What areas of the industry are there opportunities for innovation?

In the pharmaceutical and biotech industry most future innovation is most likely to come from the biotech sector. Biotech companies tend to be smaller, scientific based companies with one main main entrepreneur.They tend to produce extremely specific, powerful drugs that can only be dispensed at a doctor's office. This profile of biotech companies means that there is more chance for innovation because these small companies tend to focus on smaller parts of research at a time whereas large pharmaceutical companies tend to do mass screenings of chemical compounds all at once and hope to find something progressive. A company to look at is Eli Lilly. This pharma company has been investing in more then 200 small biotech companies working on innovative new treatments. There is no guarantee however that this investment in new fields is going to pay off however, this risk is necessary in order for the pharmaceutical industry to grow in the future. Innovation is going to be a major factor in the success of big pharmaceutical companies in the future. With major patents about to expire, competition from generic drugs, faltering trust in some big pharma companies and the threat of the government controlling more drug purchasing and pricing the only way for major companies to be profitable is to come up with new, groundbreaking ideas.

Brian Strom, a senior member of the Leonard Davis Institute also notes that Pharmaceutical companies need to stop focusing so much on competitive marketing and start focusing more on providing and advertising drugs that have more benefits than their competitors. This focus is called comparative effectiveness. The problem with comparative effectiveness is that it requires costly clinical trial data that in the end might not turn out in the companies favor. If the data shows that this new drug is just as effective as what is in the market now or maybe even worse then the company is back to square one.

No matter what the drug companies do now they will have to change their model in the near future in order to say competitive and profitable in the changing domestic and world market. Companies should look to biotech companies for the most innovative new products and invest in different drugs that can top the ones already out there instead of making an almost identical drug and then making the most profit through their marketing techniques. The next few years will be critical for the bug pharma companies and it will be interesting to see how they adapt to the changing drug climate.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2353

How has the 2008 recession affected business in Pharmaceutical industry?

Despite a declining economy, the pharmaceutical industry is experiencing growth since 2008 in the US and in many other countries.  During a recession, it is not uncommon for inferior goods to experience increased demand. What this refers to is an increase in sales of lower quality generic drugs. Also, the recession has hurt the sales of non-essential drugs and supplements such as vitamins, cold and flu remedies, and mineral supplements.
The growth is a cause of several factors independent of the recession. Essentially, despite global reduction of wealth, pharmaceuticals has continued to grow and expand. This year alone, the pharmaceutical industry has risen in terms of annual revenue from 780 Billion to 840 Billion dollars.  One of the main driving growth factors is federal involvement with healthcare; countries that don't increase funding for medical assistance run the ethical risk of depriving proper healthcare from sick individuals. A specific example of the government giving strength the the industry can be observed in our own country. The creation of "Obama care" or the project president Obama is attempting in order to offer universal health care is a major growth factor for the pharmaceutical industry because it widens the base of individuals that receive treatment with the use of drugs. Currently, the federal funding for medicaid and medicare makes up for 40% of the US' total federal budget, this increase in federal funding majorly assists the pharmaceutical world. This increase can also be observed as there was a 12% increase of pharmaceutical sales in the US alone, brining it from $810 billion in 2009 to $840 billion in 2010. Overall, research has lead many to believe that the sudden increase in pharmaceuticals is independent of the declining economic climate.

Stephen Kessler

http://apps.who.int/medicinedocs/documents/s17419e/s17419e.pdf

Comment on revenue, profit, and loss of key industry players?

