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Analysis of global pharmaceutical industry over the years.

Analysis of global pharmaceutical industry over the years.

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Global pharmaceuticals group3 Global pharmaceuticals group3 Presentation Transcript

  • GLOBAL PHARMACEUTICAL INDUSTRY Submitted by -Chandan Kumar Singh 11DCP-071 1
  • CASE BACKGROUND The case describes how the prescription pharmaceutical industry has changed since its modern beginnings in the early 1950s. The various forces affecting the competitive environment of the industry are discussed in terms of origins, immediate past and immediate future (2004 onwards). Provides insights into the evolution of barriers to enter and exit the industry for prescription pharmaceuticals Detailed industry note on the “ethical” pharmaceutical industry which provides an opportunity to analyse key 2 success factors of major players.
  • CASE BACKGROUND Descriptive overview of the predominant issues in the three major Triad market areas: the US, Europe and Japan . Covers the overall industry environment with indepth discussion of the driving forces in the industry such as globalisation (in particular global regulatory issues, changing world demographics and worldwide pricing disparities). Development of new technology; the importance of time to market; and amalgamations. The case also examines issues around corporate social 3 responsibility
  • BRIEF HISTORY Post WWII, the pharmaceutical industry operated within a quite stable & highly profitable environment as compared to other industries The industry saw the development of many new drugs during the 1960s due to technological success. However as legislation was introduced in the 70s the number of „generics‟ increased & consequentially time to market of drugs also increased Emergence of biotechnology firms, limited buying ability of consumers leading to reliance on blockbuster drugs for income resulted in the instability in the industry 4
  • Patents introduced BRIEF HISTORY 60 50 40o Simple infections that were easy 30 Patents drug targets had been addressed 20 introduce 10 d 0o Advances over existing treatments 1999 1980 2001 2002 & research for therapy of previously untreated diseases started proving expensive & risky R&D Expenditure 60o Consumers started demanding 50 value for money products as their 40 buying power became increasingly 30 R&D Expendit limited 20 10 ure 0 5 In Billion $ 1981 2000
  • ENVIRONMENT ANALYSIS External Internal ScenarioEnvironment Environment Favorable, moderate PESTEL Five forces Model and unfavorable 6
  • PESTEL ANALYSIS Political Factors • Highly fragmented industry in 80‟s. Mergers led to 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 healthcare expenditure • Multi country pricing due to Govt regulations. • Patent on drugs – India patents the process while US and EU patent the drug 7
  • PESTEL ANALYSIS Economic Factors • Demand side • Doctors tend to favor branded drugs which are high margin. • Globalization has made it possible for big companies to mass market the drugs. • Supply side • Global supply is fragmented. Pfizer has largest market share of 11% • Regional players and the generic drugs which are relatively cheaper are popular in developing world • Need for blockbuster products as R&D investments 8 do not justify the number of new drugs
  • PESTEL ANALYSIS Social Factors – • Advancement in medicine has raised the life expectancy to 75 and aged population increases the consumption. This adds strain on insurance companies and govts • Socially aware and demanding consumers Technological and Environmental factors • Human Genome and genetics are new ways to discover drugs • Rising aged population in west and middle class in developing countries makes the long term 9 prospective good.
  • PESTEL ANALYSIS Legal factors • 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 10-14 years 10
  • ENVIRONMENT ANALYSIS External Internal ScenarioEnvironment Environment Favorable, moderate PESTEL Five forces Model and unfavorable 11
  • Factors Past Future Threat of • The industry has already high entry • Firms specializing in moving potential barriers which are increasing. specific molecules along the value entrants • lead times for new drugs to be chain could be tomorrows main marketed increasing from 3 to competitors. 5years in the 1960s to 12 years by • Emphasis on high-priced niche the mid-1990s. drugs for high unmet need diseases • Need for global return on costly R&D likely to support market entry by bio favors large firms only techs. Power • Governments (EU) and managed • Controls on pricing , reimbursement of buyers health organizations (US)imposing and market access continue to systems to control tighten(„value for money‟ is atop prices/reimbursement and demand . concern on both sides of the • Growth of parallel trade. Atlantic). • Harmonization of regulatory approval • Growth of managed care continues systems. Rising patient expectations. deteriorating the profitability of big pharmaceuticals regardless of the outcome of regulation. 12
