Global Pharmaceutical Industry

Introduction

The Global Pharmaceutical Industry is one of the multinational industries which gained a high cycle of growth especially in 1960s and the industry is in high risk, regulated and driven by lengthy R&D expenditures. The industry can be different in medicinal chemical, biological, ethical, proprietary product and private formula manufactures by their backgrounds and operation sectors and does not cover consumer or animal healthcare. In 2008 total revenue of global pharmaceutical industry was $615.1 billion and expected to reach $734 billion at the end of 2013. United States, Europe and Japan are the largest pharmaceutical market. The report critically analyse the Global Pharmaceutical Industry, importance and growth with the expect of internal and external environment analysis, plausible views of industry in the future and moral values. (Global pharmaceutical).

A: identification of the main environmental forces currently affecting the pharmaceutical industry.

PESTLE

PESTLE analysis used to help organisation to understand in depth that what is the current status of the organisation and the external factors which are effecting. It also helps to the Management to make strategy for the future and overcome the weak areas of the organization. PESTLE is comprises of political, Economical, Social, Technological, Legal and Environmental factors. (Author)

Political

The both policies (domestic and foreign) of government have a great effect on the industry innovation as compare to the other factors. To get the attentions of firms due to increase the economic importance, government offer special incentives which encourage to the industry to globalisation. For example GSK increase their operations in Singapore due to low taxes and others government support. Same like, United States purchase more than 45% of drugs, the main reason is to allow foreign industry to compete with local which may help to low prices and reduce health budget. (David Floyd, 2008)

From 1980 governments focused on pharmaceutical industry to handle the challenges of price control, monopoly and trade. For example in the European countries like Spain, Portugal, France and Italy the pharmaceutical market is cheap and thus these countries are used to ship their products to UK, Germany and Sweden for high price market. In US the price of pharmaceutical goods are high as compared to neighbour’s country Canada due to the lake of price control. Like in US Lipitor (cloistral medicine) were sold with $3.20 per pill in 2003 as that of $1.89 per pill in Canada. (Sarah Holland Jul 2004 )

Environment

Environment movements are real threats for Pharmaceutical industry as these movements focus on green environments and reduce chemicals and carbon which comes from pharmaceutical industries. It is not being possible to ignore these issues as they are supposed to be practiced under United Nation charter for clean and better environment. For example Pfizer is a well reputed British Pharmaceutical company which has aims to save the environment as much as possible from chemicals, waste water which includes active pharmaceutical ingredients mixture of different compounds and carbon which comes from their pharmaceutical industries.

Different strategies could be used to reduce carbon and chemical waste from drugs for human environment, like proper consumption ,good way of savages for hospitals waste water like advance waste water treatment technology, private house hold expire drugs, training and education of medical professionals to reduce over prescription, and public education and awareness. These strategies could be help full for save green house environment from drugs.

In conclusion if we do focus on three principal strategies to reduce the input of chemicals compounds, carbon, and waste water in to the environment are substitution of complex chemical compounds, advance technical approach, and proper education and training of doctors, retailers and consumers. (Klaus Kümmerer, 2009)

Social

The social life, physical activities and level of health of a community affects the pharmaceutical industry. Change in social life and trends mention new direction for the local and national pharmaceutical industry. In the same way age of the individuals deeply change the dimensions of the industry like the citizen of a community aged more than 60 yeas consumes more drugs than the young people. Recently, the industry gets attraction and become more popularafter impact of global diseases e.g. SARS, AIDS, because of media and government attention. (Micheal A. Santoro, Date not available)

Technology:

Technology plays a vital role in to pharmaceutical industries according to current state of art methods for development and manufacturing of drugs and open new ways of research and invention. The usage of advance technologies automatically impact on social, economic, and environment. Advance technology in pharmaceutical industries help full to accurate characterize chemical compounds, better control on new enhance scientific methods and their optimization. Which decrease extra time, money and efforts and produce more accurate drugs for specific disease, and decrease all hurdles from research to manufacturing efficiently, reliably, and rapidly. (Troy Shinbrot, Benjamin J. Glasser, 2002)

Economy

Currently the pharmaceutical industry is less affected as compare to other manufacturing industries and until 2011 the industry is ideal for foreign direct investment growth. (World investment prospect survey, 2009). Despite this, in 2002 slow economy growth put the pressure on the EU market and restricts it to 8%. The global pharmaceutical industry is effecting due to interest, taxes, inflation and exchange rates which are included in the economic factors of global pharmaceutical industry. Change in the foreign currency rates makes affects on the exports and imports of drugs. High interest rates discourage investment the industry for firms and stake holders. Research and Development is a lengthy procedure which have also economically effect on the industry. Mergers and diversification allows the industry to enter in new market or develop new drugs. In 1996 two big companies, Swiss giants Ciba and Sandoz, merged one company called Novartis and attempted to cut R&D costs (James H. Taggart, 1993)

