Prescription drug purchases in the U.S. totaled about $229 billion during 2007, according to U.S. government estimates, representing about $760 per capita. The total is up from a mere $40 billion in 1990. In 2016, government estimates show that American drug purchases may reach $497 billion, thanks to a rapidly aging U.S. population, inflation and the continued introduction of expensive new drugs.

The IMS Retail Drug Monitor shows retail pharmacy drug sales in the U.S. at $206.5 billion for the twelve months ended May 2008, up about 2%. This figure does not include drugs delivered through institutions such as hospitals. Generic drugs account for about 67% of all drug expenditures in the U.S., up from only 51% in 2000 and 33% in 1990. Veterinary drugs are about a $2.5 billion market in the U.S., and about $5 billion globally. IMS Health estimates Canadian retail drug sales for the twelve months ended May 2008 at $16.7 billion, Japan at $63.2 billion (including sales at hospitals), Brazil at $11.6 billion and Mexico at $8.7 billion. In Europe's top five markets, IMS ranked Germany first, during the same twelve-month period, at $34.4 billion, followed by France at $30.8 billion, the UK at $17.1 billion, Italy at $16.9 billion and Spain at $14.8 billion. (See www.imshealth.com.)

Biotech-related drugs accounted for about $44 billion of the U.S. market in 2007, or a bit more than 20%. IMS Health places the global biotech market at $75 billion for 2007, up 12.5% over the previous year. Ernst & Young reports that revenues of publicly-held biotech companies in the U.S. rose more than 11% from $58.6 billion in 2006 to $65.2 billion in 2007. On a global scale, 2007 public biotech company revenues exceeded $80 billion for the first time, rising by 8% over 2006.

Agricultural biotechnology comprises an immense global sector, boosting production of food crops and enhancing nutritional qualities.

For 2007, the Pharmaceutical Research and Manufacturers of America (PhRMA, www.phrma.org) estimated that $44.5 billion was invested in R&D by its members in the U.S. (PhRMA estimates that the total pharmaceuticals industry, including non-PhRMA members, invested $58.7 billion in research in 2007.) At the end of 2006 (the latest data available), PhRMA members had a total of 79,856 R&D personnel on staff. As of early 2008, there were more than 2,700 medicines in development in the U.S. for nearly 4,600 different indications.

Advanced generations of drugs developed through biotechnology continue to enter the marketplace. The results promise to be spectacular for patients, as a technology tipping point of medical care is nearing, where drugs that target specific genes and proteins will become widespread. However, it continues to become more difficult and more expensive to introduce a new drug in the U.S. For example, during 2007, the FDA (Food and Drug Administration) approved only two new biologics (new biotechnology-based drugs, based on living organisms, that have never been marketed in the U.S. in any form) along with 18 new molecular entities or "NMEs" (medications containing chemical compounds that have never before been approved for marketing in the U.S.). This is down from 22 in 2006; 20 during 2005; and 36 in 2004.

These NMEs and biologics are novel new active substances that are categorized differently from "NDAs" or New Drug Applications. NDAs may seek approval for drugs based on combinations of substances that have been approved in the past. During 2007, 94 NDAs were approved by the FDA (compared to 93 in 2006 and 79 in 2005).

New Drug Application Categories

Applications for drug approval by the FDA fall under the following categories:

BLA (Biologics License Application): An application for approval of a drug synthesized from living organisms. That is, drugs created using biotechnology. Such drugs are sometimes referred to as biopharmaceuticals.

BLA (Biologics License Application): An application for approval of a drug synthesized from living organisms. That is, drugs created using biotechnology. Such drugs are sometimes referred to as biopharmaceuticals.

NME (New Molecular Entity):A new chemical compound that has never before been approved for marketing in any form in the U.S.

NDA (New Drug Application): An application requesting FDA approval, after completion of the all-important Phase III Clinical Trials, to market a new drug for human use in the U.S. The drug may contain active ingredients that were previously approved by the FDA.

Follow-On Biologics:A term used to describe generic versions of drugs that have been created using biotechnology. Because biotech drugs ("biologics") are made from living cells, a generic version of a drug probably won't be biochemically identical to the original branded version of the drug. Consequently, they are described as "follow-on" drugs to set them apart. Since these drugs won't be exactly the same as the originals, there are concerns that they may not be as safe or effective unless they go through clinical trials for proof of quality. In Europe, these drugs are referred to as "biosimilars."

Priority Reviews:The FDA places some drug applications that appear to promise "significant improvements" over existing drugs for priority approval, with a goal of returning approval within six months.

Accelerated Approval:A process at the FDA for reducing the clinical trial length for drugs designed for certain serious or life-threatening diseases.

Fast Track Development: An enhanced process for rapid approval of drugs that treat certain life-threatening or extremely serious conditions. Fast Track is independent of Priority Review and Accelerated Approval.

