Global Pharmaceutical Industry Analysis

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Global Pharmaceutical Industry Analysis
September 21
2009

Dibakar Mitra (P08017) I Manoj Joshi (B08026)


Table of Contents

EXECUTIVE SUMMARY 3
INTRODUCTION4
ORIGIN AND EVOLUTION5
ENVIRONMENT ANALYSIS (PEST)7
STRUCTURAL INDUSTRY ANALYSIS (PORTER)8
STRATEGIC ISSUES FACING THE INDUSTRY11
STRATEGIC GROUPS IN THE INDUSTRY ACCORDING TO MARKET/DRUG/FUNCTIONING 15 PROCESS FLOW: IMPORTANT FUNCTIONS16
STRATEGIC RESPONSES TO CHALLENGES: SIMPLE CORRELATION BETWEEN GROUP AND PERFORMANCE19 REGULATOR’S ROLE 21
POSSIBLE FUTURE DIRECTION21
CONCLUSION22
REFERENCE 22

Executive summary

This report provides an analytical strategic review of the global pharmaceutical industry; its origin, evolution, development and competitive environment within which it operates and the strategic issues facing the industry. The report also offers an overview of the industry, its key strategic groups, their strategic outlook, the impact of technological developments and possible future direction.

1.Introduction

The pharmaceutical industry develops, produces, and markets drugs licensed for use as medications. Pharmaceutical companies can deal in generic and/or brand medications and are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs.

Over a period of time many of these chemical companies moved into the production of pharmaceuticals and other synthetic chemicals and they gradually evolved into global players. The introduction and success of penicillin in the early forties and the relative success of other innovative drugs, institutionalized research and development (R&D) efforts in the industry. The industry expanded rapidly in the sixties, benefiting from new discoveries and a lax regulatory environment. During this period healthcare spending boomed as global economies prospered. The industry witnessed major developments in the seventies with the introduction of tighter regulatory controls, especially with the introduction of regulations governing the manufacture of ‘generics’. The new regulations revoked permanent patents and established fixed periods on patent protection for branded products, a result of which the market for ‘branded generics emerged. The top 10 firms and their particulars are provided in the table below.

Rank 2008 Company Country Total Revenues(USD millions) Healthcare R&D 2006(USD millions) Net income/ (loss) 2006(USD millions) Employees 2006 1NovartisSwitzerland
53,3247,12511,053138,000
2PfizerUSA48,3717,59919,337122,200
3Bayer
Germany
44,2001,7916,450106,200
4GlaxoSmithKline
United Kingdom
42,8136,37310,135106,000
5Johnson and Johnson
USA
37,0205,3497,202102,695
6Sanofi-Aventis
France
35,6455,5655,033100,735
7Hoffmann–La Roche
Switzerland33,5475,2587,318100,289
8AstraZeneca
UK/Sweden26,4753,9026,06350,000+
9Merck & Co.
USA22,6364,7834,43474,372
10Abbott Laboratories
USA22,4762,2551,71766,800

2. Origin and evolution

The origins of the modern pharmaceutical industry can be traced to the late 19th century, when dyestuffs were found to have antiseptic properties. Roche, Ciba-Geigy, and Sandoz all started out as family dyestuff companies based near the Rhine in Basel, Switzerland, which moved into synthetic pharmaceuticals and eventually became global players. Penicillin was a major discovery for the emergent industry, and during the 1940s and 1950s R&D became firmly established within the sector. The industry expanded rapidly in the 1960s, benefiting from significant new discoveries with permanent patent protection. Regulatory controls on clinical development and marketing were light and healthcare spending boomed as economies prospered.

The pharmaceutical market developed some unusual characteristics. Decision-making was in the hands of medical practitioners whereas patients (the final consumers) and payers (governments or insurance...
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