The pharmaceutical industry, seen as one of the most
prosperous and profitable industries, has entered several quandaries in the
past few years, and may be doomed within a few years as patents begin to expire.
The industry is one the staples of American business; it makes it’s money off
people’s health concerns which often includes their hypochondriasis.
The pharmaceutical industry is now the most profitable
industry in the US, however as we delve deeper into the Information Age, within
a few years the giant companies such as Pfizer and GlaxoSmithKline could lose
up to 30% of their market. Currently the giants that hoist blockbuster drugs
(billion-dollar drugs) such as Lipitor and Advair are making huge profits, but
within a few years we’re expecting to see consumers saving more and more money
as demand for generic equivalents keeps rising. The patents that these
companies possess are the lifeblood of their revenue. Patents are issued by the
government and expire in 20 years, so when the time runs out in a few years,
the market will become inundated with generic drugs.
There are several things that big pharmaceutical companies
are putting into practice to keep a hold on their market. Other than working
endlessly to protect their intellectual property, they are revising their
entire business model. Companies including Pfizer, GlaxoSmithKline, and Eli
Lilly are looking to expand into emerging markets across the globe, rather than
spend most of the “commercialization efforts” in the US.
Recently there have been frequent claims and suggestions to
“change”. According to a Wall Street Journal article by Barbara Martinez and
Jacob Goldstein, “the science engine of the pharmaceutical industry has
stalled” and companies are going to “have a real hard time replacing wonders
like Lipitor”. Innovation, which drives any business and the country’s economy,
has slowed down and investors are standing out on the sideline.
Despite these grim future projections, the industry as a
whole has seen a dramatic boom since 2000. As we entered the Information Age in
the 1990’s with the Internet, companies have been pushing revolutionized
marketing methods such as Direct-to-consumer advertising to reach the largest
possible audience. These methods worked, the CDC reported in 2004 that “almost
half of Americans take at least one prescription drug”. Now it seems like the
industry is fueled on prescription drug addictions and unnecessary
prescriptions.
Sources:
and
-Djeki Bidjerano
What would you say is the next frontier for the pharmaceuticals industry then? Will they end up stagnating as innovators in the US and move overseas or do you believe that the medical breakthroughs can continue to happen?
ReplyDeleteOn another note, what is your stance on how appropriate patents are for medication during this day and age? Would you agree that it would be better if the patents stayed in effect in order to ensure the continued success of countries based in America?
This is an interesting post, not only for the pharmaceutical industry, but a business strategy in general. Businesses are constantly changing, adapting, and reorganizing in order to respond to markets. If an industry is more fast-paced, there are constant external pressures on the organization. These could be growth pressures, political pressures, etc. which raises a good question from Spencer, where does the pharmaceutical industry go from here?
ReplyDeleteIn my opinion I don't see the pharmaceutical companies having many prospects exploring the global market. Considering the varying insurance and health care policies around the world, it seems difficult to appeal to different countries.
Also, I believe patents are an important part of a business and integral to its strategy. If you take the situation out of context and applied a patent to say, Coca-Cola's "secret ingredient," I doubt that many people would criticize the company from keeping it under wraps. However, it becomes complicated when you're dealing with a sensitive issue such as health care, medications, and to a certain extent peoples' lives.