What are the key drivers for economic growth in the region? In most cases, this relates to the health and safety of medications. There are a number of secondary health issues associated with obesity, and many of these require pharmaceutical treatment. Although the industry is still quite profitable, the rise of generic drug manufacturing has impacted sales of most brand name manufacturers. The growth of the industry has been driven by adopting global standards and setting up large scale plants in the country. The pharmaceutical industry has been one of the more controversial industries in the United States primarily due to high drug prices. An increase in net income from $10 billion in 2012 to $16 billion in 2017 can be attributed to an increase in sales between 2012 and 2017. In the United States, pharmaceutical companies are free to price medications however they want. Globally, the pharmaceutical companies have to invest a lot in R&D. The primary general factors that have the potential to impact this industry includes political involvement, economic competition, sociocultural changes, technological advances, and legal stipulations. However, despite the lucrative nature of the pharmaceutical industry, the industry is still an instrumental part of healthcare in the United States and globally. On the other hand, if biotechnology is used to produce healthier food options, it might take away from the pharmaceutical industry. The threat of substitutes is relatively high and will continue to rise as more companies lose patent protection. Businesses in all industries have a unique opportunity to market directly to their customers nowadays. Between 2012 and 2016, Pfizer experienced a significant reduction in cash from $10 million in 2012 to $2.5 million likely as a result of the increased cost of R&D. The most significant change in the debt ratio was between 2015 and 2016 in which the ratio increased from 0.61 to 0.65 due to an increase in total liabilities, and more specifically, an increase in accounts payable and slight increase in long-term debt. J&J currently has 10.4% of the market share in this industry. In response to increased competition, many companies are beginning to outsource labor and research endeavors to reduce costs (Oliver, 2017). These days, he spends his time flipping domain names, writing articles and pursuing other interesting business ventures. In particular, it’s the role of biotechnology in medicine that might impact the pharmaceutical industry. J&J decided to pursue Hepatitis B treatments as an alternative (Lombardo, 2017). Everyday our market is changing the way it is. An improved workflow is important for business journalists to ensure that they always have their work process smoothened out for them. A decrease in net income from $6 million in 2012 to $3 million in 2016 can be attributed to a decrease in sales between 2012 and 2016. However, J&J’s current ratio has trended upward with an average of 2.22 between 2012 to 2017. J&J, although still well below industry averages, has substantially more assets and liabilities than the other two companies. Lastly, effective marketing can either make or break the sales of a brand name drug. Operating expenses have remained flat, but operating profit continues to decline from $9 million in 2012 to $5 million in 2016. Indian Pharmaceuticals Industry Analysis . The power of the buyers is virtually low. The primary factor that forces the power of the buyers to be low is the nature of the product for the pharmaceutical industry as a whole. The general environment includes factors that are out of the control for the brand name pharmaceutical industry but may have a significant impact in the success of companies involved in this industry. No significant changes in debt ratio was seen between 2012 to 2017. Another reason is the recent trend of mergers and acquisitions where large industries have absorbed the smaller players. Industry averages for net profit margin trended upward and can also be seen with J&J (Table 3a, 3d). However, as always, there’s some overlap between the Political and Legal categories in PESTLE analysis. The Federal government imposed an additional $84.8 billion in taxes and discounts for Medicaid and Medicare patients in exchange for limiting bargaining to reduce drug prices (Oliver, 2017). While the pharmaceutical industry is extremely profitable for those involved, it’s future outlook is mixed. The threat of new entrants is relatively low due substantially high barriers to entry mainly from the research and development (R&D) costs in addition to heavy government regulation (Oliver, 2017). Without the pharmaceutical industry, no life-saving medications would be available to make an impact in the healthcare system. The equity multiplier increased between 2014 to 2015 from 2.02 to 2.28 as a result of an increase in total assets and a decrease in total equity. The COGS have remained flat with an average of $10 million, but the gross profit continues to trend downward from $47 million in 2012 to $40 million in 2016. The recent controversies of Turing Pharmaceuticals’ 5,555% price increase of Daraprim® in 2015 and Mylan’s 500% increase of EpiPen® in 2016 were heavily contested during the recent presidential election between Hillary Clinton and Donald Trump (Loo, 2017). Merck’s total revenue decreased from $47 million in 2012 to $39 million in 2016 (Table 2a). Merck currently has 9.6% of the market share and operates in the pharmaceutical, animal health, alliances and healthcare services. Segments with expected continuous growth includes diabetes, mental health, respiratory products, pain and autoimmune products, lipid regulators, antihypertensive drugs, and multiple sclerosis. The limited new