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Including Key Drivers for change and
major trends in this industry


Many countries have a monopsony where there is one powerful

purchaser; the government
Goverments have focused on pharmaceutical companies as easy
targets in their efforts to control rising health care expenditure.
Methods include price or reimbursement controls.
Government price controls also created parallel trade. Single European
Market allows distributors to pocket difference after buying from low
price market and selling in high price market.
European government has forever changing cost containment plans
FDA perceived as too closely aligned with the industry
South African government proposed legislation to allow generic imports
of branded drugs 39 firms took legal action not a good example of
industry relations
Clear principles agreed on and adopted by many companies that they
would supply critical drugs to poor countries on a no profit no loss basis
Japanese government calling for consolidation and globalisation of
domestic companies
Free trade allows wholesalers to extract a large chunk from the value


New economic reality in 2006 where growth is shifting from mature markets to
emerging ones
Reduce time in which R&D costs could be recouped
Universal coverage systems, i.e NHS in UK too slow or unable to introduce
latest treatments and insurance funded systems i.e In USA some people can
afford treatments, but not all. 15.9% of US population without health insurance
Methods imposed to control pharmaceutical spending
Venture capitalists offering funding for new industry players like biotechnology
Pharmaceutical growth is aligned with GDP growth
Companies costs for providing drug benefits to employees were increasing by
up to 20% annually.
MCOs asked consumers for increasing co-pays on branded versus generic
Economic recession in Japan
Slowing European economies
Chinese government pouring money into new universities and science parks
Acquisitions of biotechs
Product life cycle has shortened and R&D costs, in-licensing and marketing
costs have risen
Emerging markets accounting for 50% of global GDP growth in 2005


Regulators, payers and consumers more carefully weighing the risk/benefit factors
of pharmaceuticals
Lack of public or political support for industry
Ageing populations pressuring health care funding
Increasing patient expectations
Trend by payers to use generic drugs as first line treatment option, only switching
to patented drugs if they fail
Litigious US consumers forced MCO attention on offering optimal rather than
cheaper care leaving the door open for genuine innovation
Japan had worlds most rapidly ageing population, however in 2005 the population
itself began to decline
Emerging markets have enormous populations with high levels of unmet need
In 2006 companies realised that well informed patients were prepared to ask for
drugs by name and were becoming increasingly vocal, well informed, and
Consumers beginning to purchase across borders with no guarantees of drugs
being safe or even genuine
Average life expectancy in developed countries increased dur8ihng 20 th century by
about 20 years
Public perception of pharmaceutical companies was that they were greedy and
consumers and politicians lost trust
More educated consumers


Expensive high technology solutions

International convergence of medical science and practice
under the influence of modern communications technology
and increased travel and information exchange
Pace of change outstripping the capabilities and powers of
New product adoption is not keeping pace with loss of patent
Easy to purchase addictive painkillers and other potentially
harmful drugs over the internet and rogue websites offering
miracle cures for aids cancer
Opportunities in scientific and technological advances
Chinese government pouring money into new universities and
science parks


None identified


Regulatory controls becoming tighter

Legislation enacted to set fixed period on patent protection typically 20
Regulatory changes in 1997 lead to direct to consumer (DTC) advertising
Regulatory processes undergoing international harmonisation
European Medicines Evaluation Agency (EMEA) established
Move towards global regulatory harmonisation through the International
Conference on Harmonisation (ICH)
Strengthened patent protection and liberalised equality controls in
emerging markets
Fake drugs account for over 10% of the global market generating annual
sales of more than $32b
Illegal drug cartels moving into the less risky, but equally as lucrative
business of fake pharmaceuticals
Between 2000 and 2003 the US Justice Department collected over $2b in
fines from cases against pharmaceuticals firms, manly for pricing and
marketing crimes
Increasingly onerous regulation



Large emerging markets with unmet need

Market shift to specialist driven medicines
Dominant belief that size it what counts
Opportunities in scientific and
technological advances
Shorter product life cycles
Spiralling health care costs