Factors Affecting the Pharmaceutical Industry: PESTEL Analysis

21-B-LB5113-SIN-INT-SP52
Corporate Strategy
With the development of the global economy, the growth of the total population and the
increase of the aging society, the demand for medicines is on the rise. The global
pharmaceutical market maintained rapid growth. Among them, mature markets such as the
United States, Japan, and Europe have been the main markets for global drug sales for a long
time. As the most populous country in the world, China's huge population has brought a
medical and health market that cannot be underestimated. At the same time, with the
improvement of people's living standards, increased awareness of health care, and the
development of new medical technologies, the rate of consultations among citizens has
continued to increase, which has brought prosperity to the pharmaceutical market.
PESTEL

Political
In almost every country, the pharmaceutical industry has a strict regulatory framework
(Bush,2019). This includes safety certifications and drug-related safety laws. In any case, this
complicated regulatory framework is a serious obstacle to the entry of new competitors in the
pharmaceutical industry ( Bush,2019). It may also affect how drugs are advertised and where
they are sold. The pharmaceutical industry is composed of various large companies. The
global level of their distribution and marketing and regulatory framework make it difficult for
newcomers to enter the market. This shows the strict competition within the market, while
also providing a larger industry image. Many countries have enacted laws to strictly control
the price of medicines. This has hindered the development of the industry. However, this
approach also provides cheaper medicines for the lower classes of society. For example,
when diabetes treatment is critical to a person's survival, it is very unethical to price drugs so
high (Bush,2019). Therefore, the government became interested in restricting the selling price
of medicines. Ultimately, this means that after considering all factors, the profits of
pharmaceutical companies will be significantly reduced ( Bush,2019).
Economic
Ordinary people spend more and more on medical care every year. It means an increase in the
revenue of the pharmaceutical industry (Bush, 2019). The overall trend of household
expenditure is definitely increasing (Bush, 2019). People spend a large part of it on medicine.
One of the main reasons is that people now generally use more expensive medicines than
before. Due to the tremendous development of science and technology, pharmaceutical
research and development are at the highest level, and many new drugs have been introduced
into the market. People are generally buying these drugs and provide further growth for the
industry. Due to the government's policy control, drug prices have fallen sharply, and
pharmaceutical companies have to reduce production costs. This is a major downward trend
in the state of the pharmaceutical industry.
Social
With the continuous improvement of the world's medical standards, people are now facing
the serious problem of an aging population (Bush, 2019) This means that the number of
patients is higher than ever before, and there is a greater demand for pharmaceutical products.
This puts a lot of pressure on the pharmaceutical industry. Obesity is a bigger problem than
ever. The past few decades have witnessed the rapid development of global food culture,
which has caused a large number of people to become fat. Although obesity itself is not a
"disease", it is a serious health problem in developed countries (Bush, 2019). There are many
health problems related to obesity, many of which require medication. This has also led to an
increase in people's demand for drugs, thereby increasing the overall income of the
pharmaceutical industry. Despite the aging population and rising obesity rates, most people
try a more healthy lifestyle trend, especially in developed countries (Bush, 2019). The trends
in exercise and fitness have also led to a decrease in the need for drugs because people have
healthier lifestyles that do not require drugs.

Technological
Biotechnology refers to the technology that uses organisms to improve people's lives in the
fields of agriculture, food, and medicine.Biotechnology, an enabling technology, is the
growing and most rapidly changing subject which has created a number of new opportunities
for the upliftment of human society（Arora,2006）.It has played an important role in drug
research and development. The current technological development in this industry has led to
the production of many new drugs and the development of new technologies to manufacture
cheaper alternative drugs. The biotechnology industry continues to promote the growth of the
pharmaceutical industry. But on the other hand, if biotechnology is used to produce healthier
foods, it may affect the development of the pharmaceutical industry. For example, various
meat substitutes are being developed from vegetables. Since meat is considered to be the
main source of health problems, this will reduce the need for drugs for medical treatment of
health problems. The huge advertising system allows pharmaceutical brands to interact with
consumers on their authorized sales websites, which can greatly increase consumption
potential. Now pharmaceutical companies can reduce the cost of customer acquisition and
thus acquire more customers by advertising directly to consumers. More consumers buy more
medicines, which helps the development of the pharmaceutical industry.
Environmental
The development and production of drugs will leave a large carbon footprint.There have been
increasing concerns that residues of antibiotics could generate antibiotic resistance among
bacterial populations in the environment and that endocrinealtering substances could affect
the development of sex organs in aquatic species (Weigmann, 2017). In view of the current
world environmental problems, the requirements of the regulatory authorities regarding the
waste generated by the pharmaceutical industry have become the main concerns of these
pharmaceutical companies. Most of them are large pharmaceutical companies. These
requirements have forced pharmaceutical companies to spend a lot of money to improve their
production methods. However, the development and production of pharmaceutical products
have a much smaller impact on the natural environment than other industries. In addition to
regulating their own carbon footprints, pharmaceutical companies often donate money for
environmental protection.
Legal
Frauds in the sale of health care products without any efficacy are quite common, which is
why the government has enacted strict laws to control the growth of these health care
products companies. It is characterised by heavy state regulation and, sometimes, by the
competing interests of the pharmaceutical business and society (Gurgula, 2020). Therefore,
pharmaceutical companies must be careful to meet all safety requirements of the local
government when operating and producing. Pharmaceutical company's pharmaceutical
product formulations are now mainly based on data preservation. Therefore, pharmaceutical
companies need to ensure that they are protected from cyber threats. If a pharmaceutical
company does not care about cyber threats, leading to the leakage of its pharmaceutical
formulas, some pharmaceutical companies that profit from counterfeiting will be able to

produce fake medicines based on the data. Consumers may no longer trust their products and
services because of these counterfeiting companies.The pharmaceutical industry is unique in
its complexity.
These are the main factors affecting the pharmaceutical industry on a global scale. Although
the growth of purchasing power, technological innovation, the increasing number of obese
people and the aging population always need certain drugs and other factors have promoted
the growth of the pharmaceutical industry, strict regulations, various pricing pressures, health
trends, and advances in biotechnology, etc. Factors are also leading to the decline of the
pharmaceutical industry.
Porter’s Five Forces Analysis
One model for examining an industry and a company's strategic position within its industry is
Porter's Five Forces analysis. The analysis looks at five competitive forces that influence an