Submitted by

-Ashita Jain B17

-Sharlin Kothari B27
-Kritika Ray Nagori B31
-Bhumita Sarabhai B46
-Harshil Shah B49
-Purav Shah B51
-Vatsal Shah B55

Internal
Environment
Five forces
Model
External
Environment
PESTEL
Highly fragmented industry in 80s. Mergers led
to concentration of jobs in select countries.
More control thereby exercised by Governments.
Easy Targets To control rising healthcare costs
when medicines amount to 15% of healthcare
expenditure.
Multi country pricing due to Government
regulations.
Patent on drugs India patents the process while
US and EU patent the drug

Demand side
Doctors tend to favor branded drugs which are high
margin.
Globalization has made it possible for big companies to
mass market the drugs.
Supply side
Global supply is fragmented. Pfizer has largest market
share of 11%.
Regional players and the generic drugs which are
relatively cheaper are popular in developing world.
Need for blockbuster products as R&D investments do
not justify the number of new drugs.

Advancement in medicine has raised the life
expectancy to 75 and aged population
increases the consumption. This adds strain
on insurance companies and governments.
Socially aware, well informed and demanding
consumers.
Increasing aging population offered a range
of opportunities
Increase in life style diseases and hence more
pharma companies shift their focus to a
lucrative option

System controlling clinical trials and
regulatory approvals underwent
modernisation, leaving many domestic
companies ill equipped
More technology, consumers became more
aware, resulting in increased demand and
also increased awareness about
international price disparity
E-detailing used by sales force of pharma
companies as a measure to cost cutting and
time saving

There is a growing environmental agenda and the key stake
holders are now becoming more aware of the need for
businesses to be more proactive in this field.
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 programmes. Marketing and
new product development should identify eco opportunities
to promote as well. Human Genome and genetics are new
ways to discover drugs


Varied patent laws in different countries.
Many best selling drugs are replicated as generic medicine
in developing countries with full government backing.
Clinical trials have become more rigorous thereby testing
more than 20,000 people in the complete run of 10-14
years.
The industry benefitted in the 1960s due to new
discoveries with permanent patent protection.
Thalidomide tragedy led to increase in the regulatory
control on clinical trials.
Fixed period on patent protection was introduced
typically 20 years.
Due to enormous risks and large investment involved,
firms started to compete fiercely in order to establish and
retain the intellectual property rights.



Generics legislation provided an incentive for innovation and a
race to the market.
Government agencies took long time to examine the data due to
rigorous regulatory scrutiny.
To bring regulatory process harmonization, EMEA was
established to enable more rapid approvals across Europe
through centralized procedure.
EU countries augmented voluntary codes of conduct with formal
regulation after 2003.
Regulatory changes in 1997 permitted the pharmaceutical
companies to market directly to US customers fuelling rapid
sales growth.
Japans regulatory system underwent a modernisation program
which at the end resulted in low pharmaceutical growth of 1% in
2002.
Expensive intellectual property rights led the companies to form
research alliances.



Internal
Environment
Five forces
Model
External
Environment
PESTEL
The industry has already high entry barriers
which are increasing.
Need for global return on costly R&D favors
large firms only
Emphasis on high-priced niche drugs for high
unmet need diseases likely to support market
entry by bio techs.


Global sourcing leads to further reductions in
the costs of raw materials.
Emergence of China and India as key out-
sourcing locations.
Major pharma companies come increasingly
to rely on in-licensing for new products,
raising prices on such deals
Cost of licensing deals drives companies
towards more acquisitions


Here the influencers are doctors, hospital,
government and not the end consumers, so end
consumers do not have much bargaining power ,
brand identity exists but in the hands of the
influencer
The doctors are price insensitive but susceptible to
sales
Governments and managed health organizations
imposing systems to control prices/reimbursement
and demand
Rising patient expectations and growth of managed
care continues deteriorating the profitability of big
pharmaceuticals regardless of the outcome of
regulation
Substitutes available and so bargaining power is high







Threat of substitutes is high

Generics appear at a cheaper rate than the

branded drugs

Consumer suspicion of drugs leads to

increasing use of alternative remedies

Functional foods preferred as safer alternative

to drugs
Diversification into generics protects volume
share (but not the profit) of big
pharmaceutical companies

Profitable, cash-rich industry but margins
declining.
Mergers and acquisitions are expected to
continue as they could lead to economies of
scale, global sales and marketing and more
efficient R&D efforts.
Intense rivalry within product classes.