Case Solution on the Pharmaceutical Industry

Topics: Pharmaceutical industry, Pharmacology, Generic drug Pages: 6 (1497 words) Published: August 25, 2013
Q3. What are the prospects for the industry going forward?

1.Though the average level of profitability in the pharmaceutical industry has been declining over time (In 2002, the average ROIC in the industry was 21.6%; by 2006, it had fallen to 14.5%), historically, the pharmaceutical industry has been a profitable one. Because-

Name of industry| Average ROIC(Between 2002 and 2006)|
Pharmaceuticals| 16.45%(large)|
computer hardware| 12.76%|
Electronics| 3.88%|

2. The prospect for the industry for going forward is very positive. Because the demand for pharmaceuticals has been strong and has grown for decades. Between 1990 and 2003, there was a 12.5% annual increase in spending on prescription drugs in the United States. Looking forward, projections suggest that spending on prescription drugs will increase between 10 and 11% annually through 2013. So these customers spending will increase the profit of pharmaceutical companies automatically. 3. The prospect for the industry for going forward is very positive. Because the proprietary drag companies like Pfizer has already eight Blockbuster drugs that usually enough to generate 55% revenue. Q3.What are the opportunities, and what are the threats?

There are also some big opportunities on the horizon for firms in the industry. New scientific breakthroughs in genomics are holding out the promise that within the next decade pharmaceutical firms might be able to bring to market new drugs that treat some of the most intractable medical conditions, including Alzheimer’s, Parkinson’s disease, cancer, heart disease, stroke, and AIDS.

However, there are some threats to the long-term dominance and profitability of industry giants like Pfizer.

1.Controlled price in future: As spending on health care rises, politicians are looking for ways to limit health care costs, and one possibility is some form of price control on prescription drugs. Price controls are already in effect in most developed nations, and although they have not yet been introduced in the United States, they could be.

2. Enough new drug prospects in companies’ pipelines to replace revenues from drugs going off patent: Twelve of the thirty-five top-selling drugs in the industry were to lose their patent protection between 2006 and 2009. By one estimate, some 28% of the global drug industry’s sales of $307 billion would be exposed to generic challenge in the United States alone, due to drugs going off patent between 2006 and 2012. It is not clear to many industry observers, whether the established drug companies have enough new drug prospects in their pipelines to replace revenues from drugs going off patent.

3.Generic drug companies’ share of industry sales has been growing:generic drug companies havebeen aggressive in challenging the patents of proprietary drugcompanies and in pricing their generic offerings. As a result,their share of industry sales has been growing.

4. Renewed scrutiny:the industry has come under renewed scrutiny followingstudies showing that some FDA-approved prescriptiondrugs, known as COX-2 inhibitors, were associated with a greater risk of heart attacks. Two of these drugs, Vioxx and Bextra, were pulled from the market in 2004.c

Q3.What must pharmaceutical firms do to exploit the opportunities and counter the threats?

Pharmaceutical firms can do voluminous things to exploit the opportunities like as follows:

1. Invest more in R&D :Invest more in R&D especially for the development of new drugs that treat some of the most intractable medical conditions, including Alzheimer’s, Parkinson’s disease, cancer, heart disease, stroke, and AIDS. Because if they do so they can replace revenues from drugs going off patent.

2. Spend handful of money on advertisements and Promotional activities:Spend handful of money on marketing and promotional activities for launching new product. But here all companies can consider the cost of maintaining sales force. By...
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