The article that I read has to do with the loss that Pfizer will be having at the end of November when a patent ends on their cholesterol drug Lipitor.  The expiration of this patent will cause a loss of $10 billion a year for the company.  Many other companies have faced this problem and people are starting to comment on the fact that many big pharmaceutical companies are relying mainly on big blockbuster medicines to provide for their billion dollar revenues each year.  One of the problems that the pharmaceutical companies are facing is that there have not been many pharmaceutical breakthroughs over the past years.  This is leading to many layoffs in the industry and outsourcing.  The article comments on how the amount of layoffs that the pharmaceutical companies have each year is much larger than that of other industries.  Another reason the pharmaceutical company is experiencing so much loss is due to the fact that the Food and Drug Administration is approving less and less amounts of medications.  This means that companies are spending millions on research and development and in the end have nothing to show for it.  The money is being spent and no revenue comes in in the end.  Many companies are seeing the need to restructure in order to make sure that a vicious cycle does not start.  If companies continue to layoff in the area of research and development that will only cause a decrease in the amount of drugs being produced, which will decrease profit, which will cause more decreases in research and development.  Make sure not to worry though.  Even though Pfizer is set to lose a large amount of profit in the coming years, they assure people that they have new drugs coming out that are set to lessen the blow of losing Lipitor.  The end of the patent will be coming at the end of November of this year.  It will be interesting to see if any new articles about this topic come out when the patent date is up.

http://www.nytimes.com/2011/03/07/business/07drug.html?pagewanted=all

Rachael Bieck

Who are the emerging companies?

            It's very exciting in any industry when there is a new, emerging company. It not only means that there will be a new source of income for the industry and for the country that the industry is based in, but it also means new advances in technological know-how in that industry. It's especially exciting in the Pharmaceutical industry when there is an emerging company because the advances that the new company is expected to make usually result in better medicines and treatments that can save lives, reattach body parts, or increase the time that a cancer patient has. After all, the most important thing in life, is life itself and the enjoyment of it. New and emerging pharmaceutical companies cater right to this aspect. 

          OncoMed Pharmaceutical is an emerging pharmaceutical company that was founded in 2004 by Dr. Michael Clarke and Dr. Max Wicha. They founded their company based on research they did on the critical role cancer stem cells play in metastasis. In 2006, Paul Hastings took over the company as CEO and after originally forecasting an initial investment of 45 million, the CEO announced in November of 2008 that they investment total had reached 154 million dollars. Since then the company has been putting this money towards developing antibodies that fight tumor cells. While Hastings acknowledges that, "It will take a combination of pathways to block the pathways a cell uses to differentiate”, it appears that the future of fighting cancer has fallen into reliable hands at OncoMed Pharmaceutical.

            Although it’s exciting when a toy company develops a new toy, or a tech company develops a faster computer, nothing quite compares to the excitement of discovery new cures for cancer. The value of human life is far greater than any joy a toy can bring, or any knowledge a faster laptop can bring. Forget the future of the U.S. economy. The future of the world rests in the hands of emerging pharmaceutical companies, and from the looks of it we’re in reliable hands.

http://www.fiercebiotech.com/special-reports/emerging-drug-developer-oncomed-pharmaceuticals

-Gabriel Resstack

What are some Current Events in your Industry?

The Swiss Pharmaceutical Company, Novartis, announced last Tuesday a major job and cost cutting program as the company's third quarter net profit was a lot lower than they expected.
The progarm will consist of a loss of 2000 jobs, mostly in Switzerland and the US, and the closing of sites in both Italy and Switzerland. However, 700 other lower cost positions in other countries will be created over the next five years.

Johnson & Johnson together with Novartis,  has become and investigation target for the European Comission as they are suspected of possibly breaking antitrust rules that prevent generic players from entering a part of the Dutch drug market. Novartis has also been struggling with the fact that the Swiss Franc is becoming stronger and  that the patent of some of its drugs is close to its end.

http://online.wsj.com/article/BT-CO-20111025-702183.html

Maria Durá Ballester

What are some current events in your industry?

The pharmaceutical giant Abbott Laboratories has decided to beak itself into two companies. The first will be a pharmaceutical company and the second will focus more on diversified products. The products will keep the Abbott name and the company will be run by Miles D. White, 58 who has been leading the company since 1988. Richard Gonzalez 57, will run Abbott's spin off pharmaceutical company which has yet to be named. Gonzalez was previously the companies president and chief operating officer. The company expects to complete the split by the end of 2012. The new pharmaceutical company is expected to have nearly 18 billion in annual revenue mostly from their flagship drug Humira. There has been concern about how well the new company will do after Humira patent expires. Gonzalez had reassured people that Humira "has plenty of runway left" and that the companies is working on new drugs to supplement Humira. The split in Abbott will create more stock shares and allow portfolio managers to diversify their portfolios on their own because the two companies will be more focused. Abbott is the latest t U.S company that has decided to split. Others include Conoco Phillips, Tyco International Ltd, Kraft Foods inc, McGraw Hill companies and ITT corp. The split of Abbott is causing other diversified companies to split. Abbott's new pharmaceutical company is expected to be an asset of interest for many other companies including Merck, Roche, AstraZeneca and Bayer. The split of Abbott has lifted its shares two percent so far and the numbers are only expected to increase. The split of Abbott has a lot to do with what was recently discussed in class about the stock market and how companies stock prices rise and fall.

