
The cost of innovation 
Drug discovery and development is very expensive; of all compounds investigated for 
use in humans only a small fraction are eventually approved in most nations by 
government appointed medical institutions or boards, who have to approve new drugs 
before they can be marketed in those countries. Each year, only about 25 truly novel 
drugs (New chemical entities) are approved for marketing. This approval comes only 
after heavy investment in pre-clinical development and clinical trials, as well as a 
commitment to ongoing safety monitoring. Drugs which fail part-way through this 
process often incur large costs, while generating no revenue in return. If the cost of these 
failed drugs is taken into account, the cost of developing a successful new drug (New 
chemical entity or NCE), has been estimated at about 1 billion USD (not including 
marketing expenses). A study by the consulting firm Bain & Company reported that the 
cost for discovering, developing and launching (which factored in marketing and other 
business expenses) a new drug (along with the prospective drugs that fail) rose over a 
five year period to nearly $1.7 billion in 2003.  
These estimates also take into account the opportunity cost of investing capital many 
years before revenues are realized. Because of the very long time needed for discovery, 
development, and approval of pharmaceuticals, these costs can accumulate to nearly half 
the total expense. Some approved drugs, such as those based on re-formulation of an 
existing active ingredient (also referred to as Line-extensions) are much less expensive to 
develop. 
Calculations and claims in this area are controversial because of the implications for 
regulation and subsidization of the industry through federally funded research grants. 
Controversy about drug development and testing 
There have been increasing accusations and findings that clinical trials conducted or 
funded by pharmaceutical companies are much more likely to report positive results for 
the preferred medication. In response to specific cases in which unfavorable data from 
pharmaceutical company-sponsored research was not published, the Pharmaceutical 
Research and Manufacturers of America have published new guidelines urging 
companies to report all findings and limit the financial involvement in drug companies of 
researchers. US congress signed into law a bill which requires phase II and phase III 
clinical trials to be registered by the sponsor on the clinicaltrials.gov website run by the 
NIH. Drug researchers not directly employed by pharmaceutical companies often look to 
companies for grants, and companies often look to researchers for studies that will make 
their products look favorable. Sponsored researchers are rewarded by drug companies, 
for example with support for their conference/symposium costs. Lecture scripts and even 
journal articles presented by academic researchers may actually be 'ghost-written' by 
pharmaceutical companies. Some researchers who have tried to reveal ethical issues with 
clinical trials or who tried to publish papers that show harmful effects of new drugs or 
cheaper alternatives have been threatened by drug companies with lawsuits.  
 
Page 5


 
RAJALAKSHMI ENGINEERING COLLEGE 
Thandalam, Chennai – 602 105 
 
NOTES ON LESSON  
 
 
Faculty Name : T.BABU(Lecturer) 
/Mr.K.Selvaraj(Lecturer) 
Code : 
BT 106/BT84 
Subject Name : 
 
BIOPHARMACEUTICAL TECHNOLOGY 
Code : BT2040 
Year : IV Semester : VII 
Degree & Branch : B TECH ,BIOTECH Section : A /B 
 
