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