Euro Crisis

Wondering what big crisis is occurring within the pharmaceutical industry today? One of the biggest events occurring within the pharmaceutical industry today is the Euro crisis. The Euro crisis is set to negatively affect pharmaceutical companies across the globe. The government’s ongoing price cuts are predicted to slash European revenues by 300 million and has set everyone into a panic. As a result, multiple countries and drug makers are taking action to save themselves from a drastic loss in revenue.

All countries rich or poor are taking precautions during this time of crisis. Many countries have been watching and cutting their spending on pharmaceutical products. France has cut their budget, Greece lowered drug prices by 27% on average, and Germany has created a prove-your-worth system for new medications. All methods of price reduction made by France, Greece, and Germany should hopefully prove to be successful in reducing the hit of the euro crisis. Because of this crisis many public health systems are not paying their bills, which is hurting the drug makers. As a result of countries cutting their expenses on pharmaceutical products and health systems not paying their bills, drug makers have made some changes to save their skins as well.

Many drug companies have been taking precautions during this euro crisis. The pharmaceutical company Bayer is building a $5 billion liquidity cushion in order to brace the hard hit they are expecting from the euro crisis and Mereck has made some changes as well. Mereck not only is trying to control their expenses but they are also trying to work with the European government in the hopes to control and reduce the price cuts which have become such a serious threat to the pharmaceutical industry. Possibly with the help of pharmaceutical companies working with the government a reasonable agreement can be established and the euro crisis will end soon.

Hopefully this euro crisis is not set to last very long and with the precautions that everyone has taken that no one is hurt to badly and can come back from this hit they are all about to take.

~ Zenas

Sources:

http://www.fiercepharma.com/story/pharma-group-protests-european-pricing-pain/2011-11-10?utm_medium=nl&utm_source=internal

http://www.fiercepharma.com/story/merck-predicts-300m-hit-euro-sales/2010-08-02

http://www.fiercepharma.com/story/bayer-builds-5b-liquidity-cushion-amid-euro-crisis/2011-11-07

Founders of Prosperity

The pharmaceutical industry has had almost exponential success in the past twenty years. Incredible innovation and superb leadership brought this success. The biggest pharmaceutical companies have had some of the smartest founders and CEOs.

Johnson & Johnson, the pharma company with the largest market share in the US, experienced stagnancy and a period of confusion in the 90’s. However, the company has experienced huge success since their turnover to their new Chairman and CEO, William C. Weldon, in 2002. Since then, Johnson & Johnson has acquired Alza and Pfizer’s consumer-health product line and became the leader of the market in the US.

GlaxoSmithKline is the world’s second largest pharmaceutical company. Former CEO of Vodafone, Sir Christopher Charles Gent, became Chairman of GlaxoSmithKline in 2005 after joining the company several months prior. Andrew Witty became CEO of GSK in 2008. Since then, the company has prospered through their flagship products and excellent leadership.

Pfizer, the largest pharma company in the world, has beaten all expectations and has experienced significant growth since 2006; the year Jeffrey Kindler became President and CEO. Pfizer, since then, has acquired giant Wyeth and has increased revenue growth of almost 40%. Despite Pfizer’s rapid success, Pfizer lost 35% of its value in stock in 2010, which is when Kindler left the company. Nevertheless, Pfizer is still very successful and its value is expected to keep rising for the next five years.

-Djeki Bidjerano

Sources:

http://www.reuters.com/article/2011/02/02/us-pfizer-idUSTRE7103JM20110202

http://www.investor.jnj.com/governance/biodetail.cfm?bioid=3197

http://www.gsk.com/about/executivebiographies.htm

Not Enough?

In this article it talks about how there has been unexpected and widespread shortages over the
past couple of years. Doctors have been struggling with shortages in common anesthetics, and an irreplaceable muscle relaxant needed for patients in emergency situations. Similar scenarios have been happening throughout the country and around the world. In the U.S., there have been as many as 15 deaths due to ongoing shortages. Some of the pharmaceutical industry experts have stated that they think the situation is only going to get worse unless there is more pressure put on the drug companies to prevent future shortages. Drug makers have agreed that they will give advanced notice about shortages through an online database, but this does not solve the overall problem. This is just a way to deal with the shortages. Dr. Malcolm Moore of Princess Margaret Hospital (in Canada) said, “It’s not enough it’s a way of dealing with a crisis . . . but it’s not a solution.” Doctors and physicians of Canada and the U.S. have reported that the shortages have caused delays and cancellations in medical procedures. They said that alternative
procedures don’t work as well, they can be more toxic, have unexpected side
effects, and may not even work at all.

Pharmaceutical companies have pointed to issues out of their control as the recent source of the problem. Such as, problems with raw materials, and regulatory measures that causes delays.
Many pharmacists and physicians don’t believe that explanation, and have argued that the shortages are driven by profit motivated decisions. But, a recent study found that the central cause of the shortages to be a combination of the factors stated above along with the demand has increased and the production rate has stayed the same. So, companies in both the U.S. and Canada have plans to boost production, but it could be years before hospitals and pharmacies notice the effects of the changes.

In my opinion, this is a very dangerous issue to many people’s health. They need to find a solution not only for notifying the pharmacies and physicians but a solution to the whole problem and why it is happening. Once again it all comes back to how important the pharmaceutical industry is to people’s well-being, especially those suffering life threatening diseases.