  • Factors Past Future Power of • Cheap generics. • Biological generics appear. substitutes • Reduced lead times for „me-too‟ • Diversification into generics drugs from 6to 7 years to 18months; protects volume share (but not the • Consumer suspicion of drugs leads profit) of big pharmaceutical to increasing use of alternative companies. remedies • Functional foods preferred as safer alternative to drugs Power of • Global sourcing leads to further • Emergence of China and India as suppliers reductions in the costs of raw key out-sourcing locations. materials. • Cost of licensing deals drives • Major pharma companies come companies towards more increasingly to rely on in-licensing for acquisitions new products, raising prices on such deals Competitie • Profitable, cash-rich industry but • Continued industry consolidation in rivalry margins declining. static market results in fewer larger • Mergers and acquisitions are global companies, focused on expected to continue as they could specific franchises , with intense lead to economies of scale, global rivalry within therapeutic franchises. 13 sales and marketing and more efficient R&D efforts. • Intense rivalry within product
  • ENVIRONMENT ANALYSIS External Internal ScenarioEnvironment Environment Favorable, moderate PESTEL Five forces Model and unfavorable 14
  • INDUSTRY TRENDSo The pharmaceutical industry is facing a rapidly changing environment.o The need for global presence to achieve adequate return on escalating marketing and R&D costso A strong focus on health care cost containment, such that new treatments must be justified on cost–benefit grounds, adding to development costso To command price premiums, new products must offer unique benefits, yet information leakage means that most products are imitated rapidlyo IT developments provide greater access to detailed health care information for both providers and patients, also pushing forward cost-effective treatmentso Educated consumers demanding advances in therapy 15o There are opportunities to change organizational models but no-one has yet found a feasible alternative
  • Scenario 1: Favorable Increased opportunities for pharmaceutical sales developing in emerging markets. Little substitution from biotech products No entry of new participants and a decrease in mergers and acquisition activity Time to market remains critical but genomics helps to fine- tune NCE selection and reduce time in clinical trials. Organisational changes result in a number of very promising “blockbuster drugs” advancing through the pipeline There will be greater harmonisation amongst international markets.• 16
  • Scenario 2: Moderate Substitution from biotech products, some advances to reduce R&D expenditure. Outsourcing (i.e. licensing of products) continues to develop but without challenging established players. Entry of new participants and/or consumers opting for some forms of alternative medicine Slow but consistent steps towards greater industry concentration continue. There will be increasing sales opportunities in emerging and recently industrialised countries. 17
  • Scenario 3: Unfavorable Most income generation is associated to licensing agreements and profits will thereby get squeezed. There is a recruitment crisis as a whole generation of new scientists is lost to mid-sized players and biotechs. Results in dying of blockbuster drugs. All investments in genomics prove futile at present as it will be one or two more generations before any practical result is evident. Emergence of new alternative forms of non-drug-based therapeutic treatments and widespread adoption of alternative medicine practices. Entry of new global participants such as Japanese, Korean or Indian laboratories will intensify the competition. Increased mergers and acquisition activity puts substantial short-term pressure on profit margins. 18
  • ETHICAL CONSIDERATION There are thus key issues around the ethical stance of pharmaceuticals, their stakeholders and society at large including:  Property rights  R&D, budget constrains and the pursuit of ailments in emerging markets  Being in the public eye (as a consumer goods manufacturer and a provider of health products) 19
  • BUSINESS IMPLICATIONS-GOING FORWARD Innovation will be the most important thing, more important than the size of the organization. The main reason behind this is that there has to be points of difference with every new product so as to charge a premium price to it. With more of information leakage, most of the products are copied quickly. With more of R&D costs, it becomes extremely necessary to achieve adequate returns on the pipeline as this will pave the way for the success of manufacturers. New drugs need to be developed with respect to diseases which are ignored. A firm has to be more consistent in its approach with having constant innovation of new drugs. 20
  • THANKS FOR YOUR TIME AND CONSIDERATION 21