Life Science Industries

Life sciences industries comprise many sectors related to biotechnology, medical technology and pharmaceuticals. While there is no clear common definition of life science industries here only the three sectors mentioned before are considered. When looking at technology development in the three sectors, an increasing number of patent applications in all see segments is visible:

Patent applications in life science technology fields at the European Patent Office
Patent applications at the European Patent Office
Figure based on data from data from the European Patent Office, avaliable at https://new.epo.org/en/statistics-centre#/customchart .[1]

The patent statistics is based on technological classification and mainly underlines the increasing relative importance of China in biotechnology.[2] The increasing number of patent applications in the individual fields cannot be directly linked to increasing research activity since an increasing trend towards patenting can be considered a driving factor of the development as well.

Pharmaceutical Industry

The pharmaceutical industry can be defined as industry manufacturing drugs. The active ingredients  (APIs, Active Pharmaceutical Ingredients) responsible for the drugs’ biological activity can be produced by classic chemical manufacturers nevertheless. Using this criterion, only legal drug manufacturers are considered as parts of the pharmaceutical industry in this context. The overall global market size of the industry was estimated at approximately 1,500 billion USD for 2021.[3]

The distribution of global manufacturing in terms of output value is depicted in the following figure.

Value of manufacturing of pharmaceuticals by country
Global pharmaceuticals production
Figure based on data for the year 2019 from database INDSTAT 4 2023, ISIC Revision 4 by the United Nations Industrial Development Organization, available at https://stat.unido.org/.[4]

The resulting market segment is rather concentrated with comparatively few, very large companies accounting for a vast proportion of the market share at the very end of the producing part of the value chain. While literature often divides drug manufacturing companies into brand manufacturers, generics manufacturers and biotech companies, mayor brand manufacturers are already deeply involved in manufacturing biotechnological drugs. Therefore the distinction between biotech companies and other pharma companies is rather obsolete.

The market with spending on prescription drugs is largely dominated by brand products. This is underlined by the fact that approximately three quarters of expenses in 2016 in the USA originated from brand products while at the same time approximately 90 percent of prescriptions were filled by inexpensive generics.[5] The large price gap is based on temporary monopoles from patent protection and exceeds by far the costs of goods sold and certainly the costs for the active pharmaceutical ingredient.[6] In fact, this price gap has been seen as prototype for a dysfunctional patent system.[7] On the other hand the expiration of key patents for important drugs and the anticipated launch of generic products and the resulting reduction in prices is a major concern for all brand manufacturers.[8]

Furthermore, a continuous trend towards outsourcing of core functions of pharmaceutical manufacturers has been visible over the last decades. Approximately two thirds of production has been outsourced already,[9] but other core competencies like preclinical and clinical drug development[10] or regulatory affairs[11] have been affected as well. On a global level the a shift of drug manufacturing occurred not only between firms but on a grand scale between countries towards India,[12] particularly noticeable in generics, of which 20 % globally are produced in India.[13]

Medical Device Industry

Medical devices cover a broad product spectrum from adhesive bandages to diagnostics including large devices like X-ray machines and the like. Medical decices are products with medical intent for humans. They separate from drug in the sense that drugs act pharmacological, immunological or metabolic while medical devices’ main action is physical in nature. Medical devices are mainly a regulatory product category and are subject to legislation and regulations by the respective authorities.[14]

The global market size for medical devices was estimated at approximately 500 billion USD for 2021.[15] However, the overall market is rather fragmented with many different type of devices from small cheap consumables (syringes, infusion sets etc.) to large devices of considerable value (X-ray machines, MRI machines). Production is characterized by a few large and many small and medium-sized companies. The ten largest medical device companies by revenue are listed in the table below.

Company Name Revenue 2022 [million] Product areas Website
Medtronic USD 31,686[16] Small to large appliances for cardiovascular, medical surgical, neuroscience, and diabetes applications https://www.medtronic.com/
Johnson & Johnson MedTech[17] USD 27,427 Small to large devices for surgery, orthopaedics, interventional solutions, and vision https://www.jnjmedtech.com/
Siemens Healthineers USD 22,833[18] Medium to very large appliances for imaging, diagnostics, cancer care and advanced therapies https://www.siemens-healthineers.com/
Royal Philips USD 18,746[19] Small to large appliances devices for consumer health, and professional healthcare as well as general consumer appliances https://www.philips.com/
Medline Industries USD 21,200 Medical consumables to durable medical equipment https://www.medline.com/
GE HealthCare (General Electric) USD 18,461 Medium to very large appliances for imaging, anesthesia delivers, diagnostics, ventilators, and digital solutions https://www.gehealthcare.com/
Stryker USD 18,449 Consumables and medical equipment for surgical applications, orthopedics, and neurotechnology https://www.stryker.com/
Cardinal Health (medical segment)[20] USD 15,887 Medical consumables/supplies, medical equipment, and devices for compression therapy https://www.cardinalhealth.com/
Abbott (medical device segment) USD 14,687 Small to medium devices for rhythm management, electrophysiology, heart failure, vascular, structural heart, neuromodulation, and diabetes care https://www.abbott.com/
Baxter USD 15,113 Small to large medical devices in diagnostics, nutritional, hospital, and kidney care https://www.baxter.com/

Biotechnology

Biotech firms use biological processes of organisms to manufacture products or solve challenges. These processes can occur naturally or be implemented by genetic alteration of the organism. The targeted products cover a wide range from enzymes for industrial, food or medicinal applications to other proteins, lipids, vitamins, alcohols, natural gas and more. The biotechnology industry has large overlaps to the chemical industry, especially since biotechnological processes are increasingly employed by chemical manufacturers.

