Global pharma industry

8/11/2019 Global pharma industry

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Internal

Environment

Five forces

Model

External

Environment

PESTEL


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Highly fragmented industry in 80s. Mergers ledto concentration of jobs in select countries.

More control thereby exercised by Governments.

Easy Targets To control rising healthcare costs

when medicines amount to 15% of healthcareexpenditure.

Multi country pricing due to Governmentregulations.

Patent on drugs India patents the process whileUS and EU patent the drug


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emand side

Doctors tend to favor branded drugs which are highmargin.

Globalization has made it possible for big companies to

mass market the drugs.Supply side

Global supply is fragmented. Pfizer has largest marketshare of 11%.

Regional players and the generic drugs which arerelatively cheaper are popular in developing world.

Need for blockbuster products as R&D investments donot justify the number of new drugs.


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Advancement in medicine has raised the lifeexpectancy to 75 and aged populationincreases the consumption. This adds strainon insurance companies and governments.

Socially aware, well informed and demandingconsumers.

Increasing aging population offered a rangeof opportunities

Increase in life style diseases and hence morepharma companies shift their focus to alucrative option


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System controlling clinical trials andregulatory approvals underwentmodernisation, leaving many domesticcompanies ill equipped

More technology, consumers became moreaware, resulting in increased demand andalso increased awareness aboutinternational price disparity

E-detailing used by sales force of pharmacompanies as a measure to cost cutting andtime saving


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There is a growing environmental agenda and the key stakeholders are now becoming more aware of the need forbusinesses to be more proactive in this field.Pharma companies need to see how their business and

marketing plans link in with the environmental issues.There is also an opportunity to incorporate it within theirCorporate Social Responsibility programmes. Marketing andnew product development should identify eco opportunitiesto promote as well. Human Genome and genetics are new

ways to discover drugs


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Varied patent laws in different countries. Many best selling drugs are replicated as generic medicine

in developing countries with full government backing. Clinical trials have become more rigorous thereby testing

more than 20,000 people in the complete run of 10-14years.

The industry benefitted in the 1960s due to newdiscoveries with permanent patent protection.

Thalidomide tragedy led to increase in the regulatorycontrol on clinical trials.

Fixed period on patent protection was introduced

typically 20 years. Due to enormous risks and large investment involved,firms started to compete fiercely in order to establish andretain the intellectual property rights.


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Generics legislation provided an incentive for innovation and arace to the market. Government agencies took long time to examine the data due to

rigorous regulatory scrutiny. To bring regulatory process harmonization, EMEA was

established to enable more rapid approvals across Europe

through centralized procedure. EU countries augmented voluntary codes of conduct with formalregulation after 2003.

Regulatory changes in 1997 permitted the pharmaceuticalcompanies to market directly to US customers fuelling rapidsales growth.

Japans regulatory system underwent a modernisation programwhich at the end resulted in low pharmaceutical growth of 1% in2002.

Expensive intellectual property rights led the companies to formresearch alliances.


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The industry has already high entry barrierswhich are increasing.

Need for global return on costly R&D favorslarge firms only

Emphasis on high-priced niche drugs for highunmet need diseases likely to support marketentry by bio techs.


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Here the influencers are doctors, hospital,government and not the end consumers, so endconsumers do not have much bargaining power ,brand identity exists but in the hands of theinfluencer

The doctors are price insensitive but susceptible tosales Governments and managed health organizations

imposing systems to control prices/reimbursementand demand

Rising patient expectations and growth of managedcare continues deteriorating the profitability of bigpharmaceuticals regardless of the outcome ofregulation

Substitutes available and so bargaining power is high


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Threat of substitutes is high Generics appear at a cheaper rate than the

branded drugs

Consumer suspicion of drugs leads toincreasing use of alternative remedies

Functional foods preferred as safer alternativeto drugs

Diversification into generics protects volumeshare (but not the profit) of bigpharmaceutical companies


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Profitable, cash-rich industry but marginsdeclining.

Mergers and acquisitions are expected tocontinue as they could lead to economies ofscale, global sales and marketing and moreefficient R&D efforts.

Intense rivalry within product classes.

Global pharma industry

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