UNIT 1 
Development of Drug and Pharmaceutical Industry and Regulatory 
Aspects 
The pharmaceutical industry develops, produces, and markets drugs licensed for use as 
medications. Pharmaceutical companies can deal in generic and/or brand medications. 
They are subject to a variety of laws and regulations regarding the patenting, testing and 
marketing of drugs. 
History 
The earliest drugstores date back to the Middle Ages. The first known drugstore was 
opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating 
throughout the medieval Islamic world and eventually medieval Europe. By the 19th 
century, many of the drug stores in Europe and North America had eventually developed 
into larger pharmaceutical companies. 
Most of today's major pharmaceutical companies were founded in the late 19th and early 
20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, 
became mass-manufactured and distributed. Switzerland, Germany and Italy had 
particularly strong industries, with the UK, US, Belgium and the Netherlands following 
suit. 
Legislation was enacted to test and approve drugs and to require appropriate labelling. 
Prescription and non-prescription drugs became legally distinguished from one another as 
the pharmaceutical industry matured. The industry got underway in earnest from the 
1950s, due to the development of systematic scientific approaches, understanding of 
human biology (including DNA) and sophisticated manufacturing techniques. 
Numerous new drugs were developed during the 1950s and mass-produced and marketed 
through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, 
blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine 
(Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric 
medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and 
rapidly became the most prescribed drug in history, prior to controversy over dependency 
and habituation. 
Attempts were made to increase regulation and to limit financial links between 
companies and prescribing physicians, including by the relatively new U.S. Food and 
Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide 
tragedy came to light, in which the use of a new tranquilizer in pregnant women caused 
severe birth defects. In 1964, the World Medical Association issued its Declaration of 
Helsinki, which set standards for clinical research and demanded that subjects give their 
informed consent before enrolling in an experiment. Phamaceutical companies became 
required to prove efficacy in clinical trials before marketing drugs. 
Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary 
center of pharmaceutical production without patent protection. 
The industry remained relatively small scale until the 1970s when it began to expand at a 
greater rate.Legislation allowing for strong patents, to cover both the process of 
manufacture and the specific products, came in to force in most countries. By the mid-
1980s, small biotechnology firms were struggling for survival, which led to the formation 
of mutually beneficial partnerships with large pharmaceutical companies and a host of 
corporate buyouts of the smaller firms. Pharmaceutical manufacturing became 
concentrated, with a few large companies holding a dominant position throughout the 
world and with a few companies producing medicines within each country. 
The pharmaceutical industry entered the 1980s pressured by economics and a host of new 
regulations, both safety and environmental, but also transformed by new DNA 
chemistries and new technologies for analysis and computation. Drugs for heart disease 
and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a 
faster approval process. 
Managed care and Health maintenance organizations (HMOs) spread during the 1980s as 
part of an effort to contain rising medical costs, and the development of preventative and 
maintenance medications became more important. A new business atmosphere became 
institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic 
increase in the use of contract research organizations for clinical development and even 
for basic R&D. The pharmaceutical industry confronted a new business climate and new 
regulations, born in part from dealing with world market forces and protests by activists 
in developing countries. Animal Rights activism was also a problem. 
Marketing changed dramatically in the 1990s, partly because of a new consumerism. The 
Internet made possible the direct purchase of medicines by drug consumers and of raw 
materials by drug producers, transforming the nature of business. In the US, Direct-to-
consumer advertising proliferated on radio and TV because of new FDA regulations in 
1997 that liberalized requirements for the presentation of risks. The new antidepressants, 
the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for 
additional disorders. 
Drug development progressed from a hit-and-miss approach to rational drug discovery in 
both laboratory design and natural-product surveys. Demand for nutritional supplements 
and so-called alternative medicines created new opportunities and increased competition 
in the industry. Controversies emerged around adverse effects, notably regarding Vioxx 
in the US, and marketing tactics. Pharmaceutical companies became increasingly accused 
of disease mongering or over-medicalizing personal or social problems.  
There are now more than 200 major pharmaceutical companies, jointly said to be more 
profitable than almost any other industry, and employing more political lobbyists than 
any other industry. Advances in biotechnology and the human genome project promise 
ever more sophisticated, and possibly more individualized, medications. 
Research and development 
Drug discovery is the process by which potential drugs are discovered or designed. In 
the past most drugs have been discovered either by isolating the active ingredient from 
traditional remedies or by serendipitous discovery. Modern biotechnology often focuses 
on understanding the metabolic pathways related to a disease state or pathogen, and 
manipulating these pathways using molecular biology or Biochemistry. A great deal of 
early-stage drug discovery has traditionally been carried out by universities and research 
institutions. 
Drug development refers to activities undertaken after a compound is identified as a 
potential drug in order to establish its suitability as a medication. Objectives of drug 
development are to determine appropriate Formulation and Dosing, as well as to establish 
safety. Research in these areas generally includes a combination of in vitro studies, in 
vivo studies, and clinical trials. The amount of capital required for late stage development 
has made it a historical strength of the larger pharmaceutical companies. Often, large 
multinational corporations exhibit vertical integration, participating in a broad range of 
drug discovery and development, manufacturing and quality control, marketing, sales, 
and distribution. Smaller organizations, on the other hand, often focus on a specific 
aspect such as discovering drug candidates or developing formulations. Often, 
collaborative agreements between research organizations and large pharmaceutical 
companies are formed to explore the potential of new drug substances. 
The cost of innovation 
Drug discovery and development is very expensive; of all compounds investigated for 
use in humans only a small fraction are eventually approved in most nations by 
government appointed medical institutions or boards, who have to approve new drugs 
before they can be marketed in those countries. Each year, only about 25 truly novel 
drugs (New chemical entities) are approved for marketing. This approval comes only 
after heavy investment in pre-clinical development and clinical trials, as well as a 
commitment to ongoing safety monitoring. Drugs which fail part-way through this 
process often incur large costs, while generating no revenue in return. If the cost of these 
failed drugs is taken into account, the cost of developing a successful new drug (New 
chemical entity or NCE), has been estimated at about 1 billion USD (not including 
marketing expenses). A study by the consulting firm Bain & Company reported that the 
cost for discovering, developing and launching (which factored in marketing and other 
business expenses) a new drug (along with the prospective drugs that fail) rose over a 
five year period to nearly $1.7 billion in 2003.  
These estimates also take into account the opportunity cost of investing capital many 
years before revenues are realized. Because of the very long time needed for discovery, 
development, and approval of pharmaceuticals, these costs can accumulate to nearly half 
the total expense. Some approved drugs, such as those based on re-formulation of an 
existing active ingredient (also referred to as Line-extensions) are much less expensive to 
develop. 
Calculations and claims in this area are controversial because of the implications for 
regulation and subsidization of the industry through federally funded research grants. 
Controversy about drug development and testing 
There have been increasing accusations and findings that clinical trials conducted or 
funded by pharmaceutical companies are much more likely to report positive results for 
the preferred medication. In response to specific cases in which unfavorable data from 
pharmaceutical company-sponsored research was not published, the Pharmaceutical 
Research and Manufacturers of America have published new guidelines urging 
companies to report all findings and limit the financial involvement in drug companies of 
researchers. US congress signed into law a bill which requires phase II and phase III 
clinical trials to be registered by the sponsor on the clinicaltrials.gov website run by the 
NIH. Drug researchers not directly employed by pharmaceutical companies often look to 
companies for grants, and companies often look to researchers for studies that will make 
their products look favorable. Sponsored researchers are rewarded by drug companies, 
for example with support for their conference/symposium costs. Lecture scripts and even 
journal articles presented by academic researchers may actually be 'ghost-written' by 
pharmaceutical companies. Some researchers who have tried to reveal ethical issues with 
clinical trials or who tried to publish papers that show harmful effects of new drugs or 
cheaper alternatives have been threatened by drug companies with lawsuits.  
 