The OECD defines biotechnology firms as firms applying science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services.[21] Furthermore, they supplement this single definition with a list-based definition serving as an interpretative guideline to the single definition. This list-based definition comprises seven categories. A firm that reports activity in one or more categories is defined as a biotechnology firm. The categories are:

  • DNA/RNA,
  • proteins and other molecules,
  • cell and tissue culture and engineering,
  • process biotechnology techniques,
  • gene and RNA vectors,
  • bioinformatics and,
  • nanobiotechnology.

Key indicators for the biotechnology industry are available at https://www.oecd.org/innovation/inno/keybiotechnologyindicators.htm.

Footnotes

  1. European patent applications include direct European applications and international (PCT) applications that entered the European phase during the reporting period.
  2. Die Definition der Felder basiert auf der WIPO-IPC-Technologiekonkordanz. Die Tabelle ist verfügbar unter: https://www.wipo.int/ipstats/en/docs/ipc_technology.xlsx.
  3. See https://www.reportlinker.com/p06241981/Pharmaceuticals-Global-Market-Report.html?utm_source=GNW.
  4. The value is measured in billion current USD for the respective year. Countries with no reported value are colored grey.
  5. Segal, J. B., Onasanya, O., Daubresse, M., Lee, C.-Y., Moechtar, M., Pu, X., Dutcher, S. K., & Romanelli, R. J. (2020). Determinants of Generic Drug Substitution in the United States. Therapeutic Innovation & Regulatory Science, 54(32008244), 151–157. https://doi.org/10.1007/s43441-019-00039-9.
  6. Gotham, D., Barber, M. J., & Hill, A. (2018). Production costs and potential prices for biosimilars of human insulin and insulin analogues. BMJ Global Health, 3(5), Article 5. https://doi.org/10.1136/bmjgh-2018-000850.
    Gotham, D., Barber, M. J., & Hill, A. M. (2019). Estimation of cost-based prices for injectable medicines in the WHO Essential Medicines List. BMJ Open, 9(9), Article 9. https://doi.org/10.1136/bmjopen-2018-027780.
    Hill, A., Simmons, B., Gotham, D., & Fortunak, J. (2016). Rapid reductions in prices for generic sofosbuvir and daclatasvir to treat hepatitis C. Journal of Virus Eradication, 2(1), 28–40. https://doi.org/10.1016/S2055-6640(20)30691-9.
  7. Boldrin, M., & Levine, D. K. (2013). The Case against Patents. Journal of Economic Perspectives, 27(1), 3–22. https://doi.org/10.1257/jep.27.1.3.
  8. Song, C. H., & Han, J.-W. (2016). Patent cliff and strategic switch: exploring strategic design possibilities in the pharmaceutical industry. SpringerPlus, 5(1), Article 1. https://doi.org/10.1186/s40064-016-2323-1.
    Vondeling, G. T., Cao, Q., Postma, M. J., & Rozenbaum, M. H. (2018). The Impact of Patent Expiry on Drug Prices: A Systematic Literature Review. Applied Health Economics and Health Policy, 16(5), 653–660. https://doi.org/10.1007/s40258-018-0406-6.
  9. Coyle, D., & Nguyen, D. (2020). No plant, no problem? Factoryless manufacturing, economic measurement and national manufacturing policies. Review of International Political Economy, 0(0), 1–21. https://doi.org/10.1080/09692290.2020.1778502.
  10. Cleary, E. G., Beierlein, J. M., Khanuja, N. S., McNamee, L. M., & Ledley, F. D. (2018). Contribution of NIH funding to new drug approvals 2010–2016. Proceedings of the National Academy of Sciences, 115(10), 2329–2334. https://doi.org/10.1073/pnas.1715368115.
    Hayes, R. (2017). Bioanalytical outsourcing: transitioning from Pharma to CRO. Bioanalysis, 9(15), 1149–1152. https://doi.org/10.4155/bio-2017-4996.
  11. Zhou, Y. (2020). Outsourcing Services of Regulatory Submission Writing in the Pharmaceutical Industry. AMWA Journal: American Medical Writers Association Journal, 35(2), 58–61.
  12. Mohiuddin, M., Mazumder, M. N. H., Chrysostome, E., & Su, Z. (2017-07). Relocating high-tech industries to emerging markets: case of pharmaceutical industry outsourcing to India. Transnational Corporations Review, 9, 201–217. https://doi.org/10.1080/19186444.2017.1370808.
  13. Guerin, P. J., Singh-Phulgenda, S., & Strub-Wourgaft, N. (2020). The consequence of COVID-19 on the global supply of medical products: Why Indian generics matter for the world? F1000Research, 9(32566139), 225–225. https://doi.org/10.12688/f1000research.23057.1.
  14. For the US see https://www.fda.gov/medical-devices/device-advice-comprehensive-regulatory-assistance/overview-device-regulation, for the EU see Regulation (EU) 2017/746 and Regulation (EU) 2017/745.
  15. See https://www.fortunebusinessinsights.com/industry-reports/medical-devices-market-100085.
  16. Fiscal year ended April 29, 2022.
  17. Business unit of Johnson & Johnson
  18. EUR 21,714 million, fiscal year ended September 30, 2022.
  19. EUR 17,827 million
  20. Business segment of Cardinal Health
  21. See https://www.oecd.org/sti/sci-tech/42833898.pdf .