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The Analysis of Pharmaceutical Market

The pharmaceutical industry is praised as one of the nation s leading industrial sectors. The fruits of its extensive research and development are sold world wide and have improved the length and quality of life of countless individuals . A pharmaceutical company, or drug company, is a commercial business whose focus is to research, develop, market and/or distribute drugs, most commonly in the context of healthcare. They can deal in generic and/or brand medications. They are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs, particularly prescription drugs. From its beginnings at the start of the 19th Century, the pharmaceutical industry is now one of the most successful and influential industries, attracting both praise and controversy, and its activity is subject of much market research. They can deal in generic and/or brand medications. They are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs, particularly prescription drugs. From its beginnings at the start of the 19th Century, the pharmaceutical industry is now one of the most successful and influential industries, attracting both praise and controversy, and its activity is subject of much market research.

Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became massmanufactured and distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US, Belgium and the Netherlands following suit. Numerous new drugs were developed during the 1950s and mass-produced and marketed through the 1960s. Cancer drugs were a feature of the 1970s. The industry remained relatively small scale until the 1970s when it began to expand at a greater rate. The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation. Marketing changed dramatically in the 1990s, partly because of a new consumerism. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. There are now more than 200 major pharmaceutical companies, jointly said to be more profitable than almost any other industry, and employing more political lobbyists than any other industry.[2] Advances in biotechnology and the human genome project promise ever more sophisticated, and possibly more individualized, medications.

Market Segmentation
Pharmaceutical market segmentation is invariably done by pharmaceutical companies in order to understand their target market and target customers. As we all know in pharmaceutical market, two layers of customers are observed: - doctor, who prescribes medicine ( intermediate customer) -patient -the final customer or more appropriately the consumer of the pharmaceutical product

a)Pharmaceutical Market Segmentation by Products
-Institutional market products -Industrial market products -OTC (Over the counter) or non prescription products -consumer or prescription products A.Institutional market comprises of large hospitals who purchase in bulk and directly from the companies. Pharmaceutical companies need to identify the profitable hospitals on the basis of their size and how much business they can generate. Some companies have a separate department or division to cater to the needs of institutional market. B.Industrial market comprise of buyers of bulk drugs or active pharmaceutical ingredients. It also includes pharmaceutical machinery suppliers. C.OTC market includes consumer who purchases certain medicines that do not require a prescription from doctor. D.Prescription market is very important for the market of the pharmaceutical market. On the bases of variables that we have seen in the previous blog, pharmaceutical market for prescription can be sub divided into two categories: 1. Doctors or Intermediate Customer 2. Patients or consumer 1. Segmentation on the bases of Intermediate customer (Doctor): Doctors can be classified on the basis of their: a. Age (Old Doctors, Young Docotrs, Interns), Practice (Prescribing/Dispensing) f. Usage rate of products (heavy users, light users, medium users, non users) A company need to look into so many factors because these factors would help a company to effectively plan and decide its marketing strategy. 2. Segmentation on the bases of consumers Patients can be categorized as: a. Patients with similar kind of illness eg. diabetic patients b. Patients with similar stage of illness b. Speciality (Cardiologists, Diabetologists, Orthopedician, Opthalmologist etc.) c. Place of Practice (Urban, Rural, Govt Hospitals, Private clinics) d. General Practitioners e. Type of

(acute illness / chronic illness) c. Patients according to their age group (pediatric patients, geriatric patients, young patients etc.) d. Patients according to their gender (male and female patients)

b)Pharmaceutical Market Segmentation by Demography
Rapid expansion is projected for the elderly segment of the population-a group characterized by heavy use of prescription drugs. World Health Organization (WHO) forecasts the global over-65 population to rise from 380 million in 1997 to more than 690 million by the year 2025. Unfortunately that does not mean they will he free of health problems, providing fertile markets for new prescription drugs.

The four P s
Pharmaceutical products more commonly known as medicines or drugs are a fundamental component of both modern and traditional medicine. It is essential that such products are safe, effective, and of good quality, and are prescribed and used rationally. The developing world suffers the major burden of infectious disease, yet the range of drugs and diagnostic tools available for the treatment of many infectious diseases is limited. Moreover, some currently available products are difficult to access or administer in developing country settings, while others remain unaffordable at the patient or health facility level. There is also increasing resistance to some drugs.It is therefore vital that improved and/or new drug regimens are continually developed through product/drug discovery which broadly spans clinical testing to improving access and marketing. Research and Development Drug discovery is the process by which potential drugs are discovered or designed. Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug development are to determine appropriate Formulation and Dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The amount of capital required for late stage development has made it a historical strength of the larger pharmaceutical companies. Often, large multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of new drug substances.

