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This chapter and the next examine the sectors that manufacture pharmaceuticals and biologics. By way of definition, a pharmaceutical is a product made through chemical synthesis (ie, the preparation of a compound using plant- and chemical-based substances that use chemical reactions to derive a pill or capsule). By contrast, a biologic is manufactured in or extracted from living biological sources (eg, bacteria, yeast, and mammalian cells) and can include vaccines, allergenics, somatic cells, gene therapies, tissues, recombinant therapeutic proteins (including monoclonal antibodies), peptides (protein fragments), and living cells. An easier way to distinguish these 2 products is that pharmaceuticals are small molecules (<700 daltons) that allow them to be taken orally; biologics are large molecules (>700 daltons) that are usually administered by a physician via an injection, but can sometimes be patient-administered via an auto-injector.

The 2 sectors are nevertheless lumped together as biopharmaceuticals (or, “biopharma” for short). Why now use this convention? Over the past decade or two, pharmaceutical companies have diversified into making large-molecule biologics, whereas biotechnology companies have diversified into making small molecules. It is no longer possible to distinguish the 2 sectors by the companies that make these 2 types of products.


The pharmaceutical sector is large, profitable, and contentious. There are a lot of companies, several big companies, companies that earn some healthy profit margins (see Chapter 20), and companies that are frequently in the headlines—and not always for good reasons. Look at some news stories between 2007 and 2016:

  • 2007: Eli Lilly was fined $1.42 billion to resolve a government investigation into the off-label promotion of the antipsychotic Zyprexa.

  • September 2009: Pfizer was fined $2.3 billion for misbranding the painkiller Bextra with “the intent to defraud or mislead,” promoting the drug to treat acute pain at dosages the US Food and Drug Administration (FDA) had previously deemed dangerously high.

  • November 2011: Merck agreed to pay a fine of $950 million related to the illegal promotion of the painkiller Vioxx, which was withdrawn from the market in 2004 after studies found the drug increased the risk of heart attacks.

  • July 2012: GlaxoSmithKline agreed to pay a fine of $3 billion to resolve civil and criminal liabilities regarding its promotion of drugs (eg, misbranding the drug Paxil for treating depression in patients under 18), as well as its failure to report safety data.

  • November 2013: Johnson & Johnson agreed to pay a $2.2 billion fine to resolve criminal and civil allegations relating to its promotion of the prescription drugs Risperdal, Invega, and Natrecor for uses not approved as safe and effective by the FDA, as well as targeting elderly dementia patients in nursing homes and paying kickbacks to physicians.

  • September 2014: GlaxoSmithKline apologized to China for bribing healthcare workers to use its drugs and agreed to pay a fine of nearly half ...

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