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8_Globalization and the Pharmaceutical Industry Revisited

8_Globalization and the Pharmaceutical Industry Revisited -...

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Unformatted text preview: 588 / Busfield It needs to be noted, however, that despite the pressures towards mergers and acquisitions, the merged companies have not necessarily performed better than other companies. A recent analysis of the leading European companies involved in important mergers, which included the GlaxoSmithKline and the AstraZeneca mergers, indicated they have not done particularly well following the mergers, at least as measured by their share prices when compared with overall stock market performance. Indeed, there was a general slowdown among leading phar- maceutical companies in 2002, with many reporting lower profits in the first or second quarters. The consequence of this consolidation among the leading companies in the industry has been, not surprisingly, that the percentage of the market held by the top ten has increased markedly. Tarabusi and Vickery noted that in 1989, the ten largest of the world’s top 184 companies had a little less than a third of their combined sales, whereas by 1995 the top ten had close to 36 percent of the world market (3). As noted above, the figure for the top ten’s share of the market was nearly 46 percent by 2000 (2). Based on the 2000 figmres, this proportion looks set to increase to 49 percent with Pfizer’s prospective takeover of Pharmacia and the rise of a further company into the top ten. The leading firms vary in the extent to which pharmaceuticals dominate their portfolio of activities and in the balance of different pharmaceutical products: in-patent drugs, out-of-patent drugs or generics, and over-the-counter (OTC) drugs—the first two categories requiring a prescription. Some companies are engaged in producing other chemicals such as weedkillers and plant nutrients, and some produce drugs for animals. Equally, other companies are engaged in other health care activities, such as the provision of nursing care or the distri- bution of drugs as well as the production of pharmaceuticals. For example, 97 percent of the business of AstraZeneca is in pharmaceuticals (15). Eighty-five percent of GlaxoSmithKline’s sales come from pharmaceuticals, the remainder from other health care, including OTC drugs (e.g., Panadol), oral care (e.g., Macleans toothpaste), and nutritional care (e.g., Lucozade) (16). In contrast, pharmaceuticals make up only 45 percent of Johnson & Johnson’s business, consumer health care (including OTC drugs, oral care, and baby care) accounting for 21 percent, and medical devices and diagnostics 34 percent (17). Similarly, pharmaceuticals make up only 45 percent of Merck & Co.’s activities, the remainder consisting of pharmaceutical distribution via a separate subsidiary MedCo (18). Data on the distribution of production activities in 2001 for the ten leading companies are given in Table 3. Several leading companies have been divesting themselves of non- pharmaceutical activities in order to concentrate on the pharmaceutical side of their work. Despite its planned merger with Pfizer, Pharmacia continued to spin off Monsanto, which specializes in agricultural biotechnology, in 2002, although the two companies had only merged in 2000. Aventis divested itself of Wacker, a German company making silicones, in 2000; of Messer Griesheim, ...
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