16.19 As noted above, for the purposes of this Inquiry, the biotechnology sector is taken to include pharmaceutical companies. The pharmaceutical industry undertakes the development, production and supply of pharmaceutical products. The Australian pharmaceutical industry has been described as:
an integrated part of the global industry. Subsidiaries of MNEs [multinational enterprises] undertake a significant proportion of pharmaceutical activity in Australia, although there are also some large Australian owned companies within the industry (particularly producers of out of patent drugs).
16.20 Globally, the pharmaceutical industry is dominated by horizontally and vertically integrated multinational entities. Some of these are engaged in joint ventures with universities, other research institutions, or smaller biotechnology firms.
16.21 Australia’s population represents 0.3% of the world’s population yet consumes around 1% of total global pharmaceutical sales. In 2002, the Australian human-use pharmaceuticals manufacturing industry generated revenue of about $6.1 billion. Around 143 separate firms are listed as suppliers to the Pharmaceutical Benefits Scheme, and these employ up to 16,000 people.
16.22 The Productivity Commission has described R&D as the ‘lifeblood’ of the pharmaceutical industry, which relies on developing new products to maintain and sustain growth. Pharmaceutical R&D involves drug discovery, pre-clinical testing and clinical trials to test new drugs for their effectiveness and safety. Total R&D spending by pharmaceutical companies in Australia is around $300 million annually.
16.23 The pharmaceutical industry is strongly dependent on patent protection. The lead time and costs involved in research and clinical trials are cited as one of the strong arguments in support of patents in this area. It is estimated that it can cost more than $900 million to bring a new pharmaceutical drug to market.
 Productivity Commission, Evaluation of the Pharmaceutical Industry Investment Program (2003), [1.2]. For the purpose of the Productivity Commission’s report, the pharmaceutical industry was defined as ‘all those who contribute to the discovery, development, manufacture and supply of human-use pharmaceutical products and services in Australia, including the biomedical sector’.
 Department of Industry Tourism and Resources, Pharmaceuticals Industry Profile, <www.industry. gov.au> at 16 June 2004.
 Ibid. See Ch 19.
 Government programs to support R&D in the pharmaceutical industry are discussed in Ch 11.
 Department of Industry Tourism and Resources, Pharmaceuticals Industry Profile, <www.industry. gov.au> at 16 June 2004. Clinical trials are the largest component of such spending.