Pharmaceutical Industry

Topics: Strategic management, Generic drug, Pharmaceutical industry Pages: 11 (3419 words) Published: November 16, 2010
The Pharmaceutical Industry which was a small scale industry made strides at a greater rate after 1970s. There are five types of Industry players in pharmaceutical industry: Ethical, generic, Biotech, OTC and Vaccine companies. The major players in this industry are Johnson & Johnson, Pfizer, GlaxoSmithKline, Sanofi-Aventis and Novartis. The major markets for these pharmaceutical companies are USA, Japan, EU, China and Mexico. The pharmaceutical industry has made a huge impact in the well being of mankind, but time and again this industry has been scrutinized by media and government in their quest for controlling health cost. All the procedures in this industry have become expensive but the productivity is on the decline. This report focuses in exploring the environmental factors that affect pharmaceutical industry with the assistance of tools such as PESTEL, SWOT and Porter’s Five Force Model. Then suggestion on changing pharmaceutical business scenario is explored. Use and drawbacks of the tools are also discussed. STRATEGY

Strategic management is a flow of decision and actions that leads to the development of an effective strategy which in turn helps in achieving the objectives and goals of an organization (Gleek and Jaunch (1984) sited in Robson.W, 1997: 6) The five Industry players pursue diverse strategies to compete in the market. The brand prescription drug manufacturers call for strong R&D, global sales and marketing infrastructure. A generic company most often focuses on speed to market and manufacturing cost leadership. Biotechs is interested in creating a scholarly property in particular research fields. OTC drugs manufactures are more concerned in direct-to-consumer marketing. ENIVIRONMENTAL FORCES CURRENTLY AFFECTING THE PHARMACEUTICAL INDUSTRY The PESTEL analysis five-force model and SWOT analysis are used for finding the environmental forces that affect the business.

The PESTEL analysis is done for cataloging the vast number of possible issues that can affect an industry. The PESTEL analysis categorizes environmental influences on business such as: * Politics forces: Refers to the government policies and regulations. * Economics factors: Refers to factors such as exchange rates, taxation changes, inflation and economic ups and downs in the market. * Social factors: Refers to income distribution and social trends. * Technological factors: Refers to influences of technology such as internet. * Environmental factors: It includes pollution and waste issues. * Legal factors: It refers to the laws in the industry.

The Environmental and legal factors are discussed within the four factors. POLITICAL FACTORS
On account of the multiple tragedies associated with the pharmaceutical industry in 1950s and 1960s, there was a drastic change in regulatory methods and laws regarding the quality and usefulness of new medicines. This has brought about a start for changes in laws and regulations of pharmaceutical products. Strict government regulations were in place by 1980s which gave the government power and provisions to control the rising expenditure of health care. Many governments introduced reimbursement controls and payment for patents of the drugs. The existence of stringent legislations concerning a fixed-period patent protection prevents many pharmaceutical companies form adopting new product. Frequently changing plans of the European governments regarding cost reduction has compelled the companies to work with variable operational plan. ECONOMIC FACTORS

The pharmaceutical industry is fairly protected from the economic changing conditions as the demand remains constant. The demand for the pharmaceutical products is a solely dependent on the overall health of the population. A single European market allows the companies to sell anywhere in Europe which run the risk of low profit due to currency rates and exchanges. The money spent on R&D is difficult...
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