http://www.reuters.com/article/2011/10/19/us-abbott-idUSTRE79I46K20111019

How has the recession (2008-2009) affected companies’ balance sheets?

          Everybody who is at least 5 years or older now, and lives in the United States remembers the recession of 2008-2009. The recession affected business as we know it in all of the industries that do business in or with the United States of America. A recession is two or more quarters of negative growth in Gross Domestic Product. Put more simply, a recession is decline in economic activity across the board in a given economy, in a given country.
       Ask most economists and they'll tell you that the Pharmaceutical industry is usually pretty invulnerable to economic events like a recession. However, this time around things went differently. As the Pharmaceutical industry is relying more and more on the advancement of technology into the digital age, the more and more the industry is feeling the affects from other industries involved in the production of such technological products. It's because of this that this time around in the recession, the Pharmaceutical industry was hit a little harder than in years past. Since people were scared to spend their money, the amount of funding received by the Pharmaceutical industry took a large decline. Along with this did the purchasing of commodities in everyday, household medicines. Not only this, but the luxury products made by the industry went into a huge decline as well.
         The one thing that people need to remember when any economy goes into a recession is that you can't be scared to spend your money. This is what creates the revolving door of no money being spent, and therefore deepening the recession because business' cannot make money. If people started buying commodity medicines during the recession, then the Pharmaceutical industry would have picked up, wouldn't have to lay off so many workers, and therefore people would be making money again and would not be scared to spend it. People just have to be willing to take that risk of spending their money.

http://blogs.wsj.com/health/2008/12/02/big-pharma-execs-say-recession-will-hurt-dtc-ads-were-worst-decision/

-Gabriel Resstack

Do players in your industry manufacture overseas? What aspects of their operations to they outsource?

The article that I read discussed the need in the Pharmaceutical industry to outsource and manufacture overseas in recent years.  The article talks about how the how the skills that are needed in order to manufacture drugs can be readily found in emerging countries.  This takes out the fear that drugs are not being manufactured in a correct and proper way.  The article focuses on the fact that due to the recession pharmaceutical companies have needed to cut back as much as they can.  They found that outsourcing manufacturing was the easiest and most efficient way to achieve this.  The article points out a very important fact to be aware of.  It tells pharmaceutical companies to watch out for the emerging areas that they are choosing to manufacture in.  It points out that recently in the electronic industry the company that was being used to manufacture its goods decided to produce their own goods and soon became the company’s competitor.

One of the major concerns of people is that because the drugs are being produced in emerging countries there is a sense of fear about drug safety.  People are worried that despite best efforts if manufacturing is outsourced there will be no way to know if the drugs being produced will be completely safe.  Another concern is the implications that it will have on the jobs of the people already employed.  When this article was published there were no answers to these questions yet.  Many knew that outsourcing would mean loss of jobs and that is most likely correct.  When a company outsources it becomes cheaper for them to hire, which means the loss of jobs of many.

The companies that are outsourcing are outsourcing much of their manufacturing and also their research and development.  One of the main industry players that is outsourcing is IMS.  The article states that four of the ten largest pharmaceutical players have started to outsource.  This article is from 2008 since then it is most likely that more companies have decided to outsource.

http://www.outsourcing-pharma.com/Contract-Manufacturing/Outsourcing-of-production-gaining-pace-in-big-pharma

Rachael Bieck

What non-US companies are key players in the industry?

