Although the origins of the modern pharmaceuticals industry can be traced back to the late 19th century, the real development started in 1960s due to some new and innovative discovery with permanent protection. Next couple of decades saw tightening of regulatory control in the sector all across the world. It was during this period that drugs got laws for patent protection, leading to the appearance of generic drugs.

The introduction of generics was very beneficial for society as the valuable medicines became extremely cheap. 1980s and 1990s saw the introduction of venture capital in the pharma and biotech industries. Due to worldwide reforms in the healthcare sector, several regulations were passed to control the pricing of the drugs and deliverance of genuine product innovation. By the turn of the century, all the leading drug companies were spending reasonable amount of their revenue in research and development (R&D).

Today, the global pharmaceuticals industry is more than USD 550 billion and has grown at a compound annual growth rate of more than 6% in last 5 years. Geographically, north America is the biggest pharmaceuticals market with a share of almost 50%, followed by Europe 30% and Japan 9%. Around 20% of all retail prescriptions filled today are related to Medicare. Of those only 31% are for branded drugs and rest are filled generics. 

At present there are over 1,000 drugs under development, with companies diverting increasingly large proportions of their revenue streams into R&D, the primary driver of competitiveness in the industry.

Having traditionally enjoyed strong growth rates, the industry's operating environment is becomingly increasingly complex. Volume growth is, currently, negligible, the primary driver of industry value being rising per-unit values, whilst the rise of generics is eroding sales growth. Under these circumstances, the global pharmaceutical market is expected to show slightly slower growth in coming years and is predicted to be in the range of USD712 billion to USD 745 billion by the end of 2008 which is depicted below. In recent years, pharmaceutical companies in Asia, particularly in China, South Korea and India, have been a success due to their ability to retain their cost advantage while matching the quality standards of the west. Despite an impressive growth, foreign drug makers are particularly concerned with issues on corruption, governmental bureaucracy and intellectual property (IP) protection in these countries. These issues are important particularly when growing drug counterfeiting activities pose a major global public health risk as well as a financial and reputation threat to pharmaceutical manufacturers. Drug pricing pressures are challenging the pharmaceutical industry like never before, with governments resorting to drug price controls and other measures to manage spiraling pharmaceutical costs.