Legal

Undoubtedly pharmaceutical industry is a highly regulated and patent law. Pricing policies and product liability laws on pharmaceutical innovation are highly affected. The innovation of pharmaceutical is also affected because of regulation. Which cause delaying the market launch of new products and process through lengthy approval time. In United States the greater restrictions of regulation is evidence to delay in the local market of demanding new drugs. In 1989, 18 of the 23 new drugs introduced and approved for marketing in other countries while in US received their first marketing. (Stevens, Mark, 2009)

Furthermore the World Trade Organisation introduced new rules for copyright protection which later overcome the problem of fake production and allowed some relaxation of exporting the Aids drugs to Africa. In 1995, with mutual understanding many countries made different changes in their “National Laws Governing” IPR which directly impact on pharmaceutical industry. (James, H, 1993)

SWOT

Swot analysis in pharmaceutical industry provide a crystal clear scenario about on coming threats to this industry , scope of pharmaceutical industry its opportunities , advantages and provide summary analysis of strategic planning model and weakness areas including draw backs ,hurdles related to this industry.

Threats

The infrastructure of pharmaceutical industries is very different compare to other major Industries. Pharmaceutical approaching techniques state way comes in to open market environment. The influences of government in shape of pricing and legislation – individual consumers and whole sellers’ free choice directly interact with this industry.

The most of new drugs approvals and launches has decreased in the past decade, making it hard to make awesome income with these government strategies to decrease health care expenditures gives more threats in pharmaceutical industry. Over the next few years the pharmaceutical industries could be face Series downturn about of patent expiry. Drugs which are contributing 17 to pharmaceutical sales in 2008 lose patent Protection between now and 2012. (K. George Mooney, 2001)

Weakness

There are multiple examples of weakness associated with pharmaceutical industries. Some are highlights below, for example association of funding and results. Pharmaceutical company funding of clinical trials is strictly linked with published results favouring those companies’ interests. This is an important issue which should be solved and is major weakness of Pharmaceutical industry.

Another weakness in pharmaceutical industry is shortage of supply and demand of men power in industry and output from universities. There is need to collaboration and partnership between pharmaceutical industries, education institutes, and government to deal with the shortfall the challenge comes from balancing education in basic science with training in the emerging areas of science and technology. (R. Barker, M. Darnbrough, 2007)

Strengths

The pharmaceutical industry is one of the most productive and profitable industrial sectors. Therefore, effective intellectual property protections play a vital role to maintain innovation and research for products development. Study shows that USA & UK pharmaceutical industry is one of the most power and successful industry sectors in the world. The main reasons behind is commitment in to R&D sector. That’s in turn give sustainable and competitive advantage for more promising growth in industry and its development. Intellectual property protection is a basic strength for the success of the pharmaceutical industry. The pharmaceutical industry is so dependent on the patent protection, because only through strict enforceable patent protection drug companies can generate sufficient revenues. However patent protection is beneficial to inventions in the pharmaceutical industry. (Yu-Shan Chen, Ke-Chiun Chang, 2009)

Opportunities

Regardless of threats there is vast majority of opportunities with the help of different alliances, pharmaceutical industry can bring amazing resources and capabilities to compete threats and weakness’ which is now a day’s industry is trying to coping. New partnerships brings industry in to new market , deal with better trading , better economy opportunities , reducing cost ,and help to develop new inventions and research to compete market .

One of the most important reasons for making external alliances is state of the art technologies for new products, invention and research which individual companies couldn’t handle and develop by their selves from internal resources. (William W. McCutchen Jr., Paul M. Swamidass, 2004).

B: Scenario planning for Global pharmaceutical industry

Scenario planning methods used for nature and impact of the most certain and important driving forces our world; it is a process that encourages knowledge exchange and mutual understanding of the central issues for the future of the business.

The demand is increasing for new drugs as the population rises and their medical support need increases.

The process of the pharmaceutical industry can vary but the end result must be an action plan for each scenario with the following:

o Environmental scan

o Scenario options

o Financial projections

o Action plan describing how the scenario would be implemented

Features of Scenario planning and effects.

Advantages.

· Multiple scenarios and diverse outcomes.

· It includes various input source and helps in discussing with all the participants.

Disadvantages

· Doesn’t quantify the value of possible actions and lack structuring futures.

· Non rational procedures for determining the future.

Over the next few years, patent expirations will represent lost revenue of between $25 billion and $50 billion which will spur strategic alliances between R&D and generic

companies. The industry, experts say, will see a move to specialty products to fill unmet needs and a shift from a treatment and/or cure approach to prevention while pressure to bring product costs down will likely determine which products prevail in the marketplace. (Caribbean Business, MARCH 19. 2009)’

Relationship Management and transportation: It is very important to ensure that there is transparency along the entire value chain and especially in the Pharmaceutical industry as it has become a Global industry. It is also very important to maintain the customer trust and also managing the good relations with the entire stakeholder.

