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Pharmaceutical Industry New
Transcript of Pharmaceutical Industry New
Timothy Horth Blockbuster Drugs 2011 Pharmaceutical Industry Lipitor - $7.7 Billion
Plavix - 6.8 Billion
Nexium - $6.2 Billion
Abilify - $5.2 Billion
Advair - $4.6 Billion
Seroquel - $4.6 Billion
Singulair - $4.6 Billion
Crestor - $4.4 Billion
Cymbalta - $3.7 Billion
Humira - $3.5 billion Overview of the Pharmaceutical Industry Case Study Average Return on Investment Capital (2002-06)
Pharmaceutical Industry: 16.45%
Computer Hardware Industry: 12.76%
Grocery Industry: 8.54%
Electronic Industry: 3.88% Lipitor by Pfizer :-) Pharmaceutical
Company Generics Herbal Medicines Marijuana Distributor Government Porter's Five Forces Model / Macro-environment Rivalry Among Existing Competitors Demand for Pharmaceuticals have been strong & growing. Older generations tend to consume more prescription medications
Projected 10-11% annual increase in demand through 2013 Baby Boomers generation are growing old. Profitability 12.5 Billion in annual sales (2006)
Cost of manufacturing, distributing, and packaging only 10% of sales
Spent $500 Million on advertising
Gross Profit of $10 Billion
Temporary Monopoly with 20 yr. patent *Price will fall 80% once patent expires Limited Competition Patent protected molecule
High cost & risk
20% success ratio Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products or Services Threat of New Entrants Successful new prescription drugs can be EXTREMELY profitable. Case Study Continued.. Threats Government (price control)
Loss of patent *by 2009, 12 of the top 35 giants will lose their patent protection FDA Restrictions Ethical/Legal Issues? Concealing negative trial results.
Largest Defrauder of the Federal Government
Prescription drugs are one of the leading causes of Accidental deaths
Testing experimental drugs on children in developing countries
Manipulating Prices/Insurance Companies/Medical Providers/Consumers ?? ? ??? Case Discussion Questions 1. Define the pharmaceutical industry structure.
2. Using the Porters 5 Forces Model, define the opportunities & threats historically characterizing the Pharmaceutical Industry. Drawing on the Porters 5 Forces Model, explain why the the pharmaceutical industry has historically been a very profitable industry.
3. After 2002 , the profitability of the industry measured by ROIC, started to decline. Why do you think this occurred.
4. Analyze the industry Macro-environment analysis and Porters 5 Forces analysis, describe the prospects for the industry going forward? What are the opportunities, what are the threats?
5. Provide strategy recommendations going forward. What must the industry do to exploit the opportunities and counter threats. ? Brand Name: Generic: Revenue ($b): $156.3
Profit ($b): $30.0
Wages ($b): $22.0
Share of Economy GDP (%): 1.00 Revenue ($b): $52.8
Profit ($b): $7.8
Wages ($b): 6.0
Share of Economy GDP (%): 0.34 CNN Money 2012 www.operationhealthcarechoice.org 2011 Demographic forces Global Forces Technological Forces Social Forces Macroeconomic forces Political Forces