Developing a new drug is an excruciatingly slow and expensive endeavor. According to PhRMA, the average time required for the drug discovery, development and clinical trials process is 16 years. The good news is that the median FDA approval time for a "priority" NME is down to about six months since 2003, compared to 16.3 months in 2002, and for "standard" NMEs to 12.9 months in 2007 from 23.0 in 2005.

The promising era of personalized medicine is slowly, slowly moving closer to fruition. Dozens of exciting new drugs for the treatment of dire diseases such as cancer, AIDS, Parkinson's and Alzheimer's are either on the market or are very close to regulatory approval.

Stem cell research is moving ahead briskly on a global basis, despite the negative effect of restrictive research funding rules of the U.S. Federal Government. Stem cell breakthroughs are occurring rapidly. There is truly exciting evidence of the potential for stem cells to treat many problems, from cardiovascular disease to neurological disorders. Menlo Park, California-based Geron Corporation, for example, has published the results of its experiments that show that when certain cells (OPCs) derived from stem cells were injected in rats that had spinal cord injuries, the rats quickly recovered. According to the company, "Rats transplanted seven days after injury showed improved walking ability compared to animals receiving a control transplant. The OPC-treated animals showed improved hindlimb-forelimb coordination and weight bearing capacity, increased stride length, and better paw placement compared to control-treated animals."

Despite exponential advances in biopharmaceutical knowledge and technology, biotech companies enduring the task of getting new drugs to market continue to face long timeframes, daunting costs and immense risks. Although the number of NDAs submitted to the FDA has grown dramatically since 1996, the number of new drugs receiving final approval remains relatively small. On average, of every 1,000 experimental drug compounds in some form of pre-clinical testing, only one actually makes it to clinical trials. Then, only one in five of those drugs makes it to market. Of the drugs that get to market, only one in three recover their costs. Meanwhile, the patent expiration clock is ticking-soon enough, manufacturers of generic alternatives steal market share from the firms that invested all that time and money in the development of the original drug.

Global Factors Boosting Biotech Today:

A rapid aging of the population base of industrialized nations such as Japan and the U.S., including the 78 million Baby Boomers in America who are entering senior years and needing a growing level of health care A renewed, global focus on developing effective vaccines Aggressive, global investment firms that are willing to risk their funds on biotech research and development Vast research investments by major pharmaceuticals firms A growing global dependence on genetically-engineered agricultural seeds Aggressive investment in biotechnology research in Singapore, China and India, often with government sponsorship A quickly growing emphasis on bioethanol as a substitute for petroleum

Source: Plunkett Research, Ltd.

Internet Research Tip: You can review current and historical drug approval reports at the following page at the Center for Drug Evaluation and Research (CDER). www.fda.gov/cder/rdmt The Center for Biologics Evaluation and Research (CBER) regulates biologic products for use in humans. It is a source of a broad variety of data on drugs, including blood products, counterfeit drugs, exports, drug shortages, recalls and drug safety. www.fda.gov/cber

According to a study released in 2001 by the Tufts Center for the Study of Drug Development, the cost of developing a new drug and getting it to market averaged $802 million, up from about $500 million in 1996. (Averaged into these figures are the costs of developing and testing drugs that never reach the market.) Expanding on the study to include post-approval research (Phase IV clinical studies), Tufts increased the number to $897 million. Tufts estimated the average cost to develop a new biologic at $1.2 billion in 2006. Even more pessimistic is research released in 2003 by Bain & Co., a consulting firm, which states that the cost is more on the order of $1.7 billion, including such factors as marketing and advertising expenses.

The typical time elapsed from the synthesis of a new chemical compound to its introduction to the market remains 12 to 20 years. Considering that the patent for a new compound only lasts about 20 years, a limited amount of time is available to reclaim the considerable investments in research, development, trials and marketing. As a result of these costs and the lengthy time-to-market, young biotech companies encounter a harsh financial reality: commercial profits take years and years to emerge from promising beginnings in the laboratory.

However, advances in systems biology (the use of a combination of state-of-the-art technologies, such as molecular diagnostics, advanced computers and extremely deep, efficient genetic databases) may eventually lead to more efficient, faster drug development at reduced costs. Much of this advance will stem from the use of technology to efficiently target the genetic causes of, and develop novel cures for, niche diseases.

The FDA is attempting to help the drug industry bring the most vital drugs to market in shorter time with three programs: Fast Track, Priority Review and Accelerated Approval. The benefits of Fast Track include scheduled meetings to seek FDA input into development as well as the option of submitting a New Drug Application in sections rather than all components at once. The Fast Track designation is intended for drugs that address an unmet medical need, but is independent of Priority Review and Accelerated Approval. Priority drugs are those considered by the FDA to offer improvements over existing drugs or to offer high therapeutic value. The priority program, along with increased budget and staffing at the FDA, are having a positive effect on total approval times for new drugs.

