Pharma Case

- What are the important trends and uncertainties in the pharma industry, and how do these developments affect the competitive positions of Pfizer, Merck and generic manufacturers? (last Student ID digits = 4 – 6) 112340124

- From the differentiation strategy era to cost-leadership strategy era in the pharma industry (Gradually lessen in the duration of market exclusivity)

The goal of a differentiation strategy is to increase the perceived value of drugs so that customers will pay higher price for additional features. Due to the easy copy of the drugs, the differentiation strategy in the pharma industry was guaranteed by governmental patents. However, the wide dissemination of scientific knowledge and the availability of new technologies facilitated the development of me-too drugs without infringing its patent. A little different combination of the molecule led to a decrease in the time a breakthrough drug could benefit from market exclusivity from a median of 10.2 years in the 1970s to 1.2 years in the late 1990s. Additionally, The R&D cost of new drugs was getting highly cost as time goes on owing to the low R&D productivity. Therefore, the environmental trend in the pharma industry is the expiration of the differentiation strategy to pursue the innovative drugs, and it shows that Generic drug manufacturing like cost-leadership strategy mainly account for a considerable portion of market share.

* Pfizer and Merck would lose their differential advantage. On the other hand, the generic could attain the cost advantage.

The expiration of highly valuable patents meant the loss of blockbuster drugs. A diminishing number of blockbuster drugs would lead to a decrease in overall profitability. For the generic manufacturers, on the other hand, the expiration of these patents would be beneficial.