Once a patented drug enters the market, its producer has some degree of monopoly power ² that is, the ability to hold the product¶s price appreciably above the current production cost without incurring dramatic losses in sales. This is a broader definition of monopoly power than the classic notion of a market in which there is only one seller. Few drugs lack any substitutes at all. What matters most is that the drugs are differentiated substantially from their substitutes; the seller can then make a trade-off between price and volume. Differentiation occurs because various chemical molecules targeted toward a particular disease have diverse therapeutic effects and contraindications. It is sometimes asserted that drug prices are high because research-and-development costs are high and must be defrayed. The short-term monopoly profits that can be realized from patented and successfully differentiated drug sales are the lure, which prompts investments in research, development, and testing. Indeed, the linkage is surprisingly close: as drug prices rise or the difference between drug sales revenues and production costs increases, researchand-development outlays also tend to rise relative to their trend; as drug prices fall, so in tandem do research-and-development outlays.

Spending on prescription drugs and promotion by the pharmaceutical industry grew substantially during the past ten years. Spending on prescription drugs exceeded $150 billion in 2001, almost double the $79 billion spent in 1997.1 Alongside and perhaps underlying this trend, promotion by the pharmaceutical industry also grew substantially, rising 70 percent from 1996 to 2000.2 In 2000 the industry spent more than $15 billion in promotional activities (85 percent directed toward providers and 15 percent, toward consumers). The pharmaceutical industry has allocated substantial resources to detailing, or visits during which information about drugs is conveyed and drug samples provided, and is spending more to convey information to patients. Several studies have shown that consumer-directed advertising raises awareness of diseases, treatment, and specific drugs and that patients who are exposed to this information are more likely to request specific drugs. Although drug promotion is regulated through oversight by the U.S. Food and Drug Administration (FDA), many critics assert that current regulation does not ensure that physicians and patients react appropriately or that they make the right decisions. This has led to calls for greater limitations on how the industry promotes its products, perhaps even the cessation of direct-toconsumer (DTC) advertising. It would enlighten the discussion to know whether on balance pharmaceutical promotion educates or misleads. Although there have been reports that pharmaceutical sales representatives occasionally make inaccurate statements to prescribing physicians, there are no objective data showing that drug promotion (in general) or DTC advertising (in particular) results in the inappropriate use of drugs.And although a definitive answer is not available, recent studies provide a framework for considering further research and for public discussion. These studies have addressed the following questions: How much variation is there in the use of pharmaceutical therapies? Has the relative proportion of appropriate and inappropriate drug use changed over time?

4.Place (distribution)
Beginning March 2007, Pfi zer introduced a direct distribution system for its products in the United Kingdom, making them available only from the company s sole appointed distributor rather than from a choice of wholesalers. This approach, should it prove successful, threatens to overturn the established model of pharmaceutical distribution, imposing enormous changes upon key stakeholder groups wholesalers, pharmacists, hospitals, dispensing doctors, and government. The distribution market in fl ux: the changing patterns of pharmaceutical distribution and companies motives for adopting direct distribution. Pfi zer s pursuit of DTP: the company s attempts at direct distribution in Germany, Spain, and the United Kingdom. Market impact: other multinational manufacturers interested in direct distribution. Key stakeholders response: reactions of wholesalers, pharmacists, and dispensing doctors, as well as the government view of the program and the ensuing investigation of U.K. pharma distribution. Outlook and implications: our forecast for the impact of DTP on future drug distribution trends.

Marketing Strategies
Target market
Pharmaceutical marketing is the business of advertising or otherwise promoting the sale of pharmaceuticals or drugs.Evidence show that marketing practices can negatively affect both patients and the health care profession. Many countries have measures in place to limit advertising by pharmaceutical companies. Physician are perhaps the most important players in pharmaceutical sales. They write the prescriptions that determine which drugs will be used by the patient. Influencing the physician is the key to pharmaceutical sales. Historically, this was done by a large pharmaceutical sales force. A medium-sized pharmaceutical company might have a sales force of 1000 representatives. The largest companies have tens of thousands of representatives around the world. Sales representatives called upon physicians regularly, providing information and free drug samples to the physicians. This is still the approach today; however, economic pressures on the industry are causing pharmaceutical companies to rethink the traditional sales process to physicians. Pharmaceutical companies are developing processes to influence the people who influence the physicians. There are several channels by which a physician may be influenced, including self-influence through research, peer influence, direct interaction with pharmaceutical companies, patients, and public or private insurance companies. There are also web based instruments that can be used to determine the influencers and buying motives of physicians.