C. Identification of implication of changing business environment on pharmaceutical firms

“Drug discovery companies are experiencing many important transformations, which have contributed to the uncertainty of their competitive business environment. The uncertainty is underlined by the abundance of players within the industry.”

(Chaudry & Dacin 1997, p. 696).

Focus and Cost: Pharmaceutical industry should review all their processes to stay competitive. A strong focus on Business and on core business activities. it is the need to have strong focus of developing processes which can be suitable for using across multiple manufacturing sites.

Following are the some of the points which are interlinked and have an impact of decision making process, business practices and behaviour patterns.

· Slower and more bureaucratic regulatory procedures:

· Demographic development leads to pressures for medical cost containment:

· Regional integration:

· New directions for organizing health care:

· Rise of patient as consumer:

· Introduction of new innovative technologies:

· Shorter effective product patent life:

· Centralization in drug licensing decisions

D: Prevalence of ‘ethical stance’ in the pharmaceutical industry and its strategic implications.

In 1958 the shortage of polio vaccine and negligence in the law of Cutter pharmaceutical were main ethical challenges. Meanwhile the issues of marketing practices, pricing and clinical study has grown up to till date (Offit, 2005). Physicians’ prescription changes the drug sales efforts and marketing of drug companies. (Katz 2003, Blumenthal 2004

As studied has shown that the drug safety and pricing were the two main ethical issues increased during 2004-2005 and observed with 114 times of drug safety which was followed by 89 times of pricing. According to the (USA today, 2005) report, 27.6 % price of 115 brand were increased in four years which raised the question regarding public perception towards waste advertisement and cost of R&D. Even in United State, pharmaceutical firms were involved in pricing and marketing crimes and had to pay more than one billion dollars fine in 2003

The legalisation of importation and reimportation can be factor of drug price was another issue identified many times in Canada. Through reimportation the prescription cost can be cut for patients and helpful to control the healthcare budgets. (Flaherty and Gilbert, 2003).

Reference:

Chaudry, Peggy & Dacin, Peter (1997): “Strategic Planning in a Regulated Trade

Bloc: The Pharmaceutical Industry in the European Union.”, European Management Journal, 15:6, 686-697.

Blumenthal, D. (2004), “Doctors and drug companies”, New England Journal of Medicine, Vol. 351 No.18, pp.1885-90.

European Journal of Pharmaceutical Sciences, Challenges faced by thepharmaceutical industry, K. George Mooney Volume 12, Issue 4, February 2001, Pages 353-359

Global pharmaceuticals, Datamonitor publication, 2008, [accessed online] available at:

www.datamonitor.com

Healy, D. (2003), “In the grip of the python: conflicts at the university-industry interface”, Science and Engineering Ethics, Vol. 9 No.1, pp.59-71

James, H. (1993), ‘The world pharmaceutical industry’ 4th edition. Chapman and Hall, London, UK

Bátiz-Lazo, B. and Holland, S (June 2001) Strategy and structure of the pharmaceutical

industry, Open University

Katz, D., Caplan, A.L., Merz, J.F. (2003), “All gifts large and small: toward an understanding of the ethics of pharmaceutical industry gift-offering”, American Journal of Bioethics, Vol. 3 No.3, pp.39-46.

Offit, P.A. (2005), The Cutter Incident: How America’s First Polio Vaccine Led to the Growing Vaccine Crisis, Yale University Press, New Haven, CT,

The Journal of High Technology Management Research, Volume 15, Issue 2, August 2004, Pages 197-214, William W. McCutchen Jr., Paul M. Swamidass

MISG Secretariat (2002), Pharmaceutical Industry Competitiveness Task Force: “One Year On” Report, Ministerial Industry Strategy Group, London, available at:

www.doh.gov.uk /pictf/ pictfonevearon.htm

Floyd, D, (2002), Investment Decisions in Eastern Europe,

Floyd, D, (2002), Investment Decisions in Eastern Europe, European Business Review, Vol 12, No 2.

Yu-Shan Chen, Ke-Chiun Chang .The relationship between a firm’s patent quality and its market value — The case of US pharmaceutical industry Technological Forecasting and Social Change, In Press, Corrected Proof, Available online 16 July 2009

R. Barker, M. Darnbrough . The Role of the Pharmaceutical Industry Comprehensive Medicinal Chemistry II, 2007, Chapter 1.14, Pages 527-552

Micheal A. Santoro, Charting a sustainable path for the Twenty-First Centaury pharmaceutical Industry, Cambridge Univeristy Press, Pages 1

Stevens, Mark , Legal and regulatory updates. Gasson, Tony 2009, Vol. 80 Issue 5, p31-32, 2p, Ebsco publications.