Dan&mike_5-2_notes - At a minimum other changes in...

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At a minimum, other changes in the healthcare industry should be considered when evaluating the effects of vertical integration, including: the fact that the U.S. population is aging, which will lead to changes in the required mix of healthcare services; and technology improvements that change the costs of providing different health services, for example, new technologies that allow procedures to be shifted from inpatient to outpatient settings (Ackerman). The appeal of vertical integration, especially upstream, is when necessary technical skills are easily mastered (Ackerman). Abbott Labs, and basically all of the pharmaceutical industry, are in a specialized industry that keeps trade secrets very private. Meaning, Abbott must keep their upstream processes such as R&D and legal in house in order to keep their products and services secure from infringement by outside competition. Another appeal of vertical integration is increased communication efficiencies. Theoretically, by housing all of their R&D and manufacturing processes, communication downstream should be relatively easy as it is all internal. Unlike many of its competitors (including Merck, SmithKline Beecham, and Eli Lilly), Abbott did not acquire a drug distribution manager in the early 1990s. Instead, the company plowed funds into research and development. R & D outlays rose from 5.2 percent of sales in 1982 to more than 10 percent of sales by 1994--by the latter year, R & D expenditures neared $1 billion. That year marked the company's 23rd consecutive earnings lift and helped Abbott's stock hold its value better than most competitors in the uncertain healthcare environment of the early 1990s. ( Motin. J)
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Among key developments in the early 1990s was the introduction in 1991 of clorithromycin, an antibiotic developed as a successor to Abbott's erythromycin. Marketed in the United States under the name Biaxin, clorithromycin was useful in the
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Dan&mike_5-2_notes - At a minimum other changes in...

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