History and Analysis of the Pharmaceutical Industry

Topics: Strategic management, AstraZeneca, SWOT analysis Pages: 15 (4220 words) Published: October 31, 2010
The History and Analysis of the
Pharmaceutical Industry
Pharmaceuticals Industry Analysis
1. Origins and Evolution 2
2. Environmental Analysis (PEST) 2
3. Structural Industry Analysis (Porter’s Five Forces) 4
4. Strategic Issues Facing The Industry 5
5. Analysis of Key Industry Participants and Strategy 6
6. Pfizer – SWOT Analysis and Strategy Review 8
7. Conclusion 10
8. References 10
Pharmaceuticals Industry Analysis
Page 1
Executive Summary
This report provides an analytical strategic review of the pharmaceutical industry; it’s origins, 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, it’s key players, their strategic outlook, the impact of technological developments and other strategic issues facing the industry.

The latter sections of the report focuses on the industry’s leading firm, Pfizer\Pharmacia. Pharmaceuticals Industry Analysis
Page 2
The Pharmaceutical Industry
1. Origins and Evolution
The modern pharmaceutical industry is a highly competitive non-assembled1 global industry. Its origins can be traced back to the nascent chemical industry of the late nineteenth century in the Upper Rhine Valley near Basel, Switzerland when dyestuffs were found to have antiseptic properties. A host of modern pharmaceutical companies all started out as Rhine-based family dyestuff and chemical companies e.g. Hoffman-La Roche, Sandoz, Ciba-Geigy (the product of a merger between Ciba and Geigy), Novartis2 etc. Most are still going strong today3. Over 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 4. 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’5. 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’6 emerged.

2. Environmental Analysis (PEST)
Technological advancements, tighter regulatory-compliance overheads, rafts of patent expiries and volatile investor confidence have made the modern pharmaceutical industry an increasingly tough and competitive environment. Below is an analysis of the structure of the pharmaceutical industry using the PEST (political, economic, social and technological) model. 1 Non-assembled industries are industries that do not rely on manufactured or component parts or materials e.g. chemicals, glass, woodwork etc.

2 Novartis was later formed in the 1990s by the merger of Sandoz and Ciba Geigy 3 Batiz-Lazo and Holland, Strategy and Structure of the Pharmaceutical industry June 2001 4 The importance of R&D was especially prominent due to the co-location of universities and educational research institutes such as the Universities of Basel, Freiburg and Strasbourg in the Upper Rhine Valley area (BioValley). 5 Generics’ are medicines manufactured after patent expiry by another pharmaceutical and usually sold at a cheaper price.

6 Branded generics are generic products which offer a small advantage and which are sold at a price above the lowestpriced generics.
Pharmaceuticals Industry Analysis
Page 3
Increasing Political Attention:
Over the years, the industry has witnessed increased political attention due to the increased recognition of the economic importance of healthcare as a component of social welfare....
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