Because the competition on the market is at a high level, the advertising needed in order to attract customers attention should be original and convincing. Some examples of companies that adopted different marketing strategies are: Abbott Abbott's mission statement is "To improve lives by providing cost-effective health care products and services". Abbott's strategy is to remain competitive, by expanding and continuing to develop innovative products that will deliver better health care. They also want to focus on internally developed products, external collaborations, and well-targeted acquisitions that possess similar financial discipline. Abbot is committed to discovering, developing and marketing innovative drugs that improve human health. Abbott also strives to increase value for their shareholders, in order to keep investing heavily in science and technology. Eli Lilly Eli Lilly's CEO, Sidney Taurel, divides their mission in to four parts: "Ensure that all internal and external stakeholders have the information resources..., to support Lilly's innovation strategy, to provide health care solutions, and to build shareholder value"(4). Lilly has two main strategies for growth: "discovering, acquiring, and developing promising candidates; and to realize their full potential in the global marketplace. In 1998 for its first strategy, Lilly increased its R&D investments by 27%, to $1.7 billion. For the second strategy Lilly expanded sales forces in key markets and increased their direct consumer advertising in the United States. Lilly's does face some challenges on the upcoming years, such as the expirations of their U.S. Prozac patents. Once generic competition for Prozac comes into the market sometime in the year 2001, Prozac will very likely be out of the market. Lilly must pursue the development of new antidepressants in order to stay competitive in this market. Merck's mission is to: "Provide society with superior products and services, innovations and solutions that satisfy customer needs and improve the quality of life; to provide employees with challenging work and advancement opportunities, and to provide shareholders with superior rate of return". Merck's strategy for growth is driven by six major components: discover important new medicines through breakthrough research, demonstrate the value of their medicines to patients, and to be the top-tier company in the health care industry. The other three components are their operating priorities: maximize revenue growth through commitment to research, to achieve the full potential of managed pharmaceutical care, and to preserve the profitability of their core pharmaceutical business. Pfizer Inc. Pfizer (Mr. Steere) states their mission statement in a very simply way, "At Pfizer, life is our life's work". To fulfill this mission Pfizer focuses in four strategies, which have driven the company to be among the best in the world. Their strategies are to deliver shareholders value, in the past 5 years Pfizer shares have generated a total return of more than 690%. They have narrowed their focus to only produce what they do best, pharmaceutical products. They want to enable people to live better lives, and research

shows that more than 17 million people around the world turn to Pfizer every day to help them live healthier. Another strategy is to build powerful partnerships in order to come up with breakthrough medicines. Pfizer has more than 70 new product candidates in development, and nearly all of its major medicines are #1 or #2 in their categories.

The Social Position of Pharmaceutical Marketing
Drugs affect and alter health. By their very nature they play a prominent role in society. The drug industry consequently also plays a prominent role. The president of the one of the largest pharmaceutical manufacturers has defined this role to include the following: 1. Discovery and development of new drugs; 2. Rapid and safe development of these drugs into useful therapeutic tools; 3. Production and distribution of safe and efficient existing drugs. This role is admirably fulfilled by most members of the pharmaceutical industry. Nevertheless, the health field is ripe for exploitation. The efforts of marketing practitioners to match as closely as possible the marketing mix of their companies with the needs of the consumer has led to the development of a way of thinking known as the marketing concept .

