Global Pharmaceutical Industry

Topics: Generic drug, Pharmaceutical industry, Pharmacology Pages: 24 (7416 words) Published: May 10, 2010
1. Overview of the global pharmaceutical industry

In 2003, Britain’s Guardian newspaper commented that, “on the face of it, the global pharmaceutical industry looks like the epitome of a modern, mature industry that has found a comfortable way to make profits by the billion: it's global, hi-tech, and has the ultimate customer, the healthcare budgets of the world's richest countries.”

Guardian sept 2003

The global pharmaceutical industry is nowadays made up of thousands of companies contained in this industry. There are an elite ten firms which are based in Europe and America. These firms alone account for nearly half of the world’s global drug market on their own. This said the current industry’s leader in terms of global sales is Pfizer and it has only roughly 10% of the market. This shows that there are not only one or a few dominant players in the market and that competition within the pharmaceutical industry is severe.

1,1 Porters five forces model

One of the best ways to analyse industries competitiveness is by using Michael Porters five forces framework. This framework is useful for business when creating new strategies, plans or making investment decisions about a business but will be essentially used to measure the attractiveness of an industry. It suggests there are 5 main forces, which can help a company develop a broad analysis of its competitive position in its market.

Competitive rivalry
The pharmaceutical industry within the 1980s was fragmented with hundreds of companies competing with a similar market share. The companies focused entirely on different classes of drugs which helped each of the organisations involved. The result of this was that most firms had few direct competitors so they were very comfortable. The lack of direct competition allowed pharmacutical companies to raise prices as they pleased. With this lack of competition competitive rivalry was almost nonexistent then.

Throughout the 1990s, rivalry in the pharmaceutical industry increased and the market changed rapidly. Some drug companies felt the pressure to take advantage of economies of scale. By choosing to merge and acquire other firms/biotechs within the industry. Unlike the drug companies, biotechs dont have high overheads, and they possess a high quality product. While traditionally these biotechs had discovered new drugs and then sold their discoveries to already established drug companies. This sparked rivalry among the top firms as areas of expertise then began to overlap and suddenly they weren’t as comfortable as in the early 1980s.

Additional rivalry came from new competitors in the market for example some biotechs that began began not only to discover but also to develop and market their own drugs. Since the 1990s the competitiveness has continued dramatically within the industry with the creation of big pharma companies. Below is a table showing the top 5 pharmaceutical companies in terms of global sales. It will show any trends from sales in 2002 and 2007.

|Rank |Company |Sales 2002 |Sales 2007 | | | |($bn) |($bn) | |1 |Pfizer |29.5 |44.4 | |2 |GlaxoSmithKline |27.9 |38.2 | |3 |Sanofi-Aventis |14.3 |36.9 | |4 |Novartis |16.6 |32.2 | |5 |AstraZeneca |18.1 |28.7 |

The table above shows that these pharmaceutical companies have made huge increases in their global sales over the five years. This also shows how profitable this...

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