Decline in Pharmaceutical R&D Productivity Caused by High Sales Expectations

The provided content discusses the adverse effects of having more sales personnel than drugs to sell in a pharmaceutical company. Despite assuming that increased representatives would lead to higher sales, the outcome was a decline in productivity and tremendous loss for the company. The study also highlights the importance of innovation and invention in the medicine industry, with companies that focus on Research & Development (R&D) becoming market leaders.

STRATEGIC
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
THE KEY ENVIRONMENTAL FACTORS..................................................................................3
EVALUATE THE RESPONSES TO INFLUENCES....................................................................5
IDENTIFICATION OF ALTERNATIVE STRATEGIES FOR GLOBAL PHARMA GROUP
AND THE REASONS BEHIND IT................................................................................................6
CONCLUSION................................................................................................................................9

INTRODUCTION
Pharmaceutical industry has been growing at the significant rate because of the increasing
diseases in humans and due to the upgrading technology. There are several environmental factors
which are affecting the developments as well as innovation of the Pharmaceutical industry. This
report is based on the case study of the global Pharmaceutical which will focus on the challenges
and the strategic developments which are made by the companies. Further, the focus will be on
the successfulness of the strategies and the area which still required improvements.
THE KEY ENVIRONMENTAL FACTORS
The strategic developments which were witnessed in the company were because of the
different situations which occurred in the environment. The key environmental factor can be
depicted with the help of the Pestle analysis:
 Political factors- The major political factors which affect this industry is competition for
intellectual property and the increasing rules and regulations of the government on the
practices which is executed by the companies. As in the past, there were very little
influence of government and the major decisions were taken by the medical practitioners
as well as consumers (Khanna, 2012). But with the changing time, the government has
tightened their grip on the working of these companies. So this has highly impacted on
the practices. This is done because of the increasing competition. From the case study it
can be depicted that if the patent has been expired of the particular medicine then the
rivalry companies makes the same medicine with the same ingredients and sells it at the
lower price (Paul and et.al., 2010). This gives rise to unethical competition between the
competitors. These are the political factors which have given rise to strategic
development of the individuals.
 Social factors- The main social factor which is affecting the Pharmaceutical industry is
the ageing factor. From the case study it has been examined that, the person who are
more than 65 years consumes 4 times more medicine that the younger generation
(Pammolli, Magazzin and Riccaboni, 2011). As the old age population is increasing it is
creating heavy pressure on this industry to produce more medicine for the old age people.
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Another social factor which affected the development strategies was the epidemic of the
chronic diseases which are linked with the obesity issues. As in UK and Spain, they were
not able to introduce new treatments because of the financial issues. From the case study,
it was reported that 15% of the population did not have health insurance (Scannell and
et.al.,2012). Because of these reasons strategic developments were made by the
Pharmaceutical industry for overcome the factors which affected the health of the
individuals.
 Economical factors- The economic factors which majorly affect the strategic
developments were the recession which was seen in the 2008. Due the situation of
recession, the government was unable to fund the health care systems due this the
individuals who were not be to afford the medicines were in the loss (Bunnage, 2011).
The recession was so big that the study was made on the analyzing the impact of
recession on the medicines. This has slowed down the innovation of the individuals in the
field of medicines. As the government was not in the position to fund their research. This
was a big loss of the humanity. To curb this situation, emphasis was led on the
manufacturer as well as distributors while some focused on the patents and other aspects.
This was the alarming situation for the government (Viseras and et.al., 2010). As all the
things had impact on the health of the individuals. From the case it can be depicted that
the fastest growing market in the pharmaceutical industry is the US market. It fell from
over 50 percent to the 9 percent in two years from 2006-2008. These were the major
reasons for this industry to take certain steps for benefit of the individuals.
 Technological factor- This aspect has again has great impact on the operations of the
business. Technology and medicines are interrelated with each other. With the up
gradation of technology only the practitioners are able to make new medicines for healing
the patients (Light and Warburton, 2011). Because of the R&D it contributed effectively
in making the drugs which helped in achieving rapid growth and market penetration in
the industry. Technology play significant role in the in this type of industry. Because of
using the technology, the company has made significant medicines which increased their
profitability in the market (Desai, 2012). According to the case study, Glaxo become
popular because of the innovation in medicine for the stomach ulcers. From this example
significant contribution of technology on pharmaceutical industry can be witnessed.
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 Environmental factors- This factor is concerned with the natural resources which are
existing in the environment. There are many natural resources which are rare in nature so
to protect them it has become essential to reduce the use of them. But regarding to this,
the pharmaceutical company has significant impact on the environment. Because the
harmful substances which are emitted from the medicine industry are harmful for the
environment (Paim and et.al., 2011). As the major effect is seen on the lake all the
pollutants are drained out in the water bodies. This makes the water bodies dirty which
further affect the life of the human beings. This water is consumes by the individuals.
