PHARMACEUTICAL INDUSTRY
(WHAT I UNDERSTAND SO FAR)
OVERVIEW
Integral aspect of any economy
One of the largest industries in the world (expected worth in 2021: $1170 bn)
Growth rate is very high in most economies (India’s CAGR = 14.5%)
Attributed due to [Opinion]:
Aging population
Universal Healthcare (Medicare)
Increasing incomes
Increasing penetration of health insurance
Increasing price controls in many countries
PURPOSE OF INDUSTRY
Discovery Development Production
GENERICS & INNOVATORS
Innovators (Pfizer):
Discover & Develop a new drug
Generally patent the idea
High production costs (Due to extensive R&D)
Generics (Mylan):
Produce same/similar drug after patent expiry (20 years)
May have varying amounts of chemicals, or maybe even additional substances
Lower production costs
Firms may have to consort to unique production methods which hike up costs
Some countries (Cuba) utilize a regulator development in the form of Intellectual Property Regime
Fixed Generic Price Reductions
KEY BUSINESS MODELS
B2B
B2C
B2G
KEY BUSINESS MODELS [CONTD.]
Blockbuster
Semi-Blockbuster
Diversified
Subscription (Healthcare membership like Forward) [Opinion]
Federated Models
Venture Variant
Virtual Variant
PRICING
Value-Based Pricing
Fixed Generic Price Reductions
Reference Pricing
Internal
External
REIMBURSEMENT LISTS
Government (Third Party Player) covers a certain proportion of the production costs, thereby incentivizing
production
Positive List: Medicines selected for public healthcare institutions, eligible for reimbursement
Negative List: Medicines not eligible for reimbursement
R&D
Most important aspect of the pharma industry
As most products are homogenous, for a firm to remain competitive, R&D is generally preferred to boost market
share
Average cost of R&D, per drug: $800 million
The ten biggest firms in 2018 (with accordance to market share), apart from Bayer AG, are Innovators and mainly
focus on R&D, with their largest selling drugs being the ones they developed
R&D in biotechnology, especially in last ten years, is a major aspect of many pharmaceutical firms and countries
CONCLUSION
One of the biggest, and fastest growing, industries in the world
Split into: Generics & Innovators
In my opinion, R&D is the most important component to attaining higher market share due to the homogenous
nature of goods
BIBLIOGRAPHY
https://www.pharmaceutical-technology.com/features/top-pharmaceutical-companies/
https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Pharma%20and%20Medical%20Products/PMP
%20NEW/PDFs/778886_India_Pharma_2020_Propelling_Access_and_Acceptance_Realising_True_Potential.ashx
https://www.ibef.org/download/pharmaceuticals-jan-2019.pdf
https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/10-02-drugr-d.pdf
