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Figure 15. Inspecting a ‘promising molecule’.


		There are a number of things which make pharmaceutical manufacturing rather different from other manufacturing industries. These include: a product with a high added value a long product development time a strong relationship between production and Research & Development a high level of regulation by outside agencies a heavy emphasis on quality assurance and control within the production process short patent life with only a few years left when marketing starts.

	Added Value

		Medicines have a very high added value content. How do we measure this? One way would be to look at the value of the output (the medicine) compared to the value of the inputs (the raw materials). Most medicines sell for high prices but use relatively low value inputs. The pharmaceutical companies have to spend most of their income on R&D.

	Ways to achieve added value

		What makes it possible for a manufacturer like Pillco to add so much value? The answer lies in what goes before the actual production process. To discover the source of the added value in the pharmaceutical industry, we need to look at how a new medicine is developed. Figure 16 sets out the main stages in the development of a new drug.

	Developing a medicine - it takes time

		First, the company decides what diseases to look at. These will be diseases which do not yet have a treatment or have a treatment which is considered inadequate. The company then looks for promising molecules that might treat the disease. Scientists will use computer models and chemical or biological techniques to devise new molecules which might be active against the disease. They may synthesise around 10,000 such molecules in a year, then screen them to see if they could be effective. A few promising molecules are patented and followed up in the laboratory. The research stage uses only very small amounts of the ‘promising molecule’. It is tested on cell cultures for its effectiveness at treating the disease and to look for any toxic effects.

Figure 16a. More information for figure 16.

Figure 16. Developing a new medicine.

		Molecules that perform well in this screening process are made in larger amounts and tested on animals. These preclinical studies provide information to help assess if the compound is safe. The data from the studies is used to apply for a certificate to carry out clinical trials on people. Notice that, unlike many industries, Research & Development is the crucial stage in a product’s life cycle. It is at this stage that scientists invent, discover or design the mixtures and combinations which make the medicine work. It is their creativity which adds so much value to a medicine. So, unlike most products, the key element to its value is the input of ideas. These ideas are usually referred to as intellectual property and it is vital to protect them.

Assignment trigger 2

Look at Resources 3 and 4. Plot the information graphically. Imagine you are running a pharmaceutical company. Which diseases or treatment areas would you target? Which areas of the world would you aim to sell in?

Check your answer

How might added value be measured? What is the main source of added value in medicines? (hint - what is it that makes a medicine valuable?). What other manufacturing sectors depend upon ideas for their added value?

Check your answer

Contents	Close

Introduction	4. Human resources - recruitment
1. The market	Recruitment procedures
A competitive success story	5. Human resources - training
2. Making pharmaceuticals	Teamwork
Biotechnology
3. Is manufacturing pharmaceuticals like other industries
Life cycle of a medicine
Quality	6. Conclusion

Our experts' view

The data suggests that a pharmaceutical company should be aiming to produce medicines to treat the central nervous system and cytostatics since these are the areas where the market is expanding fastest. It should target N America and Australia and New Zealand.

Our experts' view

Added value is defined in the glossary. One way of measuring it would be to compare the selling price of the product against unit costs. This raises the question of how costs which are not directly related to the production are shared out. For instance, how do you include R & D costs in production costs? What about overhead costs such as administration and advertising?

Sources of added value in pharmaceutical manufacturing mainly come from the ideas which have created the medicines - it is the discovery/design of the mixtures and combinations which creates the value. So for instance the raw materials which make up aspirin represent a small element of the final cost - the reason that aspirin is valuable is because the combination of chemicals helps to take away a headache.

Another manufacturing sector which depends upon ideas for its added value would be computer software.