Adding to Lindsey's post; 

Another key player in the pharmaceutical industry is Bayer. It is a German based pharmaceutical company that started over 130 years ago. In 2009, Bayer sold 2.9 billion EUR in the European market. It spent 2,080 million EUR on Research and development and 954 EUR on Capital Expenditures. 

North America is the second biggest market for Bayer, as in 2009 it was 23.5% of it sales (8.2 billion EUR). It owns a 6,8 % of the North American market share for drugs. One of its major global healthcare headquarters, MEDRAD is actually in Warrendale, Pennsylvania; which is quite close to here. I think it would be interesting to go visit it for our project and have a first-hand insight to our industry. It also has some global R&D centers across the country, such as theprotein-based biologics drug discovery center in Berkeley, California. 

As I posted last week, China and India are fast growing markets for the industry; Bayer's statistics prove this. Asia is the third largest market for Bayer, after Europe and North America. It composes 21% of Bayer's total sales (7.5 billion EUR in 2009).  

http://www.bayer.com/en/asia-pacific.aspx

Maria

Which company(ies) in your industry are most global? What has been the key to their success in other countries?

          In an industry led by globalized companies it only seems fitting that some of the strongest pharmaceutical companies are those that have been around for a long amount of time. It also makes sense that once these companies go global, they start to grow at a much higher rate than they had when they were only operating in one country. The opportunities for investment as well as the opportunities to create new medicines that fit the needs of a foreign country increase as a pharmaceutical company grows from one country to the next. For example, a country like Zimbabwe would have a much greater need to vaccines that prevent malaria. Where as a country like the United States would not need so many vaccines for malaria but need more vaccines for the winter flu season. When a company expands globally they increase their market spread tremendously.
          The company with the largest global market share is Pfizer pharmaceutical. They own about 8.70% of the global market share. Pfizer was founded by two German men named Karl Pfizer and Karl Erhart, both of whom moved to the United States in 1848. The company is currently based in New York city, but operates in 140 countries worldwide. 
          The biggest reason for why Pfizer has been so successful for the past hundred years is because of their excellent customer relations. The pharmaceutical industry is one of, if not the most important industry to have good customer relations in. With the help of SAP BW, Pfizer has been able to come up with cost effective solutions to solve customer complaints and conditions. Not only are they satisfying their customer needs, but they are also saving money. When customers are satisfied, they return to the company and keep making purchases, creating company growth. As said by the head IT manager at Pfizer, Herbert Horne, "Access to timely, accurate market information both for decision-makers and for the sales force is becoming a key success factor". 


http://www.duke.edu/web/soc142/team2/firms.html


-Gabriel Resstack
      

What non U.S. comapnies are key players in the industry?

There are many top pharmaceutical companies not based in the U.S. In fact out of the top four companies with the highest global market share, three of the companies were non U.S. based. These companies were, GlaxoSmithKline, Sanofi-Aventis and Novartis.

GlaxoSmithKline is a UK based company with a global market share of 6.3 percent. This company operates in 116 countries and sells its products to over 125. In 2005 its reported revenues were 39.5 billion. This enabled a 19 percent increase in net profits from 2004 to 2005.

The next international company is Sanofi-Aventis. This company id based in Paris, France but operates in over 100 countries. Its revenues increased 8.4 percent from 2004 to 2005 and the company continues to grow.

The last international company is Novartis. This company was created in 1996 after the merger of

Ciba-Geigy and Sandoz Laboratories which at the time was the largest corporate merger in history. Its global market share is reported at 5 percent.

The combined global market share of these three companies is 16.8 percent. This is a significant share of the market controlled by European pharmaceutical companies. In fact many of the worlds top pharmaceutical companies are based in Europe. Out of the top ten pharmaceutical companies in 2004 6 out of ten were based in Europe while the other 4 were based in the U.S. It is clear that the top makers of pharmaceuticals are the U.S and Europe and the trend does not look like it is going to stop any time soon.

http://www.duke.edu/web/soc142/team2/firms.html

Which Companies in the Industry stand out in regards to their view and actions in CSR?

