Demand for pharmaceuticals is driven by the desire to cure illness and disease. The profitability of individual companies depends on their ability to discover and market new drugs. Large companies benefit from their economies of scale in research, manufacturing, and marketing. Small companies can compete effectively by specializing in drugs that target one or two specific ailments. The Unites States (U.S.) industry is highly concentrated: the 50 largest companies account for more than 80 percent of revenue. The global pharmaceutical market is growing steadily, with sales reaching $1.08 trillion in 2011 – a year-on-year increase of 7.8% (PWC, 2012).
Modern drug development is an outgrowth of recent research into the specific causes of illness and disease, coupled with advances in chemistry and industrial technology that allow scientists to manufacture chemicals to improve these conditions. The explosion of scientific knowledge about human biology in the past 40 years has provided a wide array of advancements in medications. Tomorrow’s challenge is to develop new medicines that can prevent or cure currently incurable diseases. Today’s challenge is to get to tomorrow – and that’s a tall order in itself.
Health care payers are imposing new cost constraints on providers and are scrutinizing the value of medicines more carefully. Health care expenditure as a percentage of gross domestic product (GDP) is climbing in countries in every income bracket, and it’s climbing most steeply in the mature global markets where the Pharma industry has historically made most of its money. That includes the U.S.
The paramount challenge is to create more value for patients, providers and payers. What thoughts and ideas do you have in order for the Pharma industry to do so? Think about all you read in Chapters 5, 10 and 12 (and the others last week). Think about the current economical, social, demographic, medical, technical and political influences and trends when responding. Consider the newer and older reimbursement models as well as the changing models of care and focus on quality currently seen in health care today. Support and explain your position as to how the pharmacy industry can reinvent itself to benefit the key stakeholders.
PwC (2012). From Vision to Decision, Pharma 2020. Retrieved from