The Global Pharmaceutical Industry Swallowing A Bitter Pill Case Solution

Another aspect is the government, which aims to control pharmaceutical industries' profitability to reduce their healthcare expenditures. This is especially true for countries that have welfare programs for their citizens, such as Canada, where the pricing of the pharmaceutical products is strictly controlled as opposed to the US market, which is based on an insurance model. 

A third force is an economy, the growth of which is proportional to the growth of the pharmaceutical industry. However, the economy has another dimension for the pharmaceutical industry as well. Inexpensive clinical trials are conducted in countries that have weaker currency like India, where companies are investing to establish R&D sites and closing many in the EU and the US. 

2. How relevant do you think the Five-Forces Framework map is to identify environmental forces affecting the global pharmaceutical industry?

The Porter's Five Forces Model comprises of an evaluation of the bargaining power of suppliers, bargaining power of buyers, the threat of substitute products, the threat of new entrants, and the industry rivalry (Orcullo, 2007). However, these forces can assess an overview of the pharmaceutical industry; it lacks some forces that are major drivers for the industry. These forces include the government healthcare policies which shape the pricing structure of the industry.

Another force that is not addressed by the five forces analysis is the economy of the country that the company is operating in. Improved economic factors result in an increased spend on healthcare, which determines company performance. R&D activities and breakthrough innovations of other companies such as Glaxo, a small company, competing with the largest industry players because of their patent of a drug for stomach ulcers. This shows that competitive rivalry is fierce but uncertain in terms of new product development.

The current situation of the virus outbreak is a new challenge which can be categorized as an environmental change, not addressed by the model (Sokol, 2020). This shows that the model does not address environmental changes. A mix of the Five Forces model, along with the PESTLE model, can better assess the environmental factors affecting the industry.

3. Do these forces differ by industry sector, and where would you place the different sectors in the industry life cycle?

Patented Drugs

These drugs include many that can be purchased without a prescription (15%) and (85%) cannot be purchased without a prescription. The patented drugs sector is in the life cycle state of maturity because patented drugs are in decline. Significant R&D investment is required to grow this sector, and there are few blockbuster innovations.