An Overview Of The Pharmaceutical Industry
By Daily Healthcare Facts
How did the pharmaceutical industry transform from a sleepy, sleepy sector to one of the most dynamic and innovative in the world? This is perhaps one of the most important and least known stories about how the global pharmaceutical industry has grown into a $300 billion business. It’s an industry filled with intrigue, mystery, and even some magic. The transformation started in earnest in the 1990s when companies began streamlining operations and slashing costs.
This was the beginning of what would become a revolution a period that saw much of the industry change its ways and become more nimble and efficient. By becoming leaner and creating better processes, pharmaceutical companies were able to drive down costs while maintaining quality at a much higher level than they were a decade earlier. Today, this transformation continues apace:
The industry is becoming more digitized, digitalizing business processes while also integrating different functions such as research, manufacturing, sales, marketing, and logistics you name it. Moreover, many pharma companies are investing heavily in research and development to stay ahead of the competition while cutting out waste and improving clinical trial outcomes. In other words: Pharma is changing fast!
Here we will discuss an overview of the pharmaceutical industry.
1. The Key To Understanding The Pharma Revolution
The key to understanding how the pharmaceutical industry has changed over the years is to look at what it used to be like. Before the 1990s, most companies focused on just one or a few drugs. They made sure those drugs were manufactured in high-quality stocks, and they had excellent distribution networks to ensure reliable, safe, and effective use. Pharma was also characterized by low key, slow moving organizations that didn’t make any big deals during their 100-year lifetime. Well, things have changed.
Today’s pharma companies are much more organized, dynamic, and ambitious than their predecessors. Their products are more diverse, and their organizational cultures are more customer-focused. They’re also more agile, which allows them to respond more quickly to new market developments and customer demands. tasked with making sure the various aspects of the business work as expected. The key to understanding how the industry has changed is to look back at how it was 50 years ago.
2. The World Of Pharmaceuticals
The global pharmaceutical industry is a $300 billion business dominated by 186 companies with combined market capitalizations of $77 billion. The top five pharmaceutical companies in terms of market cap alone account for about a third of the industry’s total. To put that in perspective, the airline industry is worth about $60 billion, the hotel industry is about $30 billion, and the music industry is worth $13 billion.
So the industry’s collective worth is about one fifth the size of the airline industry and one-fifth the size of the hotel industry. In terms of market share, the industry is currently the most lucrative in the world. It has a 36.9% share of the global pharmaceutical market, up from 29.1% a decade earlier.
3. How Was The Industry Shaped Up?
In the words of one commentator, “The pharmaceutical industry is now one of the most exciting, dynamic, and innovative industries in the world, with a technology driven, customer first business model that is reshaping how drugs are developed, produced, and distributed.” That’s a bold claim, and to be sure, the industry does face significant headwinds. Since the business model on which the industry is based is changing, so too is its culture. It’s a subtle but significant shift that has occurred over the course of the last two to three decades.
That shift is what has enabled the industry to flourish and create some truly groundbreaking technologies:
Retrofitting: The industry used to make its products in a lab, test them in a lab, and then have them approved by a regulatory authority. That approval process took months or years. But today, most companies produce drug candidates more or less as directed, test them in their own laboratories, and then market them as approved by the FDA, if they are approved at all. The industry used to make its products in a lab, test them in a lab, and then have them approved by a regulatory authority. That approval process took months or years. But today, most companies produce drug candidates more or less as directed, test them in their own laboratories, and then market them as approved by the FDA, if they are approved at all.
Culture Change: It used to be that only a small portion of a company’s efforts was devoted to transforming itself into a pharma company. The rest of the organization was focused on serving its customers. But those efforts have merged, and today,
one of the most significant pressures facing the industry is how to best serve its customers while staying nimble and effective. It used to be that only a small portion of a company’s efforts was devoted to transforming itself into a pharma company. The rest of the organization was focused on serving its customers. But those efforts have merged, and today, one of the most significant pressures facing the industry is how to best serve its customers while staying nimble and effective. In the old days, most pharmaceutical companies were content to make a profit off sales of their products. But the newer generation of pharma companies is focused on achieving better market outcomes. That focus has led the industry to make some bolder decisions than its predecessors.
4. Digital Transformation
The digital transformation of the industry has been a double edged sword. On the one hand, it has been a force for evolution within the industry by creating new ways of doing business. But on the other, it has also been a factor in undermining some of the industry’s oldest and most trusted practices. The transformation of the industry has been led by a few large pharmaceutical companies that have implemented digital transformation projects within their organizations. Other companies have been working hard to catch up and implement digital transformation initiatives.
These efforts are essential to maintaining and upgrading a company’s competitiveness in the long run. A number of factors have led to the digital transformation of the pharmaceutical industry. One of the most significant has been the growth of the internet. The internet made it possible for businesses to connect with customers anywhere in the world, instantly. It also made it much easier for companies to communicate with each other and market their products to customers around the world.
5. Mergers and Acquisitions
Over the last decade or so, the pharmaceutical industry was hit by several large scale mergers and acquisitions. These were often sparked by the excitement generated by a new innovation or the discovery of a new drug. Among the largest deals was the Pfizer Monsanto merger, which created the world’s largest drug company.
On the positive side, the industry is now a more technologically advanced place than it was a decade ago. Data and information flow have become more rapid, user
authentication has become more seamless, and cybersecurity has become stronger.
All this has led to better processes, a lower incidence of fraud, and better clinical trial outcomes.
Bottom Line
The pharmaceutical industry is a fascinating and complex sector with a rich history and a lot of promise. The transformation it has experienced over the last decade is a powerful reminder of how quickly the industry can change. The industry’s success over the next decade will determine if we will see a similar transformation in the medical device industry.