The Global Pharmaceutical Industry: Swallowing a bitter pill' Case Study - Essay Example

Generally, the global pharmaceutical industry recovered after the World War II due to the stable economical, social, cultural, and political environment. During this period, immense R&D was attained, which has been very critical in enhancing effectiveness and efficiency in treating various diseases and ailments. Nonetheless, there have been many changes such as competition for patents and other intellectual rights over innovated and invented treatment methods. What’s more, technological development has created a new environment for operations of firms within the pharmaceutical industry.

Hence, there is need to identify environment factors affecting operations of pharmaceutical firms whilst focusing on the past as well as the future industry. Porter’s Five Forces of Global Pharmaceutical Industry Threats of New Entrants There are many and high barriers that prevent new entrants into the global pharmaceutical industry. One of the many and high barriers is the high costs and capital required for R&D. Contemporary environment has been highly characterized with increased drug resistance.

Therefore, in order to come up with highly effective and efficient drugs, firms within the global pharmaceutical industry must engage in serious and intensive R&D. . Economies of scale are other high barriers to new entrants. The existing pharmaceutical firms within the industry enjoy significant economies of scale that include easy accessibility to not only financial assistance but also to market. For instance, the new entrants must engage in serious promotional activities in order to attract consumers of their products.

Such promotional activities are very costly hence prevent new entrants. Conclusion: The threat of new entrants therefore is LOW given the many barriers existing within the global pharmaceutical industry. Bargaining Power of Buyers (MEDIUM) Buyers or consumers of products from pharmaceutical industry are individuals, wholesale chemists, retail chemists, hospitals, and other health care organizations that wish to conduct specific research such as CDC/KEMRI. Unlike individuals, wholesale chemists, hospitals, and other health care organizations buy drugs from pharmaceutical industry in bulk.

In this perspective, a bigger proportion of consumers directly have powers to influence the prices of drugs produced by pharmaceutical firms. Therefore, such organizations or consumers exert pressure on pharmaceutical firms to check prices of their products. On the other perspective, individuals or regular patients have low bargaining power given the proportion of drugs they buy from pharmaceutical firms in relation to wholesale chemists, hospitals, and other health care organizations (Holland, 2010).

Introduction of generic drugs have also affected the pricing of original drugs hence consumers of original drugs are losing bargaining power on the relevant prices. In this case, the high bargaining power of wholesale chemists, hospitals, and other health