The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceutical drugs for use as medications to be administered (or self-administered) to patients, with the aim to cure them, vaccinate them, or alleviate symptoms. Pharmaceutical companies may deal in generic or brand medications and medical devices. They are subject to a variety of laws and regulations that govern the patenting, testing, safety, efficacy, and marketing of drugs.

Drug discovery is the method by which potential drugs are discovered or designed. In the past, most drugs have been identified either by isolating the active ingredient from traditional remedies or by unexpected discovery. Modern biotechnology systematically focuses on understanding the metabolic pathways related to a disease state or pathogen and manipulating these pathways using molecular biology or biochemistry. A comprehensive deal of early-stage drug discovery has traditionally been carried out by universities and research institutions.

Drug development refers to activities initiated after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug development are to determine appropriate formulation and dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The cost of late-stage development has meant it is usually done by the larger pharmaceutical companies.

Often, large multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and dispersal. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of new drug substances. More recently, multi-nationals are increasingly relying on contract research organizations to manage drug development.