Novak, Ralph S.
M.S. (Master of Science)
Department of Management
Drugs--Law and legislation; Food law and legislation; Pharmacy--Law and legislation; Pharmaceutical industry; Cosmetics--Law and legislation
In 1962, the Kefauver-Harris Amendments to the federal Food, Drug and Cosmetic Act became law. This study was initiated to try to determine some effects of this legislation on the small pharmaceutical manufacturer. For purposes of this study the hypothesis was advanced that the 1962 Amendments would eventually place the small drug firm at a disadvantageous position in competing with the large pharmaceutical manufacturer. Therefore, the costs involved in developing new drugs, as well as the number of new drug applications awarded to pharmaceutical manufacturers for new single chemicals, both before and after passage of the 1962 Amendments, were studied. Research and development costs for the majority of ethical drug producers were found to range between 7.5% and 10.0% of annual sales. Thus, a small manufacturer, having by definition a maximum annual sales volume of 5 million dollars, had approximately $500,000 to spend for research; while the large corporations had between 20 and 35 million dollars which could be similarly employed. It was thereby shown that the large firm, which could afford big research budgets, had a considerable advantage over the small manufacturer in new product development. In addition, study of data, showing the number of new drug applications (necessary for future growth) granted between 1955 to 1964 to be revealed 1963 and 1964 to be the years making the least new product contribution; further, that of the New Drug Applications approved in these two years, all were awarded to large drug manufacturers. Further pointing out the impact of the 1962 Amendments on the drug industry and in particular on the small drug manufacturer. Next, the number of new products marketed during the period 1955 to 1964 was studied. Although the number of products introduced showed a general decline over the ten year period, the years immediately after passage of the Amendments (1963 and 1964) showed a decline greater than would normally be expected from the preceding eight year trend. Moreover, indications were, based on 1963 figures, that approximately 45 percent of the new products introduced were by large pharmaceutical manufacturers; whereas, the remaining 55 per cent of the new products introduced were divided between a few firms making up the 500 to 600 small drug companies. Also, reviewed was the authority given the Food and Drug Administration to establish additional controls on manufacturing procedures. It was shown that increased record keeping and more stringent control procedures eventually have an effect on the firm's production and distribution costs. From those and other factors brought out in the study, it was concluded that the Kefauver-Harris Amendments had, while tightening industry standards, inadvertently placed the small pharmaceutical manufacturer at a disadvantage in meeting competition from the large drug firms. In conclusion, possible methods available to the small manufacturer to offset any advantages gained by the large drug houses were considered; the arears explored were manufacturing of specialized unites, diversifying, merging to from more competitive units, and the forming of manufacturer cooperatives.
Kraft, Arthur F., "Some impacts of the 1962 amendments to the Food Drug and Cosmetic Act on the small pharmaceutical manufacturer" (1967). Graduate Research Theses & Dissertations. 4983.
Northern Illinois University
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