Pharmaceutical companies are making a great contribution to the UK economy, higher than most other high-tech industries. The pharmaceutical sector’s relative importance becomes even more obvious when considering productivity, measured as Gross Value Added (GVA).
Economists use Gross Value Added (GVA) to represent the contribution made by business and industry to the UK’s national income. To measure GVA the value of output generated by the business or industry is calculated and from this the cost goods and services involved in production are deducted.
The graph below shows how the pharmaceutical industry’s contribution to the UK’s national income has evolved over recent years. This has been compared to other medium and high-tech industries as defined by the Department for Business, Innovation and Skills. For information on annual average GVA produced per employee for a cross-section of industry sectors, please visit our Employment in the pharmaceutical industry in the UK section.
Click here for a larger versionNote: Using the new definition of high and medium high tech sector (SIC2007).Source: ONS Annual Business Survey 2012 (Provisional), Section C Manufacturing, Release date 14 November 2013
The first graph below shows the total sales of prescription medicines to the NHS over the last nine years. The share of medicines sold via primary care is marked in dark purple and the share sold in hospitals (secondary care) is marked in light purple. The second graph below shows the growth profile for the same time period.
Click here for a larger versionSource: IMS Health British Pharmaceutical Index, IMS Hospital Pharmacy Audit
This table shows a comparison of prices of branded medicines in the UK with prices in a range of European countries and the USA. It compares the prices of all preparations for the top 150 branded medicines in the UK with other countries, depending on the availability of matching preparations elsewhere.
The graph below shows the development of Retail Price Index (RPI) and Producer Price Index (PPI) for pharmaceutical manufacturing between 1998 and 2012. PPIs are a series of economic indicators that measure the price movement of goods bought and sold by UK manufacturers. It is a base-weighted index using the 'basket of goods' concept. The PPI line graph shown below is for pharmaceutical products only and refers to the prices of these products when leaving the manufacturing plant, also often referred to as 'ex-factory prices'.
The comparison between pharmaceutical PPI and the RPI demonstrates that prices for medicines in the UK have lagged behind prices generally.
Click here for larger versionNote: RPI = Retail Prices IndexSource: ONS MM22 Producer price indicesSource: ONS RPI figure
Many pharmaceutical and biopharmaceutical companies are registered on the global stock markets in order for the public to be able to invest in and part-own those companies. Over the last decade these markets have seen a large interest in biotechnological companies.
There are currently 10 biotechnology companies and 11 pharmaceutical companies on The London Stock Exchange (LSE) UK Main Market (FTSE100, FTSE250, FTSE500 etc.), and 16 biotechnology companies and 13 pharmaceutical companies on the Alternative Investment Market (AIM) for smaller companies. The profitability measure on the LSE is market capitalisation, which is a measurement in terms of size of a company equal to the share price times the number of shares outstanding (i.e. shares that have been authorised, issued, and purchased by investors).
Financial Times (FT) and Reuters both publish indices for the healthcare sector as a whole as well as for individual companies:
The Reuters website also publishes figures on profitability measures such as Return on Investment (ROI), performance measures used to evaluate the efficiency of an investment, and Profit Margins. For more information, please see the Reuters: Pharmaceuticals diversified web page or the Reuters: Pharmaceuticals generic/specialty web page. These data are updated daily and should be extracted directly from their websites for accuracy.