For example, the FDA quickly approved Novartis' new drug Gleevec (a revolutionary and highly effective treatment for patients suffering from chronic myeloid leukemia). After priority review and Fast Track status, it required only two and one-half months in the approval process (compared to a more typical six months). This rapid approval, which enabled the drug to promptly begin saving lives, was possible because of two factors aside from the FDA's cooperation. One, Novartis mounted a targeted approach to this niche disease. Its research determined that a specific genetic malfunction causes the disease, and its drug specifically blocks the protein that causes the genetic malfunction. Two, thanks to its use of advanced genetic research techniques, Novartis was so convinced of the effectiveness of this drug that it invested heavily and quickly in its development.

Key Food & Drug Administration (FDA) terms relating to human clinical trials:

Phase I-Small-scale human trials to determine safety. Typically include 20 to 60 patients and are six months to one year in length. Phase II-Preliminary trials on a drug's safety/efficacy. Typically include 100 to 500 patients and are one and a half to two years in length. Phase III-Large-scale controlled trials for efficacy/safety; also the last stage before a request for approval for commercial distribution is made to the FDA. Typically include 1,000 to 7,500 patients and are three to five years in length. Phase IV-Follow-up trials after a drug is released to the public.

Generally, Fast Track approval is reserved for life-threatening diseases such as rare forms of cancer, but new policies are setting the stage for accelerated approval for less deadly but more pervasive conditions such as diabetes and obesity. Approval is also being made easier by the use of genetic testing to determine a drug's efficacy, as well as the practice of drug companies working closely with federal organizations. Examples of these new policies are exemplified in the approval of Iressa, which helps fight cancer in only 10% of patients but is associated with a genetic marker that can help predict a patient's receptivity; and VELCADE, a cancer drug that received initial approval in only four months because the company that makes it, Millennium Pharmaceuticals, worked closely with the National Cancer Institute to review trials.

Small- to mid-size biotech firms continue to look to mature, global pharmaceutical companies for cash, marketing muscle, distribution channels and regulatory expertise. Good examples are the agreement between Millennium Pharmaceuticals and Johnson & Johnson for the development of VELCADE, and Isis Pharmaceuticals' multiple deals with Novartis, Pfizer and other partners for research into new antisense drugs for inflammatory and metabolic diseases.

Meanwhile, major projects are underway, backed by diverse sponsors, to add to or build from scratch massive databases of genetic data on a scale not before imagined. In Iceland, for example, a group called DeCode Genetics has amassed a database of essentially all of the DNA in Iceland's unique, isolated population.

Internet Research Tip: For extensive commentary and analysis on the development and approval of new drugs see: Tufts Center for the Study of Drug Development csdd.tufts.edu Note: This web site gives you the opportunity to download the latest annual edition of the "Outlook", an excellent summary review of trends in drug development.

With progress come setbacks, including a massive award for damages (more than $250 million) that occurred in a small-town Texas court in August 2005. The award was made to the widow of a patient who allegedly had a fatal reaction to Merck & Co.'s Vioxx pain medication (which had previously been removed from the market due to safety concerns). Texas laws capping medical case awards will reduce the damages significantly. Nonetheless, recent drug safety issues and a proliferation of lawsuits such as this may accelerate changes in the business models of drug development firms, discouraging them from risking funds on long-shot drugs intended to benefit the mass market. Meanwhile, drug makers will continue to alter marketing methods and greatly reduce consumer advertising. Virtually all drugs have significant side effect risks for certain types of patients. While drug makers have long practiced a high level of disclosure, those risks will be more clearly communicated in the future.

Global trends are affecting the biotech industry in a big way. Post 9/11, an emphasis is being placed by government agencies on the prevention of bioterror risks, such as attacks by the spread of anthrax. This factor, combined with global concern about the possible spread of avian flu, has been a significant boost to vaccine research and production. At the same time, the rapid rise of offshoring and globalization is contributing to the movement of research, development and clinical trials away from the U.S., U.K. and France into lower cost technology centers in India and elsewhere. In fact, biotech firms are rising rapidly in India, China, Singapore and South Korea that will provide serious future competition to older companies in the West.

Likewise, retail drug markets have tremendous potential in emerging nations over the mid term. For example, consultants at McKinsey estimate that the drug market in India will grow from $6.3 billion in 2005 to $20 billion in 2015. China offers similar opportunities. This means that major international drug makers will be expanding their presence in these nations. However, it also means that local drug manufacturers have tremendous incentive to expand their research, product lines and marketing within their own nations.

Global panic over quickly rising food prices in 2008 will finally give the genetically modified seed industry the boost it needs. Agribio (agricultural biotechnology) will become a top agenda item in government and corporate research budgets, and consumer acceptance of genetically modified food products will grow quickly.