SIC 2833 Medicinal Chemicals and Botanical Products

SIC 2833

This classification covers establishments primarily engaged in manufacturing bulk organic and inorganic medicinal chemicals and their derivatives, as well as processing—grading, grinding, milling—bulk botanical drugs and herbs. Included in this industry are establishments primarily engaged in manufacturing agar and similar products of natural origin, endocrine products, manufacturing or isolating basic vitamins, and isolating active medicinal principals from botanical drugs and herbs.

NAICS CODE(S)

325411

Medicinal and Botanical Manufacturing

INDUSTRY SNAPSHOT

Medicinal and botanical manufacturing reached $9.82 billion in revenue in 2006. Products from this industry appealed to a variety of different people, due to the wide diversity of offerings, with more constantly in development. Approximately $55.2 billion was spent on research and development activities by pharmaceutical manufacturers in the United States in 2006.

Companies in this industry segment furnish the active ingredients used by pharmaceutical firms to manufacture finished products, called pharmaceutical preparations (see SIC 2834: Pharmaceutical Preparations). Active ingredients constitute the portion of a finished drug that creates the desired effect—therapeutic or preventive—for humans and animals. Extracts of crude drugs (not yet processed) derived from plant or animal sources are important examples of the components produced by this industry sector.

By the 1960s, synthesized chemicals—either a manufactured copy of an organic or inorganic substance or a new chemical entity (NCE)—had become common active ingredients in pharmaceuticals, from vitamin pills to hormones. Meanwhile, the biotechnology revolution, beginning in earnest in the 1980s, produced methods of inserting genetic material into small microorganisms. This made them miniature factories for the production of active drug ingredients like insulin and, in the process, created new molecular entities (NMEs) that could be patented.

ORGANIZATION AND STRUCTURE

A large number of the medicinal and botanical establishments are divisions or subsidiaries of other firms, including pharmaceutical industry giants such as Merck and Hoffman-La Roche. Parent firms that have developed in-house active ingredient suppliers are said to be "back-integrated," and their chemical products are referred to as "captive," dedicated to the parent firm. Chemicals produced by firms independent of the final purchaser are called "merchant."

"Fine" chemicals are pure substances that are produced by a chemical reaction. Many fine chemical companies that produce for the merchant market are contracted to large pharmaceutical companies to supply custom or specialty chemicals, and others produce and sell them on the open market. The latter often manufacture well-known bulk pharmaceutical compounds, like those used in the production of aspirin. Custom and specialty chemicals are produced in smaller quantities than bulk chemicals and frequently combine several different chemical compounds called intermediates, which are more expensive. Traditionally, fine chemicals were those with fewer impurities than the industrial chemicals not intended for human consumption.

Both the back-integrated firms and the independent fine chemical companies are involved in the complex processes of producing extracts of natural substances, synthetic inorganic and organic chemicals, or combinations of any or all of these, that go into most modern medicines. The specific formulas for these substances can be found in academic monographs or in the official U.S. Pharmacopeia (USP) and the National Formulary (NF). If they have not yet been manufactured on an industrial scale or are entirely new compounds (NCEs or NMEs), the pharmaceutical firm creates a document as a reference for its own in-house producers or as a guide to firms contracted to supply active ingredients. These references provide manufacturers with the acceptable legal standards of purity and potency for products. A new manufacturing process, as well as an NCE or NME, can be patented in the United States.

Active ingredients from natural sources start as crude drugs. According to the standard text on drug extraction from natural sources, Pharmacognosy, crude drugs from vegetative or animal origins are "natural substances that have undergone only the processes of collection and drying." Natural substances are those "found in nature…that have not had changes made in their molecular structure." The sources of these substances, medicinal plants or the animals from which glands and organs are needed, can either be raised commercially or collected in the wild. But environmental concerns tended to support the former in the 1980s and 1990s. Especially with plants, it is of vital importance that the correct species be identified before collection. Once a crude drug has been collected and the needed portions separated and cleaned, it must be safely stored or immediately processed according to how quickly the active ingredient might spoil or lose its potency. Plants are often stored over long periods to help decompose unwanted plant components while leaving the desired portions intact. Animal glands and organs, however, are generally processed quickly to avoid deterioration.

If the crude drug is a plant, the active constituent—the ingredient desired for the final drug product—must be extracted. The first step in this procedure is grinding and mincing the appropriate plant parts, such as the leaves or the seeds. Production facilities in this industry house hammer mills, knife mills, and teeth mills designed to reduce leaves, stems, seeds, or roots to a manageable powder composed of evenly sized granules. Some plant products, such as herbal remedies, can be packaged at this point for sale or combined into other preparations. For most plant-derived drugs, the powdered plant must be submitted to a series of solvent baths (a process called maceration) in alcohol or ether, or the plant goes through a series of distillation procedures (in the case of volatile oils) that separate the desired ingredient from the crude material. Animal glands or organs are...

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