Industry Definition According to the Encyclopedia of Global Industries, the Pharmaceutical Preparation Manufacturing industry can be defined as an industry that produces products or means for human and veterinary treatment. There two main segments of products in the pharmaceutical industry: pharmaceutical preparations and therapies. Pharmaceutical preparations include prescription or “ethical” drugs— products geared towards dental, medical, or veterinary professions, as well as “over-the-counter” drugs which are sold to the general public. The Encyclopedia of Global Industries also includes “therapies derived from the genetic engineering or related biotechnology processes,” within the scope of the pharmaceutical industry (Pharmaceuticals). The geographic focus of our report will be mostly on the pharmaceutical industry within the United States. Industry Performance In this section we will touch on the different aspects of financial performance within the pharmaceutical industry and companies within this industry. There will be graphical representation accompanied by interpretation of the graphs. The graphs will be further analyzed in the STEP analysis section. Within Figure 1 an upward trend in the stock of the pharmaceutical industry can be seen. Although there are small dips here and there, an overall assumption can be made that investor optimism within the pharmaceutical industry is healthily thriving. Figure 1, S&P 500 Pharmaceutical Stock Index To prove that there are similar upward trends between the different markets, Figure 2 is a compilation/ comparison of the pharmaceutical stock index in different markets. Figure 2, Pharmaceutical Stock Index (market comparisons) Figure 3, Industry Total S... ... middle of paper ... ...t is also likely that the pharmaceutical industry will experience a major shift towards selling directly to patients. This will rely heavily on the need to cut costs because of lowered profit margins with generic drugs as explained above. Key Success Factors The key success factors in the pharmaceutical preparation manufacturing industry has relied on the heavy focus on R&D in developing new drugs, obtaining patents for these drugs, and then sales with high profit margins to cover the costs of the patented drugs. In the future of the pharmaceutical preparation manufacturing industry, success will depend on the ability to manufacture affordable products by keeping costs low throughout the entire supply chain. Key factors will include responsive supply chains, the transition to direct sales, focus on cost driven sales, as well as influence in e-commerce.
...ll help the company in selling generic drugs and provide affordable medications to its customer base.
... (2013) IMS health study points to a declining cost curve for U.S. medicines in 2012 Retrieved from http://www.imshealth.com/portal/site/ims/menuitem.d248e29c86589c9c30e81c033208c22a/?vgnextoid=8659cf4add48e310VgnVCM10000076192ca2RCRD&vgnextchannel=437879d7f269e210VgnVCM10000071812ca2RCRD&vgnextfmt=default
Lehman, Bruce. 2003. “The Pharmaceutical Industry and the Patent System”. International Intellectual Property Institute. Pages 1-14.
Main Issue In 2000, Rich Kender, Vice President of Financial Evaluation and Analysis at Merck & Company was discussing the opportunity of investing in licensing, manufacturing and marketing of Davanrik, a drug originally developed to treat depression by LAB Pharmaceuticals. LAB proposed to sell the rights of all the future profits made from the successful launch of Davanrik at the cost of an initial fee, royalty payments and additional payments as the drug completed each stage of the approval process. Merck & Company's organizational goal is to constantly refresh its drug development portfolio and reach as many customers as possible during the patented period. So there was not only the potential of financial gain or quantitative aspect of the offer, but also the qualitative value which will be added by getting better positioning in the risky pharmaceutical industry.
Prescription drug prices rose three times faster than inflation in the decade between 1981 and 1991, making the pharmaceutical industry the nation's most profitable business. Prescription drugs even exceeded the rapidly rising inflation rate for all other medical services. They now represent at least 10% of all the medical costs in the United States.1
An Analysis of GlaxoSmithKline The business that I have done research into is GlaxoSmithKline. This company is a globalised research-based pharmaceutical public limited company. Its ownership structure has changed a great deal since the original company was first established in 1715. Originally a pharmacy, the company has expanded, merged with and taken over other companies over the decades.
...emand for prescription drugs over the next 25 years. The number of people between 45 and 64 years old will increase 41% by 2015. Given the rise in age population and life expectancy rates around the world and the level of pharmaceutical use by aging individuals, growth in the industry should remain in an upward trend.
This paper analyzes the main economic indicators related specifically to one of the largest pharmaceutical companies, Pfizer, Inc., such as overall performance, revenue, net income, research and development, cost and expenses. There are certain economic indicators that do not apply to individual companies, but influence their economic forecasts. Such factors as inflation and unemployment rate pertain to an industry or region and such factors as political instability or any major economic conditions will affect the market analyses even if they are not economic indicators. There are many more factors that affect economic predictions and their detailed analyses are presented at http://www.economic-indicators.com, a web site for tracking the US economy. Overall performance is always one of the most important indicators of economic activity and every financial report starts with results of annual performance.
The point at which they decide to produce will rest on their own adversity of revenue, risk and effort. The company also needs to know the price elasticity of the curve: the greater the price elasticity, the more a company such as Pfizer will struggle to establish high prices and a high volume. Although monopolies appear damaging at times, there are arguments that they are an advantage to society. Monopolies in the pharmaceutical industry drive companies to pursue research and development (R&D) efforts to gain new patents. According to a 1992 study, among the 24 U.S. Industry groups, pharmaceuticals dedicated 16.6% of their amounts to basic research, while all other industries averaged at 5.3% (Sherer 1307).
When a drug does make it to market and is successful, companies need to make up for the money spent in development as well as the cost of drugs which did not make it to market. After all investments are taken care of, there is still the need for profit. Some are concerned that if the United States government implements control over prescription drug costs, then private firms will be less motivated to invest in pharmaceutical development, fearing they will not make their investment back. This would supply pharmaceutical companies with less finances for the research and development process. According to the information collected by Abbott and Vernon, a drop in the price of pharmaceuticals would result in significant loss in investment in research and development (Abbott and Vernon).
Maris, D. (2012) ‘What’s Really Driving the Pharma M&A Frenzy’, Forbes, 27 April [Online]. Available at: http://www.forbes.com/sites/davidmaris/2012/04/27/pharma-feeding-frenzy/ (Accessed at: 15 December 2013)
10. Collis, David, and Troy Smith. "Strategy in the Twenty-First Century Pharmaceutical Industry:Merck&Co. and Pfizer Inc." Harvard Business School, 2007: 8-12.
Over the years the company has survived by focusing on its internal development in addition to a series of mergers, acquisitions, and corporate restructurings. Being a pharmaceutical company, the entire population is impacted: patients, physicians, employees, hospitals, and investors are some of the most important stakeholders. We first began our analysis of Novartis by evaluating the company’s strategic direction. Novartis’ mission statement is to care and to cure. They are a company that wants to discover, develop, and successfully market innovative products to prevent and cure disease, to ease suffering, and to enhance the quality of life.
Many new players entered the market copying the same techniques for growth as Teva to capture a significant market share by offering low prices due to their low cost strategies. The entry of these players made the industry intense with tough competition, low profit margins and collapsed prices. The segment of drug industry where Teva had to come up with innovative drugs demands to invest high capital on R&D that was in billions for a single drug could potentially lower the growth and revenues for Teva and could push the company into serious trouble. Analysis To build some effective and real world alternatives and recommendations to Teva Pharmaceuticals, we will conduct the following analysis to understand the external and internal situation of the company. Internal and External Analysis SWOT Analysis (Exhibit 1) Strengths:
Other companies cannot replicate the drug and therefore they are forced to either wait until the patent expires or they must find an alternative drug that carries out the same purpose.... ... middle of paper ... ... It is clear to see that there are many pros and cons to patents in the pharmaceutical industry.