Sources:

http://www.thestar.com/article/1085977--it-makes-you-think-there-s-something-wrong-with-the-whole-system-that-needs-to-be-fixed

Cutting the Fat

The pharmaceutical industry is heavily capital reliant for every dollar they spend on capital they spend only 36 cents on labor. But capital expenditures have been decreasing, mostly to eliminate redundancies created by company mergers.

As talked about in previous posts most major pharmaceutical companies already have factories all over the world so companies like Pfizer are closing factories to reduce costs and continue to bolster profits. Pfizer plans to close a facility the United Kingdom and shift some operations from its Connecticut R&D facility to its Cambridge, Massachusetts site. They have gone from over 81 facilities in 2009 to 76. Personnel was at 111,500 after the merger with Wyeth, down from 120,700.

In an industry reliant on a steady supply of new drugs many companies are cutting their research and development. GlaxoSmithKline, Pfizer and AstraZeneca are all cutting their R&D budget. AstraZenaca is cutting 1,800 R&D jobs while Pfizer is reducing total expenditure on R&D from 11 billion after their acquisition of Wyeth to between 8 and 8.5 billion. In contrast Merck has increased their R&D expenditures by over 10% from 2008 to 2009, some of this was due to their acquisition of Schering-Plough. Overall they will still be spending around 14% of their revenue on R&D. At the same time Merck has been laying off thousands of employees, half of which were in the U.S., to reduce production costs and to outsource non-core manufacturing, they have cut over 11% of there workforce.

In order to reduce costs the industry has been outsourcing manufacturing jobs over the years. Pfizer recently entered an agreement with India-based Claris Life sciences Ltd. to commercialize 15 sterile injectable medicines. Pfizer stated back in 2009 that they wanted to increase their outsourced manufacturing from 17% to 30% over the next three years. Another major thing being out sourced is analytical testing. Clinical trials in India are expected to increase to 8% of total worldwide testing by 2016. Soon every major drug manufacturer will have operations in India thanks to their trial recruitment, lower labor costs, a rich talent pool and tax incentives.

Sources

http://www.pfizer.com/files/corporate_citizenship/cr_report/manufact_supply.pdf

http://clients.ibisworld.com.proxyau.wrlc.org/industryus/competitivelandscape.aspx?indid=487

Convoluted Efficiency

The pharmaceutical industry is a gargantuan pile of logistics.  Employing more than one quarter of a million people in 2008, the various companies that make up the market create jobs for a huge sum of individuals.  But pharmaceutical corporations don’t just provide career opportunities for scientists; they form job opportunities for almost all skill levels.  31% of the work force may hold doctorates, but another 27% is involved in production and manufacturing, both of which hold positions for low skill workers.  All of the discovery and production channeled by the previous 58% is channeled through the other segment of the work force, marketing and administrative staff.  As the elderly population grows, both the importance and size of almost all pharmaceutical corporations and their staff can be expected to rise substantially, especially in the areas that provide innovation for new products.  Coordinating everyone from Microbiologists, to Tablet Testers, to Sales Representatives requires a little more than the typical company structure and leadership, and often that structure becomes a spider web of employee positions.  Each individual must know their position and function, and more importantly, must perform that function with absolute safety because of the necessity of their product.  Corporate structure therefore becomes of the utmost priority, especially in the largest pharmaceutical companies in which every aspect of the work force is employed.

Pharmaceutical companies don’t get any bigger than Pfizer.  The huge corporation is divided into two primary segments, the PharmaTheraputics Research and Development area and the BioTheraputics Research and Development area.  These two areas are further splintered for commercial use into nine factions of specialization: “Primary Care, Specialty Care, Oncology, Emerging Markets, Established Products, Consumer Healthcare, Nutrition, Animal Health and Capsugel”.  Each of these business sectors has its own leadership with “clear accountability for results” and reports to the executive board of the firm.  Most of the other key players in the industry follow a similar, if slightly less convoluted structural scheme.  Roche Holdings proceeds to create similar divisions within their corporation between pharmaceutical development and the newly emerging biotechnology field, just as Pfizer has done.  Roche Holdings has only recently completed a transition to this structure after their acquisition of Genentech in 2010, but as biotechnology continues to become a higher priority for innovation in the industry, one could expect a continuation of the corporate focus split.  Other large organizations don’t divide themselves quite as much as Pfizer and Roche Holdings, but all of the key players follow the trend of having a board of directors, which controls the some key strategy and hiring and firing of leadership, and a team of C-level of officers who manage day to day operations and other corporate strategy.  

Pharmaceutical corporations, especially the major industry players, manage almost every aspect of their market.  They produce their raw own materials (active ingredients), manufacture their own products (medications), package those products, and sell them using their own in house sales and marketing teams.  That's an astonishing number of people to coordinate, with an astounding difference in career choices.  The structures that this level of complexity requires are enormous, and yet they must run with the utmost precision and efficiency.  I'm still amazed at just how organized the big players in the industry are, because their logistics are nightmarish.  

-Spencer Swan

Information for this article was gathered from:

Bureau of Labor Statistics. (2009). Pharmaceutical and medical manufacturing. Career Guide to Industries, 2010-2011 Edition. Retrieved from http://www.bls.gov/oco/cg/cgs009.htm#outlook.

Elkind, P., Reingold, J., & Burke, D. (2011). Inside Pfizer’s palace coup. Fortune. Retrieved from http://features.blogs.fortune.cnn.com/2011/07/28/pfizer-jeff-kindler-shakeup/.

www.phizer.com 

Roche. (2011). Company Structure. About Roche. Retrieved from http://www.roche.com/about_roche/at_a_glance/company_structure.htm.