Pharmaceutical

1. Customer segments 

• Medical patients (through pharmacy & OTC)
• Hospital (through distributors)
• Government subsidy (for R&D purpose  insurance program)
• Health insurance company 

! Influencing factors: seasonality (vaccine and cold medicine)

!! Key purchasing factors: convenience (location) >>>cost>>>quality (standardized)

2. Cost

• Manufacturing (largest)
• R&D
• Marketing
• Taxes
• Others (wages, liability insurance, legality fees,..)

3. Competition

• Competitive rivalry: high. The industry exhibits a pattern of firms merging and larger firms buying smaller firms that have promising research or new drugs.
• Supplier power: low. The raw materials for manufacturing drugs are commodity products in the chemical industry, which are available from numerous sources. Most of the equipment used in manufacturing and research is available from multiple manufacturers
• Buyer power: low (with all the buyers)
• Substitute: depends, on individual products. Once a drug loses its patents, generic drug manufacturers start selling copycat versions at substantially lower prices. 
• New entrants: low because of big payoffs. one of a startup investor’s main exit strategies is to sell out to a big pharma firm when new products are through the initial development phase.

4. Key economics drivers

• Median age of population
• R&D expenditure
• Patent protection
• Insurance and regulatory landscape

5. Industry challenges

• Rising costs and pressure on health care industry manufacturers as (1) many blockbuster-branded drugs come off patent protection and move to generic status and (2) pressures from regulatory agencies and payers
• Increase in the number of widely used drugs moving from prescription to over-the-counter (OTC) status
• Increasing health care needs of an aging global population in developed countries

6. Change drivers

• Technology & innovation: Product release time increases, digital medical records,…
• M&A: The industry is becoming consolidated than ever

7.  Other information

• How pharma com make new products: (1) R&D; (2) M&A; (3) Partnership
• (US) 3 phases of clinical trials: (1) Efficacy; (2) Safety in human; (3) FDA
• “Invest now, rewards (hopefully) later” industry -> don’t put all eggs into one busket

Reference

1. Belk, D. and Belk, P. (n.d.). The Pharmaceutical Industry. [online] True Cost of Heathcare. Available at: http://truecostofhealthcare.org/the_pharmaceutical_industry/ [Accessed 7 Feb. 2020].
2. Powell, S. (2015). How do pharmaceutical companies make money?. [online] Qoura. Available at: https://www.quora.com/How-do-pharmaceutical-companies-make-money [Accessed 7 Feb. 2020].
3. ROSS CASEBOOK 2015. (2015). 1st ed. Ross Consulting Club, p.27.
4. S.Strong, J. (n.d.). RETHINKING STRATEGY IN PHARMACY AND DRUGSTORE RETAILING. [online] Babson.edu. Available at: https://www.babson.edu/academics/executive-education/babson-insight/strategy-and-innovation/rethinking-strategy/ [Accessed 7 Feb. 2020].
5. Whiteside, E. (2020). The Industry Handbook: Pharma Industry. [online] Investopedia. Available at: https://www.investopedia.com/articles/markets/051316/industry-handbook-pharma-industry.asp [Accessed 7 Feb. 2020].