advances in medical technology has limited the ability of companies to produce blockbuster drugs (Oliver, 2017). Overall, it appears that J&J is outperforming both Merck and Pfizer in terms of profitability and liquidity. The following factors are all boosting healthcare market growth: 1. (Loo, 2017). the pharmaceutical market – and ultimately the R&D base – is likely to shift gradually towards emerging economies. The net profit margin between 2013 and 2014 decreased from 42.65% to 18.42% due to a substantial decrease in net income which may be attributed to a decrease in operating profit and an increase in operating expenses. With the increased competition and abundance of treatments available, Merck decided to discontinue clinical trials after Phase 2 (Lombardo, 2017). Here are the Sociocultural factors affecting the pharmaceutical industry: As healthcare around the world has rapidly improved, we now face the issue of an aging population. The company’s long-term debt has remained flat with an average of $30 million between 2012 to 2016. Here are the Technological factors affecting the pharmaceutical industry: Biotechnology is the study of using living organisms to improve our lives, in areas such as agriculture, food science, and medicine. Due to the high cost of brand name drugs, most consumers cannot pay for drugs out of pocket. Mergers began to rise including Pfizer-Wyeth, Merck-Schering-Plough, and Roche-Genentech further increasing market share for Pfizer and Merck (Oliver, 2017). However, various pricing pressures, health trends, and biotechnology advancements might hold pharmaceutical companies back from achieving maximal profitability in the future. SIC code 2834 includes companies that primarily engage in manufacturing, fabricating, or processing drugs in pharmaceutical preparations for human or veterinary use (Occupational Safety and Health Administration [OSHA], n.d.). Insurance providers typically negotiate with manufacturers on a formulary tier based system (Oliver, 2017). Other segments include clinics (10%), independent retailers (8.5%), nonfederal hospitals (5.9%), grocery stores (5.3%), and other avenues (5.1%) (Oliver, 2017). These categories include pharmaceutical preparations, medicinal and botanical products, biological products, and in-vitro diagnostic substance products. A larger difference between gross profit and operating expenses created the reduction in operating margin. Pfizer’s gross margin remained flat from 2012 to 2016 indicating that the company has been able to generate an average of 79.96% of revenue to pay for COGS (Table 3c). The following companies: Merck, Pfizer, and J&J will be assessed regarding their dominant products within the industry as well as their current position. In response to expiration of patents and competition, many companies have focused developing biological drugs and outsourcing (R&D) to contract research organizations (CRO) to reduce operational costs and improve competitive positioning (Oliver, 2017). The analysis of each individual ratio will allow an analyst to determine critical information to fully assess a company’s ability to pay off short term debt, determine profit generating capabilities, and assess the risk of solvency. PESTLEanalysis.com is an educational website collecting all the information and resources related not only to PESTLE but also SWOT, STEEPLE and other analysis that will come useful to business owners, entrepreneur, and students alike. This is a PESTEL analysis of the pharmaceutical industry analyzing how these various pressures affect it. The DuPont formula allows an analyst to asses a company’s return on equity (ROE). Chain pharmacies have extensive distribution networks and therefore, contribute the largest share of industry revenue in the US with 23.2% in 2017 (Oliver, 2017). The higher the tier, the more expensive the drug classification. The most significant change equity ratio was between 2015 and 2016 in which the ratio decreased from 0.39 to 0.35 due to both an increase in total assets and a decrease in total equity. However, J&J’s operating margin has remained flat. Typically, the higher the debt ratio, the more likely a company is at risk of solvency. However, in a recent Wall Street Journal article, it was particularly noted that the pharmaceutical industry has begun an offensive to battle groups that advocate for lower drug prices (Loftus, 2016). The most significant change in equity ratio was between 2014 and 2015 in which the ratio decreased from 0.49 to 0.44 due to both an increase in total assets and a decrease in total equity. All other components of a generic drug can be the simple or cheap excipients (these are non-therapeutic components) saving a substantial amount of capital to produce generic drugs. Between 2012 and 2017, J&J generated an increase in cash from $14 billion in 2012 to $18 billion with 2013 having the most cash during the five-year trend with $20 billion. Reduced taxes and lowered drug prices in the USA 2. Manufacturers will negotiate to be classified in a lower tier to drive demand at the cost of reducing revenue (Oliver, 2017). As new medications are created from various biological sources, pharmaceutical companies might have a wider range of drugs to produce and distribute, generating additional revenue. As such, you may wish to interpret the regulatory frameworks of the pharmaceutical industry as a Legal matter, and not a Political one. The profit margin between 2013 and 2014 increased from 10% to 28.22% due to a substantial increase in net income as a result of decreased interest expense. The average current ratios of both Merck (1.8 between 2012 to 2016) and Pfizer (1.99 between 2012 to 2016) are well below industry averages and have trended