Pharmaceutical companies are involved in the life sciences industry, bringing new treatments to the market and improving the treatment options for patients.

But, diseases can't be easily treated. There's no cure for all forms of cancer or an effective way to stop all variants of infectious diseases that affect humanity.

Companies in the pharmaceutical industry try to find new treatments for existing diseases and to improve on what is already available. A pharmaceutical company could develop drugs for multiple indications, or look into broader categories such as pain.

The US is the leader in research-and-development (R&D) worldwide. Catalyst Pharma reports that since 1980, the US has seen a significant increase in R&D spending, with a record US$2billion in 1980 and a record US$91.1billion in 2020. The US is also the largest pharmaceutical market.

The country's prescription drug sales are strong and will reach US$400 Billion by 2025. This is an increase of US$359 Billion in 2020.

Investors who are interested in this expanding industry might want to invest their money in companies that could find new treatments or cures for rare diseases. There are many risks involved in investing in these companies. It's important to remember that patience and time play a major role in the pharma industry.

It is important to understand that, while the largest pharma companies are working on their own pipelines and using licensing deals, partnerships, and collaborations to grow drug candidates. Pfizer (NYSE :PFE), Bristol-Myers Squibb, (NYSE :BMY,OTC pink:BMYMP), and AbbVie are just a few of the players that investors can count on as major market stocks.

It is important to remember that the overall pharmaceutical industry extends beyond the largest pharmaceutical companies. The impact of small- and medium-cap drug firms on the development of innovative pharmaceutical products continues to be felt by many investors.

Investing in Pharmaceutical Companies: Drug approvals

Drug manufacturers have to deal with the challenge of developing innovative therapies through a cycle of trials.

The US is the largest healthcare market worldwide. Its regulatory agency, the US Food and Drug Administration, ensures that all medications that are marketed go through the Center for Drug Evaluation and Research. CDER reviews every new therapy before it is allowed to be sold on the marketplace.

Investors and pharmaceutical companies must be patient during the new drug approval process. Companies must submit an FDA application for approval in order to be granted any type of approval. This can take up two-and-a-half years.

It can take companies up to 10 years to create a drug and bring it on the market. It takes more than three years to test a new therapy before it is approved by the FDA. The FDA will approve the drug and it will go through three phases in clinical trials.

Some are calling for a quicker process. However, a lower barrier to entry could result in unforeseen reactions or products that fail to pass FDA testing.

Pharmaceutical companies play an important role in managing clinical trials once a drug is approved for clinical trials. Drug companies are responsible for ensuring that processes like enrolling patients, gathering and submitting trial results, and other aspects of the process are correct.

Every clinical trial is different in terms of length, participation, and purpose. However, this process begins before any drug is even in clinical trials. A medicine can only be tested on humans after it has been developed and drug discovery.

This is why investors need to be prepared to invest in pharmaceutical companies for the long-term. If a company misses its target deadline or a drug fails to perform as promised, it is common for share prices to drop.

Investing in Pharmaceutical Companies: Lower Drug Prices

Scott Gottlieb, the former FDA Commissioner, led a campaign to lower prescription drug prices by encouraging competition among pharmaceutical companies during his tenure.

Gottlieb stated in a February 2019 statement that the agency was taking steps to "support down pressure on drug prices through helping to clear a pathway for more efficient generic development." This was Gottlieb's main strategy to fulfill the campaign promises of former US president Donald Trump. A hearing by the US Senate Committee on Finance in January 2019 also criticized several executives from pharmaceutical companies for the high price of drugs.

Trump's administration passed rules in late 2020 that linked drug reimbursement to cheaper foreign drug prices, and allowed medication imports from Canada. The rules also require insurance companies to pass discounts from manufacturers onto patients at the point-of-sale. Big Pharma has taken the fight against these regulations to court, as it is not surprising.

The US President Joe Biden still places high importance on lowering the cost of prescription drugs. His administration has made lowering prescription drug prices an important component of the Build Back Better plan.

China and other emerging markets have raised the stakes. China has extended drug patent life from 20 years to 25 years, making it the longest period of time in any major market. This will allow companies to benefit from five years more sales before generic products are possible.

How do you invest in pharmaceutical companies?

The pharmaceutical industry is set to continue evolving. Even though we rely on established methods and practices, progress is inevitable in a market that is so forward-looking. Small and large companies in this sector of the health industry are constantly looking for innovative ways to remain relevant.

PWC identifies several trends in the Top Health Industry Issues 2021 Report.

• Virtual health is changing the way healthcare is delivered. 95 percent of US large employers now cover telehealth, an increase from 56 percent in 2016.

• Virtual technology is making clinical trials more efficient. In fact, 98 percent of executives in pharma and life science said that they expected to increase their digital investments in clinical trials.

• Physicians can use digital tools to improve efficiency and patient relations.

• Executives in the health sector expect their companies to invest more into predictive modeling as part of strategic planning.

• Expect more investment from the pharma industry in vaccines and pre-pandemic areas.

• Pharma companies may be able to improve their data analytics technology in order to develop trial protocols that are more applicable to diverse populations.

These stocks are high-risk and can be risky, but investors can still look to these companies for long-term profits. Investors can also use pharmaceutical exchange-traded funds to get involved in the market and to keep track of trends.

Securities Disclosure - I, Melissa Pistilli have no direct investment in any company mentioned.

By: Melissa Pistilli
Title: Investing in Pharmaceutical Companies
Sourced From: investingnews.com/daily/life-science-investing/pharmaceutical-investing/investing-pharmaceutical-companies-what-you-need-to-know/
Published Date: Wed, 17 Nov 2021 21:30:00 +0000

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