The Pharmaceutical Industry : A Competitive Environment

Pharmaceutical Manufacturers (companies are allowed to set the prices of their new products, and they usually do so based on the perceived value to the consumer rather than production costs) “(Office of Economic and Demographic Research, 2015)

On one hand, there is the need to target more pharmaceutical firms in order to have a wide portfolio of medicines, necessary to address a broad range of diseases and to try solving the prioritization problem.

government has avoided to regulate lower prices. The American Government is also taking advantage of their citizens by supporting these companies. They supply them with their support because they make so much off taxes from the desperate people purchasing drugs. (…too much influence, web)

The U.S. pharmaceutical industry is continuously growing and profiting. How these industries profit and grow in the current status of the American business is caused by various factors such as demand of the citizens, change in marketing and competition. To understand how the factors added to the increase in profit and growth of the pharmaceutical industries, we need to know how it was founded and industrialized.

When the company has patent protection or a government market restriction such as orphan drug status, the company functions like a monopoly. Because no other company can manufacture the drug while these barriers are in place, they are the only supplier. They face a rather inelastic demand curve because sick people are likely to purchase the drug no matter the price. In the long run, after the patents and barriers to entry have expired, drug companies function like monopolistic competitors. Because the formula to manufacture the drug is no longer secret, other companies will produce generic versions of the drug. This means the supply will increase and the market will reach a more efficient, lower price of equilibrium. However, because the drug company will spend money on advertising to differentiate the drug from generic brands the company will act like monopolistic competitors not pure

Moreover, the pharmaceutical industry is increasing the profit margin yearly, when the growth is steady and the intellectual property rights are really favorable for the industry in order to maintain the performance.

The biopharmaceutical industry has historically been dominated by large companies. The threat of new entrants is low, but not impossible. The main path for entry into this market is through development of novel new drugs. New entrants are limited to this method of entry due to patent thickets surrounding incumbent drugs. The largest barrier to entry for companies attempting to enter the biopharmaceutical industry is high research and development costs. Not only must new firms develop and test new therapies, but they must also obtain approval from regulators in order to bring their products to market. Approval of a new drug requires highly capital intensive clinical test in addition to navigating a heavily bureaucratic approval process. The process is time consuming and

As indicated by Pharmaceutical Research and Manufacturers of America (PhRMA), the pharmaceutical exchange bunch, high costs are an impression of the innovative work costs it takes to put up a medication for sale to the public. PhRMA refers to that all things

The pharmaceutical market is said to grow at a CAGR of 2.7% from 2011-2016 which will plummet the market to a value of 299.5 US billion dollars by the end of 2016.

The intellectual property is essential in pharmaceutical industry, which is usually embodied in laws regarding patents, copyrights and trademarks etc. It motivates the sustainable development of the innovation of the pharmaceutical companies (Richard & Rozek 1990).

The pharmaceuticals industry is one of the most profitable business sectors. The implications of this business can be observed on individual, corporate, and national level. The actions that companies make determine significant effects on different categories of stakeholders.

In the world the main hub of pharmaceutical industry are in United Kingdom, USA. New Zealand is far away located from these countries and has a population of 4.4 million and has got less number of pharmaceutical industries. The statistics figure show that there were only two compounds developed during 2001 but due to increased in the government funds from $16.3 million in the year 2000-2001 to $43.1 million in the year 2006-2007 the number increased to 12. The success and profit of a pharmaceutical industry depends on the research of molecule, its efficiency and the cost in the market. The main factor for the gradual decline in the profit of the pharmaceutical industry was decrease in the production and increase in the cost of the drug. As a result this industry is going to build a new method that includes the developing alliance with the smaller companies which will help in reducing the manufacturing cost. (Lockhart, 2012).

According to Dam (1994, P. 247), the copping of intangible assets are very easy and this will result in free copying of innovation by imitators at a low cost. Patent which is one of the way of IPRs, helps to motivate innovation and R&D by giving assurance to innovator total and exclusive rights, these rights include manufacturing right, selling or maintaining, distributing or licensing to distribute the invention. If patent laws in not available in pharmaceutical market no investors will ready to do investment in R&D and the risk is so high that competitor will copy the good and services with less risky investment (Ryan and Shanebrook, 2004, pp. 15, 16).

The Big Pharma companies have a number of responsibilities to submit in order to protect their sustain in market like control drug effectiveness and safety, manage care organizations, drug costs and reimbursement, deal with competitors about alternative brands or generics. Internally, the number of molecules in pharmaceutical company pipelines is shrinking, and the risk/reward ratio for research and development outlays is worsening.

The controls, restrictions and pressures are really important in pharmaceutical organization in many countries such as France, USA, Japan, etc. Some governments are directly involved in the price control of pharmaceuticals products. It is impossible to foresee whether controls, regulations or buyers’ pressure will increase, or if new controls or regulations will be created in any area where GSK is present. The pricing strategy is actually essential, especially in the pharmaceutical industry, as it is a budget that cannot be cut down by customers. People belonging to lower class will always prefer