downward. Pharma industry depends upon several organic chemicals. Pfizer created a cheaper drug to compete with J&J’s Remicade for arthritis but is unable to sell to health insurers, hospitals and clinics due to exclusionary contracts imposed by J&J (Rockoff, 2017). The company’s long-term debt has steadily increase from $16 million in 2012 to $24 million in 2016 while its shareholder equity has steadily decreased from $53 million to $40 million. The patent cliff forced many brand name pharmaceutical manufacturers to consolidate their companies by improving operational efficiencies (Oliver, 2017). The Cloud Computing in Pharmaceutical market analysis is provided for the international markets including development trends, competitive landscape analysis, and key regions development status. When these drugs — such as diabetes treatments — are crucial to another human being’s survival, it seems incredibly unethical to price them so highly. Drug pricing regulations are expected to become more stringent in the oncology segment to prevent price hikes and allow more patients to obtain treatment. The nutritional supplement industry is not regulated by the FDA, and the claims made by these products have not been verified. Thus, the aging population means we have more health issues to tackle. J&J’s gross margin remained flat from 2012 to 2017 indicating that the company has been able to generate an average of 68.99% of revenue to pay for COGS (Table 3d). Thomas Bush is an English-born writer, entrepreneur, and fitness enthusiast. The most prevalent cancers include prostate cancer in men and breast cancer in women. Media Kit | Legal | Contact: minimalistpharmacist@gmail.com, Instagram | Facebook | Twitter | Tumblr| Google+ | Pinterest | Reddit, Spotify | Essential | Bambino | Lunar Tempo 2 | Oblivion | NordVPN, Understanding Pharma: The Professional’s Guide to How Pharmaceutical and Biotech Companies Really Work, The Antidote: Inside the World of New Pharma, The Billion-Dollar Molecule: The Quest for the Perfect Drug, Free #Meningitis Diagnosis & Treatment Study Chart, Minimalist Infectious Disease Spectrum of Coverage (Part 3), Acute Decompensated Heart Failure Clinical Review, ISDA Guidelines for Use of Antimicrobial Agents in Neutropenic Patients with Cancer. GDP growth of over 6% in China and India 3. In May of 2011, J&J obtained approval for the first new AIDS medication since 2008 (Oliver, 2017). The pharmaceutical industry amassed $174.1 billion revenue with $39.2 billion in profits (Oliver, 2017) with an annual growth rate of 3.6% between 2012 to 2017 (Oliver, 2017). Indian Pharmaceuticals Industry Analysis: Updated content on market overviews, growth drivers, opportunities and key organisations capturing the dynamism.... October 06, 2019 : Indian Pharmaceuticals Industry Analysis . This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2016 to 2027. Industry brand names for J&J’s include Remicade®, Topamax®, and Procrit®. The major competitors’ analysis is composed of dominant companies and their position within the brand name pharmaceutical industry. The decrease in revenue could be attributed to decreases in insurance reimbursements and brand name manufacturers increasing discounts to reduce brand name drug prices. Oncology leads the industry with an estimated 1 million new cases occurring in the US annually. The equity multiplier increased in 2013 from 2.26 to 2.88 in 2016. Report Description: Biopharmaceutical Logistics is the logistics of Biopharmaceutical, medical and surgical supplies, and other products needed to support doctors, nurses, and other health and dental care providers. Between 2013 to 2014, J&J’s ROE increased from 19% to 23% (Table 4c). The value added to the US economy is growing, but revenue growth is expected from specific therapeutic classes in addition to trimming the workforce and consolidation of operations (Oliver, 2017). The market conditions (2015-2019), corporate competition pattern, corporate SWOT analysis are elaborated, and other qualitative analyses like market dynamics, market penetration, market business environment analyses, the regional regulatory scenario in the Animal Pharmaceutical market will be shown in this report. If pharmaceutical companies do not comply, the federal government may bargain and stronghold pharmaceutical companies into paying prices that meet the needs of the consumers that are covered under Medicare and Medicaid. Global Dexamethasone Acetate Market Top Manufacturers Analysis: Chemocare, Sigma-Aldrich, Kingyork, LGM Pharma The Atypical Chemokine Receptor 3 market report presents an analytical study that is defined based on the various parameters and trends followed by the global market. This market research report provides information about Pharma & Healthcare, Country Overview (Pharma & Healthcare), Pharmaceutical Manufacturing industry. Availability of Substitutes. The global market for pharmaceuticals is $900 billion and this figure is fully expected to exceed $1,1 trillions in the next few years. The perception of cheaper generic drugs as adequate alternatives to more expensive brand name drugs will be a key social issue further discussed within the pharmaceutical industry. While not a “disease” per se, obesity is a serious health issue in developed countries. If this trend continues, and influences more people to lead healthier lifestyles, it might reduce the need for pharmaceutical products in the long term. This regulatory framework, consisting of numerous governmental agencies and various drug-related laws, lays out crucial rules for operating within the pharmaceutical industry. However, the rate of blockbuster drug development has decreased while the cost of R&D has increased (Oliver, 2017). Individual