Pharma Indusrty Report

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Environmental factors

Environment movements are real threats for Pharmaceutical industry as these movements focus on green environments and reduce chemicals and carbon which comes from pharmaceutical industries. It is not being possible to ignore these issues as they are supposed to be solved under UN charter for clean and better environment. Pharma companies need to see how their business and marketing plans link in with the environmental issues. There is also an opportunity to incorporate it within their Corporate Social Responsibility programs.

- Use scenario planning techniques to consider the various environmental influences which may affect the global pharmaceutical industry in the future.

Scenario planning methods used for nature and impact of the most certain and important driving forces our world; it is a process that encourages knowledge exchange and mutual understanding of the central issues for the future of the business.

The demand is increasing for new drugs as the population rises and their medical support need increases.

The process of the pharmaceutical industry can vary but the end result must be an action plan for each scenario with the following:

o Environmental scan

o Scenario options

o Financial projections

o Action plan describing how the scenario would be implemented

Features of Scenario planning and effects.

Advantages.

· Multiple scenarios and diverse outcomes.

· It includes various input source and helps in discussing with all the participants.

Disadvantages

· Doesn't quantify the value of possible actions and lack structuring futures.

· Non rational procedures for determining the future.

Over the next few years, patent expirations will represent lost revenue of between $25 billion and $50 billion which will spur strategic alliances between R&D and generic companies. The industry, experts say, will see a move to specialty products to fill unmet needs and a shift from a treatment and/or cure approach to prevention while pressure to bring product costs down will likely determine which products prevail in the marketplace.

Relationship Management and transportation: It is very important to ensure that there is transparency along the entire value chain and especially in the Pharmaceutical industry as it has become a Global industry. It is also very important to maintain the customer trust and also managing the good relations with the entire stakeholder.

- How relevant is the Five-Forces Framework map to identify environmental forces affecting the global pharmaceutical industry?

Porter’s Five Forces Analysis

One model for examining an industry and a company's strategic position within its industry is Porter's Five Forces analysis. The analysis looks at five competitive forces that influence an industry: threat of new entrants, power of suppliers, power of buyers, availability of substitutes, and competitive rivalry in the industry. How these five forces interact provides a good picture of the sector's dynamics and whether an individual company is properly positioned for survival in the sector.

Threat of New Entrants

The big payoffs available in the pharmaceutical industry lead to a steady flow of new companies being created. A team of researchers with a hot idea or newly granted patents can find venture capital funds eager to provide millions of dollars in startup funding. These smaller companies pose no serious threat to big pharma. In fact, one of a startup investor's main exit strategies is to sell out to a big pharma firm when new products are through the initial development phase.

Power of Suppliers

Suppliers have very little power in the pharmaceutical industry. The raw materials for manufacturing drugs are commodity products in the chemical industry, which are available from numerous sources. Most of the equipment used in manufacturing and research is available from multiple manufacturers. Suppliers usually offer multiple products to the manufacturer, which moderates pricing on rarer materials and unique equipment.

Power of Buyers

Pharma is unique among industries because the medical patient has an absolute lack of power regarding pricing. The prescriber of the drugs, the physician, ethically is not allowed to profit from the sale of drugs. The entity that pays for the drugs, the insurance company, only has a say in how much it will pay to the distributor of the drugs, meaning it has little power with the drug manufacturers. The insurer can refuse to pay for treatments it believes are overpriced.

The only entities with any negotiating power are the pharmacies and medical institutions that fulfill the medical patients’ prescriptions. Even these entities have little power over newer drugs under patent or drugs with only one manufacturer. Pharmacies focus on their profit margins and have little incentive to provide patients with the lowest possible pricing.

Availability of Substitutes

The effect of substitutes is dependent on the individual drug. A new FDA-approved blockbuster drug that has patent protection, treats a major health condition and is first to market in its category has a license to print billions of dollars. The development of a new drug that cures a major disease could be worth tens of billions of dollars per year. However, the 30th drug to treat a common condition could take years to recoup the R&D costs.

Once a drug loses its patents, generic drug manufacturers start selling copycat versions at substantially lower prices. A drug that netted $100 million a year in profit could become one that earns only $1 million a year in profit overnight. Additionally, there is a major international problem with counterfeit drugs. The best of these counterfeits duplicates a real drug's formula and sells it at a lower price, which hurts corporate profits. The worst counterfeits are made with low-grade materials