Five Forces and Pharmaceuticals

Five Forces and Pharmaceuticals - However once those...

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Guadalupe Landeros January 28, 2011 Business Strategy Online Professor: Khoja Five Forces and Pharmaceuticals Michael Porter’s Fives Forces Model is a frame work that analyzes the characteristics of an industry’s environment. Specifically, for this assignment I will be analyzing the pharmaceutical industry. The five forces that can affect the profitability of the pharmaceutical industry are potential entrants, substitute products, suppliers, buyers and rivalry among existing firms. Potential Entrants – The threat for potential entrants to the pharmaceutical industry is low due to high barriers. There is high cost for the research and development of new drugs, not to mention long wait time of 7 – 10 years or more from identifying a molecule to actual drug development. New entrants will lack the capital requirements associated with the developmental stages. Substitute Products – Due to patent protection the threat is fairly low for substitute pharmaceutical.
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Unformatted text preview: However, once those patents expire the threat rises. For example, generic brands, once the patent has expired other companies can produce a cheaper alternative. However, patents can be issued for certain substances within the drug. Suppliers and Buyers-The bargaining power of suppliers is low. The bargaining power of customers is low in the US market while the bargaining power of customer in some countries is medium for example Canada which the government sponsored Canadian health care has a powerful bargaining power to pharmaceutical companies. We the “customer” do not get to choose which drug we would like to take. The doctors choose from influence from the pharmaceutical companies or PBM’s on which drug they prescribe to the patients. Rivalry among Existing Firms – Threat is high, with cheaper alternatives including herbal alternatives. The rivalry is based on price, quality and innovations which continues to evolve in the drug market....
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Five Forces and Pharmaceuticals - However once those...

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