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Local Pharmaceutical Drug Sales Reached $769 Million In FY 2000, A 38% Hike

PIA to P.R. government: tax incentives for R&D not enough

"The government has been pro-active asking pharmaceutical companies
to transfer their R&D to the island. But technology is not tax-driven."
said economist Joaquin Villamil, president of Estudios Tecnicos.


November 23, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

To develop a single new drug costs the pharmaceutical industry an average of $750 million, and can reach as high as $1 billion. These astronomical costs include basic research, pre-clinical testing, Food and Drug Administration (FDA) submission and approval.

Eli Lilly’s Phil Johnson reported this data during a seminar on the economics of pharmaceuticals at Puerto Rico’s Pharmaceutical Industry Association’s (PIA) convention last week at Westin Rio Mar Resort.

"Eighty percent of development costs are allocated for the drug’s research and development (R&D). The probability of failure for any one drug (there can be up to 14 ‘candidates’ or variations of being tested at one time for any one drug) can go as high as 50%. The remainder goes on to pre-clinical testing, " said Johnson.

One way to cut down cost, is to encourage early stage productivity and conduct testing on drug candidates with the best probability of success. The final cost of the product will also be influenced by the dosage recommended, as lower dosages bring costs down.

These costs weigh in when pharmaceutical companies consider opening R&D divisions.

"The government has been pro-active asking pharmaceutical companies to transfer their R&D to the island. But technology is not tax-driven. Transaction costs, such as legal procedures and permitting, must be lowered and re-engineered to assure sustainability. A new definition of infrastructure must include telecommunications, e-commerce, broadband communications, and Internet," said economist Joaquin Villamil, president of Estudios Tecnicos.

Other pharmaceutical company executives said that current tax incentives need to recognize that technology such as R&D is not labor intensive. Procter & Gamble Pharmaceuticals General Manager Ramon Sepulveda agreed.

"Local tax incentives are still mostly based on the number of jobs that are created. On the one hand the government wants to develop a high technology industry, which involves a substantial investment on the part of the companies. Benefits and incentives must be geared towards that investment, which in the long run generates construction, security, and maintenance jobs as well as direct employment in the company," said Sepulveda.

Over 100 PIA members and industry representatives participated in the two-day event, attending seminars on healthcare reform, drug delivery via Internet, and human resources change management. IMS Health Vice President William Machtinger also spoke about the impact of the pharmaceutical industry globally.

"Puerto Rico’s pharmaceutical drug market is comparable to much larger Latin American countries such as Venezuela, Chile, and Peru. It also ranks 37 among mainland states with annual sales of $768.9 million. This is a larger figure than Utah ($752 million), Maine ($729.4 million) and New Mexico ($608.1 million)," said Machtinger.

Between Oct. 1999 and Oct. 2000, local pharmaceutical drug sales grew 30.5%, from $589.1 million to $768.9 million. The majority of sales, or 37.8%, were made by chain stores and independent businesses (36.5%). The top ten products sold in P.R. were Epogen, Prilosec, Lipitor, Cipro, Prevacid, Augmentin, Norvasc, Zyprexa, Glucophage, Claritin. Sales of those 10 drugs were $105.1 million, or 14% of total drug sales.

This Caribbean Business article appears courtesy of Casiano Communications.
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