Pharmaceutical Industry Analysis

Document Type:Thesis

Subject Area:Economics

Document 1

The long-term profitability of pharmaceutical industry can be determined by studying various areas that will indicate the prospective future of this industry. The industry is a complex interaction of companies, consumers, opportunities and diseases that is inclusive of medication. Dominant economic features of the Pharmaceutical industry The persistence growth of this industry is based on its irresistible desire to curing diseases and illnesses in all individuals from diverse groups such as all ages, backgrounds, and ethnicities. In the U. S, there are about 1500 pharmaceutical companies and about 80% of its revenue is made from the 50 largest companies. 82), emphasizes that drug advertisement is the main economic influence that educates patients, doctors, and pharmacists on the opportunities for treatment and cure of particular products.

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The primary target consumers of the pharmaceutical industry are doctors who need to have clear proof of the effects of medication in curing of patients before prescribing it to clients. Other advertisement strategies include television ads, online ads, medical journals, radio commercial and medic and samples. The industry has two main medication segments namely Over Counter medication and prescription drugs. Before they could reach the market, all products must be approved by FDA which would take an average of any year. New drugs were also granted protection from development of generic replacements. The pharmaceutical benefited from the act where they can reproduce a generic version of the existing product that will assist in suppressing the loss of generic versions on their previous products.

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Hence, the approval of remembrance product will probably take short period since the studies had been conducted during the original product. Also, the research and development process requires a large amount of financial investment that means only larger companies can afford such investments needed. The US largest Pharmaceuticals have established distribution channels across the country and the world. The innovation of following products also applies similar formulation but is improved to treat wide range symptoms without major costs on development and research. Patent protections enable the sequential development of other medications in the developing nations by protecting them with patents that prevent generic inventions from emerging. Established companies have strong credit profiles, healthy balance sheets, and liquidity. Hence they absorb smaller and successful corporations with research capabilities and collaborate with larger firms to exploit sales economics and to expand their expertise.

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The larger companies compete with strategic marketing and innovation rather than pricing. There is the current development of Managed Care Organizations that have a significant effect on the buyers bargaining powers in the industry. More than 90% of insured individuals in the US have coverage plans with some form of managed care that firmly standardize the details of each feature of their coverage plans. The health insurance industry has brought changes by lowering the overall costs of all procedures associated with healthcare. (Martin, p. 154), states that under MCO Act, patients are advised to make use of generic medications wherever available where physicians use their perceived efficacy and quality of particular drugs thus prescribing names and brands of particular medications. E. S. T.

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L. E (Political, Economic, Social-cultural, Technological, Legal and Environmental) factors. Additionally, the regulatory and competitive environment has changed the attractiveness of the pharmaceutical industry. The legal driver, on the other hand, has greater impacts on the industry more than any other industry. The legal driver is made up of three main factors namely; product registration and regulation, this is where agencies review the products before they can enter the market. The US FDA has responsibility for that process of regulation and registration of existing and new procedures for new products. The FDA requires proving that drugs are effective and not harmful to human consumption and companies are required to highlight both benefits and risk of their products. On their website, Pfizer has indicated its goal that states “to bring more innovative medicine, to more patients, more quickly.

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” Its success is based on their strategic technique which includes splitting its research and development groups into two different organizations; biotherapeutics that focuses on the discovery of larger modules research and vaccine and biotherapeutic that stresses on smaller molecules and related modalities. Division strategy has succeeded the specification of tasks among the workforce. Pfizer is the main emphasis is promoting value for their stakeholders and society by prioritizing interests by these groups thus differentiating them from other companies (pfizer. com). It has more than 132 plans in medical development. According to its website, Norvartis. com, the industry had devoted 18% of its net sales in their development divisions and research and will carry on inventing the same amount in future. When comparing GlaxoSmithKline pharmaceutical company with Pfizer and Novartis, all focus their entire business effort towards the delivery of three common priorities such as increasing growth, risk reduction and improvement of long-term financial performances.

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However, GlaxoSmithKline has a distinct characteristic that separates it from other companies; it seeks to promote a diversified global business. Nevertheless, the key success of the industry will always be based on some factors such as increased consumers’ needs who will always want to live a healthy life thus assuring the growing demand of prescription medications. (Frosch, pg. 8), says that pharmaceutical companies will also need to maintain significant pricing that will offer the companies opportunities to recover their costs in research and development and marketing and advertisements. The prospective impacts on about the evolution of the pharmaceutical industry are where consumers may not be able to afford the drugs they require. Therefore, with the myriad technology, these companies have the capability of manufacturing high-quality medications that will have enhanced quality over time Analysis Summary The analysis of pharmaceutical industry shows that the industry is continuously growing with its demand getting higher from across decades.

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The pricing will also create competitions, and thus, companies will be required to make effective plans for their manufacturing and invest wisely in their activities to avoid losses when their products enter the market. That means that the strategic positions that will enhance with time are production and cost efficiency. A successful company will probably be able to manufacture similar products at a lower cost and charge significant prices in the market to ensure they make profits instead of the loss. The other strategic position is advertising. Advertising and promotion ensure that consumers are sufficiently exposed to products, and hence, companies will require being careful when taking their products in the market. The overall problem that exists within the pharmaceutical industry is the costs that will always be required in the manufacturing of new products.

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The production power among companies will remain high whereas the buying power of consumers will remain low. Otherwise, there is the limited room for threats to the entrants and rivalry will always exist despite the industry. That means that the most powerful companies will remain competitive whereas less competitive companies will end up failing. Pharmaceutical industry stands a chance for successful future and is a cost-effective industry to enter. DiMasi, Joseph A. , Henry G. Grabowski, and Ronald W. Hansen. "Innovation in the pharmaceutical industry: new estimates of R&D costs. GlaxoSmithKline. GlaxoSmithKline plc, 2012. Web. 19 April 2018. <http://www. "Direct marketing of pharmaceuticals to consumers. " Annual review of public health 23. Martin, Anne B. , et al. "National health spending in 2014: faster growth driven by coverage expansion and prescription drug spending.

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