The more successful pharmaceutical companies will have a caring image, after all, they are in the business of making people healthy and saving lives. This means that from the company's creation, the board of directors had. However, this also means pharmaceutical companies are apt to be blasted by criticism from any unethical dealings. The bottom line is that these pharmaceutical companies are businesses with profit margins and deadlines first, and health activists second. This can be demonstrated by the actions taken by Greece last year, when in an attempt to lower spending, they cut the price they paid for insulin by 25% as a result of being strapped for cash. This was not met with positive public responses as Noko Nordisk employees, the company selling the insulin reported violations of CSR and overall lack of care for individuals with diabeetus. This however, is misdirected as Greece had more than a surplus of insulin for individuals that are ill, and thus were never in danger of a shortage. The cutting of price of insulin only means that Greece will have some more cash to spend on other health goods such as research and development or more money to purchase drugs to help individuals. Also, many copycat companies are capable and willing to produce generic insulin for about 10% under current market price. I say if they are able to sell for lower, why not? In the end, as long as sick individuals are able to get their medicine, there should be no debate over the price adjustments, because in the end it is the companies producing the insulin that are hurt, not the sick individual. It is because of this that companies must be wary of their patients yet at the same time, jump on opportunities to save money whenever possible in order to preserve profits and utilize funds in appropriate CSR ways.

http://online.wsj.com/article/SB10001424052970203476804576616523620930718.html?mod=WSJ_Pharmaceuticals_leftHeadlines

Stephen Kessler

• What are some current events in your industry? What is the impact of these events on the industry?

I read an article that talked about pharmaceuticals in water sources.  The article talks about how water testing was done and how there were traces of 14 different types of pharmaceuticals and “personal care” products.  After the water was tested it was found that the product were not in large enough quantities to harm anyone drinking the water.  Drugs such as ibuprofen and Tylenol were among the detected.  It was said that in order for these drugs to be considered at a harmful level that a person would have to drink “tens of thousands” of glasses of water.  The test was done because and Associated Press investigator found trace levels of pharmaceuticals in drinking water.

            While at first this does not seem to relate to marketing it is interesting to look at it from a marketing standpoint.  This article is acting as PR for the pharmaceutical company.  It is currently acting as good PR because nothing that awful was found in the water.  It could have just as easily acted as bad PR.  If the testing of the water had produced bad results and concluded that there were high levels of pharmaceuticals in the water, this would not have been good for the pharmaceutical companies.  Many questions would be arising and the companies would have a problem on their hands.  People would want to know what pharmaceutical companies were doing with their drugs that so much of it was ending up in the water source.  A larger scale investigation would have occurred and this would most likely have not been good for companies.  For now the pharmaceutical companies are alright and they have been given some good PR.

http://online.wsj.com/article/AP9eaaad91836043d39a989bdf6b060dec.html?KEYWORDS=pharmaceutical

Rachael Bieck

What are some recent consumer behavior trends that are influencing the industry?

One of the main trends is the fact that the role of generics is increasing in the industry. Many drug patents are expected to expire over the next years which will force the companies to lower the prices of their generis drugs by 85%. This is why many companies are now making their drugs "branded generics" and so can sell them for a higher price than their equivalent generics. The most interesting thing, is that customers buy these "branded generic" drugs instead of buying their equivalent generics... simply because of the effective packaging, promotion and branding of these drugs. It is also said to provide more reassurance to customers than generic drugs.

Growing economies, like China and India have and increasing demand for drugs; It is said that the indian drug market will reach $20 billion by 2015. This will lead to companies having to increase the branding of their products to attract more of these customers. It may also make companies have to invest more into research and development of new drugs to suit these new markets, as they may have more demand for a certain drug than in the current countries they're selling. 

Finally, a third consumer factor that may influence the industry is the increasing need for perzonalized medicine. It can cause the industry to, once again, have to invest more into research and development to cover the needs of certain groups of patients. They will also have to invest into more specialized marketing and promotion startegies to target these groups of consumers. 

Maria 

http://blogs.hbr.org/hbsfaculty/2010/04/pharmas-future-depends-on-thes.html

What is the Competitive Landscape of the Industry in the USA?