Besides this, in the recent scenario it was found that diabetes medicines were found in the
water which is harmful if it is consumed by the individual who are suffering with these
diseases (Regulating the Environmental Impact of Pharmaceuticals, 2016). Because of
improper sewage and the drain system it is disposed off in the water. Due to this, the
scientist found that in the deep sea all the medicines are deposited which is affecting the
whole ecosystem (Kaitin and DiMasi, 2011).
 Legal factor- According to the case study, there was interference of the government in
the practices of the pharmaceutical industry was because of the patents and the licensing
factor. According to the law, it is important for the organization to sell the medicines
which are licensed. For manufacturing the generic medicines it has made the compulsory
regulation to license their products (Jiménez-González, Constable and Ponder, 2012).
Even the government is more focusing on the patents as they feel that it is essential for
the companies to make their trademarks.
EVALUATE THE RESPONSES TO INFLUENCES
There are several developments which are taken by the pharmaceutical to overcome the
influence of the factors. The global pharmaceutical companies have made certain evolutions to
develop for improving the efficiency of the drugs. Further many companies also introduced the
diseases management initiatives so that they can better understand the goals of the healthcare
system. With regard to the strict government regulations, the authority made the free movement
of goods across the European market (Fatta-Kassinos, Meric and Nikolaou, 2011). In this, the
distributors were made free to distribute their goods to the high price market. This made the
distributor profitable. The major focus now of the companies was on the resource and
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development. With the help of new technologies innovative drugs was developed to cure the
diseases of the patients. This helped the individuals to get proper treatment. The most important
thing is that the significant category in the medicine field is the vaccine. The companies are more
focusing on that aspect as it will help in curing the patients. Besides this, the major diseases arte
cured through the vaccines only. According to the case study, the companies are emphasizing on
the innovations so that they can reduce the risk which is involved in making the vaccines.
Further, the pharmaceutical companies are working on the Alzheimer diseases so that they can
cure the diseases as well as can monitor the cure (Freeman, 2010). All the strategic developments
are made for the developments of the individual. This will help in saving the humanities from the
diseases. Further the companies are also focusing on the patents and the licensing. As for
manufacturing the generic medicines all the companies have took license and they are making
huge contribution in saving the life of the individuals. Another strategic approach which was
conducted by the pharmaceutical industry was that they conducted phramacoeconomic
evaluations which helped in demonstrating the extra which was attained by the innovation.
Regarding the steps of the strategic management, healthcare business model will be adopted to
respond to the environment change (Hitt, Ireland and Hoskisson, 2012). Several ill effects are
seen from the waste of the pharmaceutical companies so reduce the effect they are focusing on
eliminating the impact. But all these measures have significantly contributed in the lifestyle of
the humans. Further, for the curing the cancer diseases, the medicines which were made were
costly so the companies are planning to reduce the cost so that they can be given to the individual
who are not able to respond back. The government had made several regulations and decided the
budget regarding the healthcare system. It will be helpful for the companies if any recession
problem is arising. Then in that case, available finance will be given to the practitioners to make
innovation in the product and made medicines to cure the diseases (Hill, Jones and Schilling,
2014).
IDENTIFICATION OF ALTERNATIVE STRATEGIES FOR GLOBAL
PHARMA GROUP AND THE REASONS BEHIND IT
There are several influences which are witnessed by the pharmaceutical companies. The
strategies which are discussed under are the alternative strategies which are available to the
pharmaceutical companies. They were facing challenges through the government as well as from
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the technology as well as the cost involved in that. Besides this, there were some legal issues also
which occurred at the time of developed. The drug development process took several times and
even the cost involved in that was much which affected the budget given by the government.
Majorly different strategies was adopted by the Phrama group which focused on the R&D as
their major aim was to make the vaccines and the drugs which can cure the individual and
benefit them. Further the major issues were with the loosing of the market share (Khanna,
2012). Through the free good movement, there were strategic differences were seen in the prices.
So the alternative strategy which was adopted was to establish the market in that country which
are in the growth stage. This will help in increasing the profitability as well as the productivity of
the firm. According to the case study, the market of India, Ruissia, China contributed around half
of their market which helped the companies to earn revenues. The China was said that it can
overtake the EU markets. The most of the individuals can afford the expensive treatments and
their middle class population was also increasing this has contributed major achievement in the
companies (Paul and et.al., 2010).
Another alternative strategy which was adopted was that of the innovation. By make
innovation in their drugs the pharmaceutical companies was able to do market penetration.
Several problems were witnessed by the companies in case of innovating it problems. To curb
this problem, they adopted the network based approach so that it can support the new
technologies and help in reducing the risk which is attached to the development of the drug.
Further, for the developing drugs huge costs were involved (Pammolli, Magazzini and
Riccaboni, 2011). So for manufacturing the drugs and medicines and reduce the impact of risk
on that AstraZeneca and BMS collaborated to de3velop the drug it helped them in sharing the
risk involved in that and the reward which was gained was also shared by them. This was the
major step because these types of drugs were required by the human beings but the finance and
the expertise required are more.
