CHAPTER 3
Introduction to the Pharmaceutical Sector Any effort to reform pharmaceutical policy must take into account several broad trends affecting the sector, especially patterns in the world pharmaceutical market, the emergence of new producers in middle-income countries, the drive toward consolidation in the research and development– oriented industry, and conflicts over product pricing. These trends shape the pharmaceutical problems that arise in low- and middle-income countries— the problems that policy reformers seek to resolve—and are related to both the market failures and the government failures described in chapter 2. We briefly review these four trends in the pharmaceutical sector to provide the broader context for our explanation of how to undertake pharmaceutical policy reform.
The World Pharmaceutical Market The worldwide pharmaceutical industry is characterized by the concentration of consumption, production, and innovation in a relatively small number of high-income countries. In 2008, countries in North America and Europe, plus Japan, accounted for 82 percent of global pharmaceutical sales (by value) (IMS Health 2009a), and their share of production was even higher. During the 1980s and 1990s, the share of global production 35