Pharmaceutical Industry

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Spiralling healthcare costs resulted in increased political intervention in the industry affecting strategy within the industry, including tighter regulatory and pricing legislation. The first concern is the move by the British government in 1985 to introduce a blacklist of certain patented drugs that it would no longer fund.

The strategic implication is that, as the major purchaser, the government are forcing the manufacturers of delisted drugs to seek new ways to market; Roche’s decline from a top ten firm to the forties when two of their major products were delisted demonstrates the implications for firms operating in a market with such a powerful purchaser. However, legislation fixing the patent length allows other, smaller firms to introduce generic drugs, effectively copies with little differentiation, as patents expire. With little R&D investment required, generics are available at a cheaper price than the branded original.

Prudent government purchasing is holding down demand at launch and flattening the product life cycle resulting in the need for High Compression Marketing (HCM)1. Regulatory bodies demanding increased clinical trials lengthen the lab-to-market lag but measures such as the European Medicines Evaluation Agency (EMEA) aim to limit this by coordinating trials so that one country provides the approval for all. However, the issue of regulatory bodies remains a complex issue strategically with each body differing. This is epitomised by claims that Japanese people metabolise drugs differently from westerners.

Therefore this blocks HCM, as it can prove difficult to coordinate a product launch globally. A further development is the growth of parallel trade due to greater European integration. However government imposed price differentials have resulted in profit losses for pharmaceuticals as the parallel importers benefit. This opens a strategic opportunity for the main players to acquire these importers and gain presence in low fixed-cost countries such as Spain. EU concerns over this allow pharmaceuticals to gain strength politically as they influence EU policy. Economic Environment

Although the industry seems “recession proof”2, economic recession affects the industry in countries with welfare systems and high healthcare spending as a proportion of GDP such as the UK and Korea (between 7 and 8%)3, as healthcare provisions decrease in times of recession. Arbitrage4 through tax minimisation can be obtained through manufacture in low tax countries such as the Republic of Ireland and Puerto Rico; combining with opportunities for parallel trade through the Single European Market. The US and Japanese markets remain the largest worth $133 billion and $51 billion respectively.

Along with Japan, Latin America is the other emerging economy in the industry. 80% of all pharmaceutical trade was conducted in just nine strategic economies5 allowing HCM. Socio-demographic Environment The major feature demographically is the “greying population” which is beneficial for the industry as people over 65 consume four times as many pills as those under, suggesting that firms should focus R&D on the aged market. Greater media coverage has raised awareness of the drugs available resulting in heightened DTC advertising and increasing availability of OTC drugs and creating a “pull” strategy.

Consequently, patient expectancy has risen placing the onus on the providers to deliver quality and value for money. On a global scale, private healthcare systems such as in the US mean that poorer people are unable to afford quality healthcare meaning that a portion of the market is left unexploited. Increased awareness over personal issues such as impotence and obesity have led to the development of lifestyle drugs. However, cardio-vascular disease remains the biggest market with 5. 2% of all sales. The AIDS epidemic in Africa remains a market under supplied with lacking funding in the continent.

Another demographic concern is the different manners in which different races metabolise drugs leading to difficulties in the clinical trial stages, thus making HCM strategy difficult to implement. Technological Environment Technological advancements within the industry focus mainly on biotechnology and the Human Genome Project. These have affected the industry by increasing the cost of R&D6 whilst the discovery of new chemical entities has fallen7. Strategically, the industry can incorporate functional genomics, which aims to develop drugs to meet specific targets.

Also Pharmacogenomics, the study of why different populations metabolise drugs differently will allow drugs to aimed specifically at those who benefit the most. I anticipate that the role-out of the above practices will reduce R&D costs in the long-term. On the demand side, the greater use of personal computers is improving methods of handling information including “formularies” of available drugs, thus creating awareness of generic alternatives to traditionally higher priced branded originals, therefore all manufacturers must compete on price and differentiation.

Related to the PC boom is the growth of Internet. This has greater effect in the USA where 71% of households have access with health issues the second most searched subject on the Internet. However, European use is more varied with just 12% access in Spain and 65% in Sweden. Strategically, this offers the pharmaceuticals the opportunity to build DTC (direct to consumer) advertising and thus awareness of the products available; 75% of US users who search for health issues are likely to discuss their findings with the healthcare providers, possibly asking for products by name.

Tagged In :

Get help with your homework

Haven't found the Essay You Want? Get your custom essay sample For Only $13.90/page

Sarah from CollectifbdpHi there, would you like to get such a paper? How about receiving a customized one?

Check it out