 
 
Product approval in the US 
Food and Drug Administration #Regulation of drugs: 
In the United States, new pharmaceutical products must be approved by the Food and 
Drug Administration (FDA) as being both safe and effective. This process generally 
involves submission of an Investigational new drug filing with sufficient pre-clinical data 
to support proceeding with human trials. Following IND approval, three phases of 
progressively larger human clinical trials may be conducted. Phase I generally studies 
toxicity using healthy volunteers. Phase II can include Pharmacokinetics and Dosing in 
patients, and Phase III is a very large study of efficacy in the intended patient population. 
A fourth phase of post-approval surveillance is also often required due to the fact that 
even the largest clinical trials cannot effectively predict the prevalence of rare side-
effects. Post-marketing surveillance ensures that after marketing the safety of a drug is 
monitored closely. In certain instances, its indication may need to be limited to particular 
patient groups, and in others the substance is withdrawn from the market completely. 
Questions continue to be raised regarding the standard of both the initial approval 
process, and subsequent changes to product labeling (it may take many months for a 
change identified in post-approval surveillance to be reflected in product labeling) and 
this is an area where congress is active.  
The FDA provides information about approved drugs at the Orange Book site.  
Orphan drugs 
There are special rules for certain rare diseases ("orphan diseases") involving fewer than 
200,000 patients in the United States, or larger populations in certain circumstances. 
Because medical research and development of drugs to treat such diseases is financially 
disadvantageous, companies that do so are rewarded with tax reductions, fee waivers, and 
market exclusivity on that drug for a limited time (seven years), regardless of whether the 
drug is protected by patents. 
Legal issues 
Where pharmaceutics have been shown to cause side-effects, civil action has occurred, 
especially in countries where tort payouts are likely to be large. Due to high-profile cases 
leading to large compensations, most pharmaceutical companies endorse tort reform. 
Recent controversies have involved Vioxx and SSRI antidepressants. 
Product approval elsewhere