Besides all these approaches, the global pharmacy also focused on the sales nad
marketing of the products. It was noticed that through marketing their medicines the company
can easily create competitive advantage on the other firms (Scannell and et.al. 2012). The
technique which was adopted was that the sales personnel personally gave detail about the
medicines to the doctor this had a significant impact on the company and further, the doctors
were given the free samples to use. This helped in increasing the sales of the company and
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creating awareness of the drugs and the medicines made by the pharma. According to the case
study, in US DTC advertisement was adopted by the pharma companies which target large
audiences and helped in making the last long impression on the consumers (Bunnage, 2011).
This was expensive but indeed was profitable for the companies. This was new for the
pharmaceutical companies because they never advertise their medicines. These companies
developed the franchise in which the collaboration was made with the sales and marketing as
well as the R&D. But because of the several competitors and many challenges the organizations
adopted different ways to market their drugs (Viseras and et.al., 2010). Besides this, the major
challenge which was faced by the pharmaceutical companies was that the customers were
demand was not met because of the expensive cost which was associated with the drug.
By seeing these conditions a major step was taken by the pharmaceutical companies in
which the government focused on creating generic drugs for the humans which will not be
expensive and it can be afforded by all the individuals. The major step was taken was of the
merger and acquisition by the pharma companies’ as there were top 10 organization who have
the 43 percent of the whole market share (Light and Warburton, 2011). Because of the
collaboration, the organization was able to conquer other companies and came in the list of top
10.
Another major step taken by the organization was in the field of making vaccines. The
organizations were suffering from loss so in that case the companies focused on making the
vaccines as it was successful venture. Besides this it helped in curing the serious health diseases
which are taking the life of the individuals. So for making it prolong for the industry, new
vaccines were manufactured by the companies as this will help in grabbing high amount of
profits (Paim and et.al., 2011). One of the major reasons for adopting the vaccines was also that
it helped in preventing at least 3 million deaths which was a good number for the humanity.
Further, because of these reasons the government gave right to the companies to carry out the
process. Another reason for adopting this technique was that there was higher level of the
success rate and the risk involved in the failure was also less than the generic medicines. But this
was possible only for those companies who were having good amount of finance, resources as
well as expertise human resource in this field (Kaitin and DiMasi, 2011).
Acquisition was another strategy which was utilized by the organization top gains the
economies of scale in finance and help in complex patent disputes. Besides this, acquisition was
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alternative strategy for expanding the market. Future growth was dependent on the strategies
which are adopted by the companies (Hill, Jones and Schilling, 2014). Further in US, it was
witnessed that the cost for providing drug has been increased. It was major concern to the
country because it dominates the market in terms of medicines. Further, the US government
made Managed Care Organization has adopted several control measures to curb the cost
involved in that. With that the Medicare reforms expanded its drug market and focused the
elderly aged people. Through this it became the largest to provide drug directly to the customers
(Khanna, 2012).
Due to the economic recessions, many countries were facing loss and the big markets like
the US and Japan was seeing the downturn in this industry. This became of the major
disadvantageous factor and the cost of treating the individual increased because of the more
demand and less supply (Bunnage, 2011). This was the major reasons as why all the
organizations were targeted on increasing the profit and expanding its geographical locations.
Because of these reasons many innovations were conducted in the field and this helped the
organization in getting huge success. But besides these successes the strategies which were made
were not fully successful. All these were profitable were at some point of time (Paim and et.al.,
2011).
The new strategy which was developed was the emphasis on vaccines and the mergers as
well as acquisitions. But the vaccines were costly so the individuals were not able to afford
which made the human dissatisfied with the medical care. It cured the diseases and prevents 3
million lives but it was only of that individual who was able to afford the treatments. Further, the
focus was given on the R&D but it was also expensive for the companies (Fatta-Kassinos, Meric
and Nikolaou, 2011). As they required vast resources as well as expertise and it reduced the
productivity of the companies and even the time which was involved in the developments was
also made lengthy and it vacate time consuming or the organization to develop the drugs. The
profit which was made by the organization was not that much which can overcome the cost of
R&D. even the expense was involved in the patents so the profit which was earned was not that
much. The growth of the company was also declined by 2 percent. Besides this, to increase the
distribution and enhance the profit, the government made the free goods movement (Freeman,
2010). It was able to earn the profitability but because of the huge difference in the cost and the
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price coated for it, it further created wide differences which hampered the purchasing of the
individuals.
Through the sales and marketing strategy as it was successful for some period of time but
after that the demand for the sales representative increased which gave adverse effect on the
sales of the company. It was assumed that if the company is having more representatives then the
sales will be higher. But there were more sales personnel and the drugs which were to sell out
were less (Paul and et.al., 2010). This declined the productivity of the company and because of
this they had to face tremendous loss.
CONCLUSION
From this, it can be concluded that government had made strict rules and regulations
regarding safeguarding the rights. But through the stringent rules, the rival companies made
strategies in which they targeted the drugs whose patents were not renewed. This gave rise to
unethical practices against the rivalries. There were measures which were developed for
increasing the profitability and productivity but there were few flaws which hampered the
success of each step. The innovation and the invention in the medicine are possible only
through the technology which is emerging in the country. From the case study, it can be said that
the pharmaceutical companies who paid major focus on the R&D became the market leaders.
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