In recent years there has been much discussion both within Australia and internationally on the extent to which countries benefit from international trade agreements. In this case study we aim to focus on the global context of the pharmaceutical industry, in particular the effect of governmental intervention through the use of international trade agreements, highlighting the problematic patent system and how it affects the market place both internationally and domestically.
I. The Pharmaceutical Industry
The pharmaceutical industry is a knowledge based and technology intensive industry that develops, produces and markets pharmaceuticals for use as medications on a world wide scale. Pharmaceutical companies involve both branded and generic products that are governed by a variety of laws concerning the patenting, effectiveness and marketing of pharmaceuticals.
Australia
The Australian pharmaceutical marketplace comprises of many differing firms across the numerous sub-industries relating to the production and distribution of medications. Pharmaceuticals are one of Australia’s major manufactured exports with $3.9 billion in 2012-2013, employing approximately 16,500 people. The industry receives substantial support from the Australian Government through both the Pharmaceutical Benefits Scheme and the research and development tax incentive.
Despite its comparatively small population, Australia consumes a large amount of medicinal products with sales to
Economic: Globalization of the pharmaceutical industry is an exciting opportunity to have research and development done at cheaper prices in other countries. However, this could be a double edged sword for companies because it is easy for other countries, such as India, to produce generic versions of the drug in bulk.
U.S. based companies hold rights to most of the world’s rights on new medicines and holds thousands of new products currently being developed. As of 2012, the industry helps support almost 3.4 million jobs in the U.S. economy. It is also one of the most heavily R&D based industries in the world. In the United States, the environment for pharmaceuticals is much friendlier than other countries around the world in terms of pricing ability and regulations. Both the Pharmaceutical and Biotechnology industries have experienced significant growth in the past year with year-over-year increases of 13.02% and 34.69% respectively. It is an even more striking when looking at the past five years considering both have beat out the S&P 500 with pharmaceuticals increasing an additional 31.44% and the biotechnology sector besting an astonishing 269.3% more return than the
Five of the top ten pharmaceutical companies are located in the United States and the other five are European companies, all of these companies combined, employ approximately 787,000 people. The ranking of the following pharmaceutical companies are based on
Market failure appears when there is a failure in allocation of goods and services. When the market is unsuccessful, the government is called to intervene and correct the failure. Over the years, government participation in the pharmaceutical market has been more wide-ranging than any other good or service. With the government’s ability to regulate, mandate, inform, finance and provide, their intervention to overcome market failure can be beneficial for the economy. Market failure plays a significant role in today’s economy.
The Pfizer case provides an introduction to external analysis. The case highlights the pharmaceutical industry, which has enjoyed extraordinary long-run profitability. The case also demonstrates how broad changes in broad environmental factors (i.e. demographics, technology, culture, etc.) have an impact on industry competition. The case is not especially complex, so it is not overwhelming as a first case.
By volumes and generated percentage, the Pharmaceutical industry might possibly be considered a small industry which can prove itself of substantial value considering the amount of profits that can be generated, and the number of promising investors that exist.
The pharmaceutical industry includes companies that research, develop, market or distribute generic and branded drugs. The industry expanded during the 1980’s and drugs to treat heart disease and AIDS were prominent. Consumer demand for nutritional supplements and alternative medicine increased during the 1990’s with the Internet facilitating direct purchases of drugs. Advertising for direct consumption of pharmaceutical drugs became more prominent; pharmaceutical companies were criticized for over medicating personality or social problems.
In pharma industry the raw materials mainly consist of organic chemicals. The need of different organic chemicals depends on the chemical formulae of drug. Pharmaceutical industry depends on various different organic chemicals for the production of end drugs. The chemical industry itself is very competitive and also very fragmented because their products (organic chemicals) are standardized and steps to produce them are also standardized. The chemicals used in pharma industry are commodity as pharmaceutical companies do production on economies of scale to lower the cost. The suppliers have low bargaining power because companies can switch to a new supplier without incurring a high cost. But there is a threat from supplier if it decides to go for forward integration and become a pharma industry
Yes, there is an impact on the pharmaceutical company, like those in the US as a result of differential prices between that country and other nations.
The macroeconomic conditions of India with respect to pharmaceutical industry were analysed and it was found that the issues around the Pharmaceutical sector are more policy related, with tax measures only reflecting one side of the proposed solution. The support of Indian government for macro issues in the area of improving the infrastructure and skill development is commendable but the Pharmaceutical sector will require more support than that to reach its true potential.
Further more, with other benefits such as low costs in research and development, strong clinical research capabilities, and low sovereign risk, Australia is advancing as one of the most prominent players in the pharmaceutical industry (Productivity Commission 2003). Australia’s population represents 0.3% of the world’s population and consumes around 1% of the total global pharmaceutical sales. The industry generated a total revenue of $6.1 billion in the year 2002 (ALRC 2014).
This report provides an analytical strategic review of the global pharmaceutical industry; its origin, evolution,
Solution: Creating autonomous teams that don’t report into the organization but report to the top management. Co-locate with the local biotech ecosystem. Second, give time bound budgets.
The domestic Pharmaceutical output has increased at a CAGR of 13.4.Currently the Indian Pharmaceutical Industry is valued at $ 8 billion (approx).Globally the industry ranks 4th in terms of volume and 13th in terms of value. It provides employment to millions and ensures that essential drugs are available to the vast population of India at affordable prices.
By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size