components show there are no major changes in profit margin between 2012 to 2017. Benchmark liquidity ratios averaged around 3.66 between 2012 to 2016 (Table 3a). Among young and middle-aged adults, it’s becoming fashionable to lead a healthy life. The research, development, production, and sale is completely controlled by the individual companies who manufacture the pharmaceuticals. Furthermore, for whatever reasons, average healthcare spend is also rising. Pfizer is currently outperforming Merck and J&J with an average gross margin of 79% between 2012 to 2016. Unfortunately, due to high cost of treatment, up to 20% of cancer patients forego treatment (Oliver, 2017). NAICS code 32541 includes companies that operate in (1) manufacturing of biological and medicinal products, (2) processing botanical drugs and herbs, (3) isolating active medicinal principals from botanical drugs and herbs, and (4) manufacturing pharmaceutical products intended for internal and external consumption (United States Census Bureau, 2017). Collectively, these companies have 28.8% of the brand name pharmaceutical manufacturing industry’s market share. As such, you may wish to interpret the regulatory frameworks of the pharmaceutical industry as a Legal matter, and not a Political one. Coupled with it are the other expenses which generally result in higher prices of drugs. The most significant change in cash ratio was between 2013 and 2014 in which the cash ratio decreased from 0.87 to 0.40 due to a reduction in cash as a result of the purchase of Cubist Pharmaceuticals (Loftus, 2014). We couldn’t find any significant Environmental factors affecting the pharmaceutical industry. However, no major legislation has yet to be imposed on the industry and current President Trump has expressed a relaxation of price regulations for the industry (Ratty, 2017). As per the analysis provided in the report, the global market of Pharmaceutical Membrane Filters is estimated to growth at a CAGR of _% during the forecast period 2018 to 2025 and is expected to rise to USD _ million/billion by the end of year 2025. page 1 The DuPont formula consists of three primary ratios that are multiplied together to determine a company’s earnings from its assets. As a result, growing obesity rates are actually driving more sales of some drugs, thereby increasing the overall revenue of the pharmaceutical industry. Most of the players in the industry have been here for a long time and are well recognized globally. However, the industry is primarily segmented into various therapeutic areas with oncology and antidiabetic products making up 10.8% and 9.4% of industry revenue respectively (Oliver, 2017). Merck ‘s industry brand names include Gardasil®, Januvia®, and Zocor® while Pfizer Inc.’s industry brand names include Lipitor®, Norvasc®, and Zoloft® (Oliver, 2017). The legal issue regarding the repeal and replacement of the Affordable Care Act with the American Healthcare Act has been heavily contested in the United States with many Americans potentially losing healthcare coverage. Both Merck (62%) and J&J (68%) have below average gross margins. The most significant driver of pharmaceuticals is the increasing elderly population (Oliver, 2017). Merck’s gross margin remained flat from 2012 to 2016 with the company being able to generate an average of 62.86% of revenue to pay for COGS (Table 3b). This creates greater demand for pharmaceutical products, and will lead to more revenue for the pharmaceutical industry. From partaking in regular exercise to eating well and even practicing mindfulness, healthy choices are definitely hot right now. The asset turnover remained flat with no major changes. J&J’s debt ratio in 2017 was also 0.50 and has remained flat between 2012 to 2017 with an average ratio of 0.47. The report published on the global Blockchain In Pharmaceutical market is a comprehensive analysis of a variety of factors that are prevalent in the Blockchain In Pharmaceutical market. The bargaining power of suppliers in the market is very low. As a small content curator, I am always looking for ways to provide new content. This means that the average person is now older than ever before. (Oliver, 2017). PESTEL or PESTLE analysis, also known as PEST analysis, is a tool for business analysis of political, economic, social, and technological factors. The COGS have remained flat with an average of $21 billion, while thee gross profit continues to trend upward from $45 billion in 2012 to $50 billion in 2017. J&J is the exception with a positive ROE trend from 17% in 2012 to 23% in 2017. According to our global market study on the basis of extensive primary and secondary research: “One trend is maturing of the business environment. A. DiMasi, Henry G. Grabowski, Ronald W.Hansen, Innovation in the pharmaceutical industry: New estimates of R&D The pharmaceutical industry is one of the most competitive industries in the world. It is important to note is that the pharmaceutical industry does not include nutritional supplements (Oliver, 2017). A new FDA … Individual components show a decrease in profit margin between 2013 to 2014 from 43% to 18% resulting in a substantial decrease in net income which may be attributed to a decrease in operating profit and an increase in operating expenses. The pharmaceutical industry has been around for millennia, but it’s only within the last century that we’ve been able to understand and treat the majority of health ailments. The asset turnover remained flat with no major changes. The insurance providers will have the ability to negotiate prices and have the potential to significantly impact sales of the brand name pharmaceutical industry (Oliver, 2017). 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