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Q: Strategic Management ( Answered 4 out of 5 stars,   0 Comments )
Question  
Subject: Strategic Management
Category: Business and Money > Economics
Asked by: okunka01-ga
List Price: $50.00
Posted: 13 Jan 2003 22:02 PST
Expires: 12 Feb 2003 22:02 PST
Question ID: 142396
1) pharmaceutical industry attractive for investors?How do
pharmaceutical firms achieve a position of economic profitability?What
are teh issues confornting the future of the pharnmaceutical industry?
2)Can A firm with a new strategy cahnge the basis for competition in
the pharmaceutical industry?Is there a place for a visionary CEO?Or
are the rules of the game settled and the basis for competition
settled?
3)Does the United Kingdom constitute a good location for a
pharmaceutical firm?What are the advantages /disadvantages associated
with the United Kingdom?

Clarification of Question by okunka01-ga on 15 Jan 2003 02:29 PST
Just wanted to know about the pharmaceutical industry and it's strategies.
Answer  
Subject: Re: Strategic Management
Answered By: sabrina_j6-ga on 15 Jan 2003 09:37 PST
Rated:4 out of 5 stars
 
Dear Okunka01,

The pharmaceutical industry will be met with many changes in the
regulatory environment, both in the international and in the European
context. In many countries the role of competition by market forces in
the pharmaceutical sector will be promoted, most notably, on the
demand side. The pharmaceutical industry is one of Britain’s most
important industrial sectors, and is crucial to the health and wealth
of the nation; contributing considerably the country’s export
earnings.

To answer your questions: 
 
1) The Pharmaceutical Industry is generally attractive to most
investors. According to The Pharmaceutical Industry Competitiveness
Task Force (PICTF), investors are attracted to the industry by
features such as the availability of a high quality scientific
workforce, a supportive regulatory framework, protection of
intellectual property, and an environment beneficial to the research
needed to realize the cures of the 21st century. According to a recent
BCG study, the financial markets anticipates pharmaceutical companies
to bring a 13% earnings growth in the near future.

The issue of profitability in the pharmaceutical industry is complex.
The profitability of the industry in Britain and the ability of the UK
to retain world class pharmaceutical investment is decisively reliant
on the willingness of the Government to understand the complex issues
involved, and to offer an environment in which industry can conduct
its research, manufacturing and marketing activities as effectively as
they are done in the USA and other European nations.

Issues in the Pharmaceutical Industry involve the policies of
successive governments relating to both demand and supply side
measures, increasing regulation, and bureaucracy, and increased
international regulation (principally by the EU). All these issues
have lead to have led to a less competitive environment in the
pharmaceutical industry.


2) Yes, studies show that a firm with a new strategy can indeed change
the basis for competition in the pharmaceutical industry.  According
to The Boston Consulting Group (BCG), which recently conducted a study
entitled "The Pharmaceutical Industry into its Second Century ", new
and effective managerial decisions can revolutionize the foundation of
competition.

The report states that the pharmaceutical industry is becoming
outmoded, in the current system, companies function in
vertically-integrated corporate structures and create new drugs very
slowly. Pharmaceutical companies have been more inclined to focus on
"blockbuster drugs", which are more lucrative and aimed at mass
markets. As a result, companies are apt to think more about insurers,
providers and medical institutions, than about their ultimate
customers, i.e. the patients.

The following is from the BCG report:
“Mass-market pharmaceutical compounds are not effective for entire
patient populations: 20% to 50% of prescriptions today are either
marginally effective or wholly ineffective for certain patient
populations. Current market dynamics prompt "me too" imitators from
competitors that target the same mass markets. The pharmaceutical
industry will, however, be forced to a different plain by
(a)Revolutionary scientific breakthroughs that will expand drug
production exponentially
(b) Establishing more sophisticated pharmaceutical consumers.”
The BCG Study by ‘The Boston Consulting Group’
http://www.bcg.com/media_center/media_press_release_subpage6.asp

Escalating competition, healthcare reforms and the rising cost of
research and development serve as increasing threats in regard to the
traditionally high profitability of pharmaceutical manufacturers. As
the healthcare industry finds itself at a turning point, the strategic
direction a visionary CEO will be crucial in determining whether a
company can continue to obtain consistently high profit margins.
Hence, with new management strategies, and under a CEO who will
enforce new guidelines in an organization, the basis of competition
can be altered. A few other guidelines that a new CEO might follow
are:

1.Speeding up and reforming product launches 
2.Partnering with other organizations
3.Making a full global commitment and rapidly penetrating the
top-seven international markets.
4.Accelerating global launches, enabling products to reach peak global
sales in five years instead of seven years.
5.Dropping costs directly through both inventory and capital asset
management.
 

3) Considering all the political and economic factors involved, the UK
would constitute a good location for a pharmaceutical firm. According
to The Pharmaceutical Industry Competitiveness Task Force (PICTF) “The
UK resources currently employed in the pharmaceutical industry produce
greater economic benefits than they would if employed elsewhere in
manufacturing industry. The net benefits currently total around
0.7-2.0 billion a year although this sum can only be a very rough
estimate. There is also a terms of trade effect which we estimate at
1.0-2.0 billion."

The Statistics and Net value U.K Pharmaceutical firms are as follows:

Producer rents (from exports and overseas activities) account for over
500 to 1,500 billion Pounds per annum
Labour rents account for  80–160 Billion Pounds 
Research and development spillovers account for 120–360 billion pounds
Terms of trade effect: 1,000–2,000 billion pounds
Net Benefit: 700–2,000 billion pounds
Source of data: The Department Of Health,
http://www.doh.gov.uk/pictf/value.htm

The pharmaceutical industry operating in Britain has habitually
enjoyed a reasonably competitive environment in the UK, as confirmed
by its history of balance of trade surpluses. In the UK, the industry
has been able to contend effectively for business abroad and for
domestic investment in R&D and manufacturing. The pharmaceutical
industry, as a whole, has invested heavily in R&D and in manufacture
in Britain, but new regulation and Government action have produced an
environment where this may no longer be sustainable. There are
indications that many may soon prefer the more heartening environment
in the US and in other member states of the EU. However, the UK’s
pharmaceutical industry has an outstanding tradition and has
contributed very substantially to the economy. A key feature in
maintaining the UK’s attractiveness will be effective partnership at
the highest levels between Government and the industry.


You may find the following links useful:

The Philosophy of Investors in Biotech/Pharmaceutical Companies
http://www.biomedicine.ch/portf2.html

Growth Expectations in the Pharmaceutical Industry
http://www.redherring.com/mag/issue54/talk.html

Links to sites of Pharmaceutical Interest
http://www.abpi.org.uk/links/Other_links/

Some information about the future of the pharmaceutical Industry
http://mit.execseminars.com/pharm/?program

An Overview of the UK Pharmaceutical Industry
http://www.allaboutmedicalsales.com/pharma_overview.html


Search Strategy:
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Issues+pharmaceutical
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pharmaceutical+UK+advantages
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If necessary, please feel free to request a clarification for this
answer.

Hope this helps!
sabrina_j6-ga
okunka01-ga rated this answer:4 out of 5 stars
Thanks very much for the search really appreciative and ahs been very
helpfull.Thanks again.

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