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CASE STUDY 1,2
The Global Pharmaceutical Industry: Swallowing a Bitter Pill
The case describes the evolution of the pharmaceutical industry and its strategic
environment. Attention is drawn to environmental pressures from regulators and payers. Key
forces driving the industry are discussed, including addressing unmet medical needs, the
importance of innovation and time to market, and globalisation. The case illustrates how an
increasingly hostile environment, combined with a decline in R&D productivity, led to waves
of job losses, and sparked a fresh round of consolidation. On the global level, the historical
supremacy of the US was challenged with the highest market growth rates recorded in the
emerging markets.
Q1. Identify the main environmental forces currently affecting the global
pharmaceutical industry.
It is expected that all aspects of the PESTEL analysis will be addressed. Illustrative points
are given here, but this is by no means exhaustive.
Political Government’s focus on the industry as an easy target in the drive to reduce
healthcare expenditure; public outcry over safely alerts and international price comparisons;
and public pressure to fund cancer medicines.
Economic Pharmaceutical sales correlate closely with GDP flattening in established
markets and growth in emerging markets; the rise in the power of payers as decision-
makers; in some countries patients are paying a greater proportion of drug costs themselves
leading to increased linkage of sales and income levels; availability of venture and depth
finance to support biotech innovation.
Social Aging population drive not only increases in healthcare costs but also increases in
demand for medicines; pressure to act ethically rather than purely following profit; the
number of better-informed patients with rising expectations; continued global convergence in
medical practice and public acceptance of new technologies such as stem cells and genetic
testing
The Global Pharmaceutical Industry
In the pharmaceutical industry market segments can be found depending on the criteria
used. For example, geographically there are three main market segments (the Triad
accounting for 80% and with the strongest growth): The United States of America, Europe
and Japan with the main future segment being the least developed countries. Another way of
classifying the market segments that the pharmaceutical industries face is by those products
directed to primary care (those used by office based practitioners) and specialist products
(those used by hospitals).
This industry includes quite a few distinguished strategic groups. The ethical drugs are those
which are prescribed as opposed to OTC (over the counter) drugs which can be bought
without prescriptions. Branded drugs are those which are patented as opposed to generic
drugs. Biotech drugs are those that work in the fields of molecular biology and genetic
engineering.
The macro-environment can be categorised into certain environmental influential areas by

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the Pestel framework. The technological and socio-cultural categories are extremely relevant
in this industry. Drug companies must face high levels of investment on research and
development projects. This causes the transfer of costs from producing the drug to its final
consumer price. The USA heavily invests in R&D resulting in higher prices. This is becoming
unsustainable for the pharmaceutical industry as prices are higher in the USA than in other
countries which should either share part of the R&D burden or rise their own prices. But
anyhow these costs are still being sourced in the best place world wide for this kind of
investment which is the USA. Moreover costs are rising due to the fact that clinical trials and
investigating are becoming more complex and costly and high technology solutions are
needed for the cure of any decease.
The need of developing cheaper, more effective and tolerable drugs is increasing due...
(2013, 05). The Global Pharmaceutical Industry: Swallowing a Bitter Pill.StudyMode.com. Retrieved
05, 2013, from http://www.studymode.com/essays/The-Global-Pharmaceutical-Industry-Swallowing-a-
1696425.html
The primary focus of this essay is the analysis of the global pharmaceutical industry and the
substantially significant factors that shape this industry; the industry is primarily defined by
very few yet critically influential factors; these consist of: governing bodies, the role of
corporate social responsibility, and the emphasis put on the industry and firms by the
Research and Development process.
The most consequential factor placing emphasis on the industry is the governing body, with
it being the legislative body and largest purchaser of the industry exclusive of the USA
creates a strategic dilemma for the corporations in terms of profit maximization. Patent
limitation, regulatory controls, price or reimbursement controls and extensive safety
legislations are methods adopted by the government to legislate control and limitations over
the industry. These legislations construct a paradigm that the main objective behind the
intervention is to keep medicinal costs low as the majority of the population i.e. under 18’s,
over 65’s and people primarily on benefits, medical costs are paid for by the government and
with the ageing population the expenditure is ever increasing hence the various limitations.
Being the legislative body and the largest purchaser gives the government various types of
buyer control; the case study implies that the industry is a “monopsony”, giving the
corporations very little bargaining power in terms of profit maximization and can often alter
the strategic outlook of a firm, a strategy synthesis states that in some opinions government
should set basic rules of conduct and stay out the way, whereas it also suggests they should
interfere and stay there (a strategy synthesis, page 360), in this industry they tend to do a
mix of these opinions due to the nature of the industry and circumstances created. In the

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CASE STUDY 1,2 The Global Pharmaceutical Industry: Swallowing a Bitter Pill  The case describes the evolution of the pharmaceutical industry and its strategic environment. Attention is drawn to environmental pressures from regulators and payers. Key forces driving the industry are discussed, including addressing unmet medical needs, the importance of innovation and time to market, and globalisation. The case illustrates how an increasingly hostile environment, combined with a decline in R&D productivity, led to waves of job losses, and sparked a fresh round of consolidation. On the global level, the historical supremacy of the US was challenged with the highest market growth rates recorded in the emerging markets. Q1. Identify the main environmental forces currently affecting the global pharmaceutical industry. It is expected that all aspects of the PESTEL analysis will be addressed. Illustrative points are given here, but this is by no means exhaustive. Political – Government’s focus on the industry as an easy target in the drive to reduce healthcare expenditure; public outcry over safely alerts and international price comparisons; and public pressure to fund cancer medicines. Economic – Pharmaceutical sales correlate closely with GDP – flattening in established markets and growth in emerging markets; the rise in the power of payers as decision-makers; in some countries patients are paying a greater proportion of drug costs themselves leading to increased linka ...
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