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An Analysis of the Pharmaceutical Industry using Porter's Five Force model, PEST, BCG Matrix and predicting future prospects.

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An Analysis of the Pharmaceutical Industry using Porter's Five Force model, PEST, BCG Matrix and predicting future prospects.
"In 1897, Felix Hoffmann created a new industry. He found a way of adding a cluster of two extra carbon and five extra hydrogen atoms to a substance extracted from willow bark. The result is known to chemists as acetylsalicylic acid. To everyone else it is known as aspirin. It turned Bayer, the dye-maker Hoffmann worked for, into the world's first modern drug company." Geoffrey Carr, The Alchemists, The Economist - Feb 19th 1998

Today's Pharmaceutical Industry is characterized by several important factors that influence the business environment in which each company operates:

·Severe competition from capitally strong competitors

·Strict government regulations

·Long approval wait time

·Technology as an important factor

·Lower levels of marketing and customer relations in comparison to other markets

- Sales share of the world's top 75 prescription medicines 2002

Source

IMS

Industry Environment Analysis

In 1997, the $65 billion industry was composed of three strategic groups: patented prescription drugs, generic prescription drugs and over-the-counter drugs. Firms such as Merck, SmithKline, Eli Lilly and others produced various types of brand name drugs. Pharmaceutical companies spent huge amounts of money on development. The products produced by companies are very innovative. Many companies market up to ten (10) "blockbuster" drugs each year. These drugs have a patent life of seventeen (17) years. However, since it takes on average twelve (12) years to get the drug to market, manufactures have only five (5) years in the market to recoup their heavy research and development costs. After the patent expires we move to our next strategic group; the generic prescription drug makers.

Pharmaceutical R&D expenditure in the UK

Pharma R&D expenditure £ millionPharma R&D as a % of output1

1972427

198554614

19901,14017

19911,23917

19921,42017

19931,70721

19941,91820

19951,90319

19962,07820

19972,25121

19982,37623

19992,78523

20002,84625

20013,04024
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