Economic Profitability of the Biopharmaceutical Industry 2022

September 22, 2022

How does the biopharmaceutical industry’s economic value added (EVA) spread compare with that of other industries? Managing Director Richard Manning and Vice President Anushree Subramaniam examine how the EVA spread of the biopharmaceutical industry has changed since 2020. This policy brief covers the following findings:

  • Traditional profitability measures showing high profits for the biopharmaceutical industry do not account for the differing risks and costs of capital across industries.
  • Including risk and cost of capital measures in the analysis enables a more comprehensive view of economic profitability that captures the risk-reward landscape across different industries.
  • An evaluation of industry profitability using appropriate measures reveals that biopharmaceutical industry profits are generally below the median of all industries considered. An earlier version of this analysis finding a similar result has been cited by the U.S. Congressional Budget Office in its January 2022 report on the prescription drug industry.
  • Data are mixed on whether COVID-19 resulted in financial gains to the biopharma industry.

Read the brief here

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