Demand Analysis
The demand for pharmaceuticals derives from the demand for health. While most markets have two participants, the producer and the consumer, demand for health care is also determined by so called third-party intermediaries, the insurers or other payers who stand behind the patient ready to pay for whatever he or she decides to purchase. But the picture for health care is even more complicated because the physician frequently has two roles as decision maker: as a provider of care and as the consumer`s agent. This agency relationship , in which the professional acts in the consumer`s best interest, has been the subject of intense debates for decades primarily because of the incentives built into fee-for-service medical care still the predominant form of physician payment in the United States and most other countries. Fee-for-service payment rewards the practitioner for performing each specific service. The inherent conflict of interest facing a physician who is paid according to the quantity of services performed is disquieting. Of course there are many other areas of our lives in which our expertise as consumers is so limited that we must trust others to make decisions for us. Health insurance creates an odd division between professional advice, service delivery, consumption and payment. Health services are traditionally selected by the physician who neither consumes the service nor pays for it. The patient receives the service but for approximately 84% of expended shares, does not pay it directly. Payment is left to government or private insurers, acting as third party payers. Of course patients ultimately pay but only directly and as part of a greater pool of insurance beneficiaries and tax payers. In the pharmaceutical market another professional also participates the pharmacists. The role of pharmacists is changing rapidly, and we will look particularly at some of the forces shaping the future of this profession. Pharmaceutical demand is influenced by the fact that drugs are both a traditional product, in the sense of other manufactured goods, and a service, because of the professional component is selection and

dispensing. Another important consideration is the degree of market concentration or competition in the industry, and how consumers and their physician agents receive information about therapeutic alternatives.

Supply Analysis Supply chains in pharmaceuticals industry are experiencing a revolution. Threats such as parallel trading and counterfeit drugs and the requirements of organizations such as the FDA demand more rigorous controls and traceability on drugs; new technologies and new ways of working with wholesalers or alternative distributors offer a new flexibility in manufacturing and an ability to respond to immediate opportunities or crises in any give market. Rob Whewells cutting edge guide explains the nature of these threats and opportunities and provides the means to develop a strategic approach to supply chain that allows you to minimise risk and, at the same time, ensure flexibility and improved long-term profitability. World Pharmaceutical market

COMPETITION Firstly, pharmaceutical companies compete among themselves. Although not all leading pharmaceutical companies cover all segments of pharmaceutical market, they cover the segments with the highest potential such as treatment of infectious, cardiovascular, psychiatric or oncology diseases. Secondly, they experience significant profit losses due to competition from the generic drug manufacturers. A generic drug (generic drugs, short: generics) is a drug which is produced and distributed without patent protection. The generic drug may still have a patent on the formulation but not on the active ingredient. Generic prices are usually much lower then those of major pharmaceutical companies; as the result, after patent expiration, generic drugs manufacturers capture significant market share.Finally, the whole pharmaceutical industry competes with other health care industries.

Market leaders in terms of sales

Pfizer Incorporated is a major pharmaceutical company, ranking number one in sales in the world. The company is based in New York City, and its research headquarters is in Groton, Connecticut. It produces the number-one selling drug Lipitor ( used to lower blood cholesterol); the neuropathic pain/fibromyalgia drug Lyrica ; the oral antifungal medication Diflucan, the long-acting antibiotic Zithromax, the well-known erectile dysfunction drug Viagra, and the anti inflammatory Celebrex (also known as Celebra in some countries outside USA and Canada, mainly in South America). Products: Ben-Gay. Viagra Xanax

GlaxoSmithKline plc a United Kingdom-based pharmaceutical, biological, and healthcare company. GSK is the world's second largest pharmaceutical company and a research-based company with a wide portfolio of pharmaceutical products covering anti-infectives, central nervous system, respiratory, gastro-intestinal/metabolic, oncology, and vaccines products. It also has a Consumer Healthcare operation comprising leading oral healthcare products, nutritional drinks, and over the counter medicines. Products: Aquafresh Augmentin Panadol Sensodyne

Sanofi-Aventis , headquartered in Paris, France, is a multinational pharmaceutical company, the world's third-largest by prescription sales. Sanofi-Aventis engages in the research and development, manufacturing and marketing of pharmaceutical products for sale principally in the prescription market, but the firm also develops over-the-counter medication. Sanofi-Aventis covers 7 major therapeutic areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis and vaccines (it is the world's largest producer of the latter through its subsidiary Sanofi Pasteur).[3] The company is a full member of the European Federation of Pharmaceutical Industries and Associations (EFPIA) Products: Lovenox Lantus


Novartis International AG is a multinational pharmaceutical company based in Basel, Switzerland. With revenues of over $42 billion, it is one of the largest healthcare companies in the world and a leading giant among pharmaceutical companies. Novartis owns Sandoz, a large manufacturer of generic drugs. The company formerly owned the Gerber Products Company, a major infant and baby products producer, but sold it to Nestlé on 1 September 2007. Products: Voltaren Lamisil Nicotinell