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Finance

What it takes to be called ‘big pharma’

These are the key features that distinguish big pharma from other pharmaceutical companies:

  • exclusive research and development centers
  • patented products*
  • market reach
  • economies of scale
  • diversified bouquet of products

(*Patented products may also be found in mid-size and small pharmaceutical companies.)

Revenues derived from the sale of patented products make up over 70% of big pharma’s total drug sale revenues. This is why companies spend around 20% of revenues each year on research and development, or R&D, of new drugs. Companies try to fetch maximum returns from a patented drug while its patent is valid. Once the drug is off patent, its price falls to 10%–15% of its original cost.

Big pharma companies have manufacturing units and R&D centers located in multiple countries, as well as wide distribution networks around the world.

Big pharma companies Johnson & Johnson (JNJ), Pfizer (PFE), Merck and Company (MRK), and Gilead Sciences (GILD) together form 30.34% of the Health Care Select Sector SPDR Fund (XLV).

View more information: https://marketrealist.com/2015/02/takes-called-big-pharma/

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