1) External Environment:
The Pharmaceutical Industry is dependent on political and legal conditions of general environment. In pharmaceutical industry we have two kind of medications which are generic or innovative. Innovative pharmaceutical industry success depends on the patent protection in the industry. For example, in United States innovative industry can have 10 to 12 years of patent protection life from the time that product is for sale in the market. Success of the generic pharmaceuticals which are bioequivalent to innovative pharmaceutical is also related to the political and legal environment of their market. If we look at pharmaceutical industry globally we can see that regulations toward generic pharmaceutical are different in different countries. For example, in United States they have the Hatch-Waxman ACT 1984including Abbreviated New Drug Application which reduce the drugs approval period and give the chance to Generic companies to have a 180 day exclusivity period if the generic company can submit an abbreviated new drug application before other generic competitors. In Europe regulations are different in each country for example, United Kingdom and the Netherlands are very similar to USA, and countries such as Germany and France are more physician-driven or branded generics market and the cost of sale for generic products are higher in these countries. Market for generic drugs in the rest of the world also depend on the regulations in each country. For example Japan and East Asian market are highly regulated and generic drug occupy only 10% of pharmaceutical drugs in Japan. Developing markets such as Latin America, eastern Europe, Russia, India and China are very attractive for generic market. 2) Attractiveness of the industry
Pharmaceutical industry has some of porter’s five forces model of competition: a) Threat of new entrants:
In pharmaceutical industry we can see that low cost firms are entering the pharmaceutical market and because of their low prices they can be a threat to other bigger pharmaceutical companies. There are new low cost companies from India (Ranbaxy), Eastern Europe and Iceland. For example, Indian firm Ranbaxy is using its low cost advantage to compete with other pharmaceutical companies abroad.
b) Rivalry among competing firms in the industry:
There is a high rivalry among Generic industry competitors in offering the lowest possible price and obtaining the 180 days exclusivity period. Also Innovative firms are competing for patent challenges by using legal process. For example, companies such as Mack, Pfizer and Eli Lilly released their own authorized generic version of their own product during the 180-day exclusivity period by licensing production rights to a competing generic company. c) Threat of substitutes products:
Innovative firms are more in danger due to the increased demand for lower cost drugs because of aging population and increase in healthcare costs and more than 70 drugs will lose patent protection by 2010.
d) Bargaining power of buyers;
The power of buyers in pharmaceutical industry is related to the kind of product they need to buy. For example, if the buyers need the new innovative and discovered product that is offered only by the innovative pharmaceutical company they don’t have a lot of option and power but to buy that product at the price which is given by seller. But for generic medication there is a high competition between generic medication companies and buyers have more choices and they have a lot of power because they would go for the lowest cost generic medication. e) Bargaining power of suppliers:
There is not enough information related to the suppliers that provide ingredients to the pharmaceutical companies, but in pharmaceutical industry companies that own active pharmaceutical ingredient production will be more powerful and power of suppliers would not be high...