          Within every industry around the United States of America there is competition. Competition is necessary for any industry to thrive and make economical, as well as technological advances. Once again however, the competition within the Pharmaceutical industry is much different than the competition in other American industries.
          Recently the United States Pharmaceutical industry has been showing signs of vertical consolidation. What this means is that a lot of pharmaceutical companies are combining their suppliers and distributors under a common owner. Through this consolidating practices, industry leaders can then better predict pricing deviations and adjust prices to better compete with other industry leaders. PBM, which stands for Pharmaceutical Benefit Management is used in this process by Pharmaceutical companies. Through these PBM's companies can find out whether they can offer a better rebate to consumers than their competitors and can adjust rebates accordingly.
          Competition in the Pharmaceutical industry is also affected by special prices and deals for senior citizens who are the main consumers of the pharmaceutical industry. Although these prices may result in a loss of competition because all companies are regulated by the government to provide these prices, it may also cause a different type of competition through price discrimination. Most trends have shown price discrimination to go hand-in-hand with competition within the industry. It's competition like this that makes the Pharmaceutical industry different from other U.S. industries.
        







http://www.ftc.gov/reports/pharmaceutical/drugexsum.shtm

How do companies in this industry differentiate themselves from one another?

The pharmaceutical market is a very competitive one; many different companies are currently in place distributing generic drugs that essentially differentiate very little in terms of the final product. However, this is why more successful companies find that most profits are to be attained through means of innovation. What this means is that an excellent way for a company to stand out in the pharmaceutical world is by developing new drugs to meet a demand. This is an expensive process however as tedious research and testing is required in order to put a medicine on the market. This is why for the most part, new drugs are simply spin-offs of previously developed ones but either with a few well advertised advantages or a lower price. In terms of generic pharmaceuticals, it is key to have the lowest price; this is simply because consumers are more likely to buy the same product for the lowest price if possible. However, there are some brands such as Tylenol or Advil that are trusted over other companies by many consumers and they are willing to pay a premium for these drugs over the competing-cheaper generic drugs.
A specific example is the ADHD drug Vyvanse and the ADHD drug Adderhal. They are both amphetamines used to help people with ADD and ADHD, however, recently, vyvanse being a newer drug has been a favorite for consumers over the previous popular drug, Adderhal. What is the reason for this? According to the article "Vyvanse vs Adderall-Benefits, Problems," Vyvanse is a safer drug to take than adderhal because Vyvanse is less affected by the user's diet as opposed to Adderall which can be dangerous to take if drinking orange juice in instance. Another reason more doctors are prescribing Vyvanse over Adderhal is because Vyvanse cannot be abused by snorting or injecting it while Adderhal has been abused for years. In summation, the minor inovations used to create Vyvanse create an increase in purchase incentive for consumers, and while Adderhal has been trusted in the past, buyers look to see the modernness of medications and attempt to reduce negative side affects whenever possible, even if they are insignificant.

Stephen Kessler
Source:
http://healthlifeandstuff.com/2009/07/vyvanse-vs-adderall-simple-vs-complex/

What are Pricing Trends in the Industry

The overview of this article talks about price increases in Brand name and generic drugs from 2000 to 2004. The study found that overall drug prices for 96 frequently used drugs used by both medicare and non Medicare participants rose a whopping 24.5 percent over the course of four years. The study also found that the average wholesale price increased at a faster rate than the average manufacturing price did. The study showed the increases annually through three indexes. The average wholesale price index increased the fastest at a rate of 6 percent a year. The study also concluded that brand name drug prices increased at a higher rate than generic drug prices.

The findings in this study are relatively shocking to discover. The rapid rate at which the price of pharmaceuticals is increasing means that it is continually going to be harder and harder to afford many medications. The fact that the wholesale price increases faster than the manufacturing price shows that much of this increase in price does not have much to do with manufacturing costs. Prices are increasing due to the want of drug companies to make more profit. The conclusion that brand name drug prices increase at a faster rate than generics also shows that want for drug companies to make more money because they make more profit off brand names than they do generics. These price increases are a concerning trend in the industry and show that it is only going to get more difficult to pay for prescriptions as time goes on.

http://www.gao.gov/new.items/d05779.pdf