Prof Weren Fall 12’
Pfizer Case Study
1. Why has the pharmaceutical industry been so successful historically?
The pharmaceutical industry has been such a successful industry for numerous reasons:
• Patent protection is considered to be an incentive for investing, and also creates customer loyalty.
• Generic brands have been profitable and cost efficient for buyers. This simply means that suppliers don’t need to offer a particular name brand; all they need have is the active ingredients that brand name suppliers that have the same function as name brand medications.
• Insurance availability for prescription drugs such as Medicare Part B for the elderly, which pay for the cost of medicine.
• The flexibility in price mark-ups through the OECD countries. US pharmaceutical manufacturers have received at least 60% of sales profits.
• The lack of Gov’t involvement with price regulations & State funding for drug insurances.
2. The pharmaceutical industry will become more competitive; barriers to entry will not be such a big threat. For example the patent holder time period was 20 years which prohibited competitors to produce, or offer the medicine to be used commercially, and along comes a substitute drug (break-through drug) produced by another supplier, with not so many restrictions and the same active ingredient that the patent holder has which cures the same illness that the first drug does. Although patent laws were created Generic brands have still become much more popular. In Pfizers case I believe had they not invested in their own generic brands the sales would have dropped a long time ago. By 2005 the market for branded drug collapse, 90% of all prescribed drugs were generic.
Pfizer was affected by the market crash in 2007 and the failure of Torcetrapib.
3. Competition within the industry will all depend on the market change, the evolution of new chemicals with fewer side effects and the role