Current Events- Carla Llaneza

Carla Llaneza

25 February 2013

Business 1.0

Pharmaceutical Industry

What are some current events in your industry? What is the impact of these events on the industry?

Much has been discussed in current times of what Obama's health care plan has in store for civilians. However, the companies seem to be the ones who are put at most risk. The companies which will take the greatest influence from this change are in the pharmaceutical industry. In an article written by Alan Rappeport and Barney Jopson in the Financial Times, the large effects of "Obamacare" are spelled out by explaining how the system will effect not only retailers and restaurant owners but pharmaceutical and health companies as well. The problem seems to be that Obamacare calls for all people to have insurance and if someone does not comply with the rules they will be fined. However, the pharmaceutical companies will take a large fall to this law because it is understood that once insurance is given out to everyone there will not be a large increase in the number of people who use medication. In fact, the CEO of Pfizer claimed that by implanting this law the pharmaceutical companies will

continue to "pay a substantial cost" (Rappeport, and Jopson). This will greatly impact the people who are invested and involved in the pharmaceutical industry because the income will be cut by large numbers. The idea that "obamacare" seems to portray is one that promotes an increase in the number of people who use the services of the pharmaceutical companies. However, that is not the case. The pharmaceutical business would only do well if all were willing to contribute and pay money for their medicines. The industry as a whole will be working directly with insurance companies who will eventually cover all patients' costs. This will greatly impact the way in which the pharmaceutical companies and employers create revenue. The interjection of the government with the pharmaceutical's future is a great example of how we know our economy to work in present day. Although there is a strong belief that capitalism and privately owned businesses are what help the economy thrive, the government's interjections help manage the well-being of all people.  

Rappeport, Alan, and Barney Jopson. "Suffering side-effects of health reform." U.S. Politics and Policy. The Financial Times Ltd., 18 Feb 2013. Web.

Challenges in Ethics

http://www.ft.com/intl/cms/s/0/6c77bb92-cdc7-11dc-9e4e-000077b07658.html#axzz2Lt6RhY6P

New lease on life? The ethics of offshoring clinical trials

This article touches some of the key, current issues surrounding the ethics in the pharmaceutical industry. Due to a growing globalized economy, pharmaceutical industries are seeing the need to "off-shore" clinical trials. In other words, drugs that were once produced, and mainly targeted for people in the Western World, are now being demanded by Eastern countries. This has lead many companies, including Novo Nordisk and Glaxo Smith Kline's to include international patients into their trials. This, ultimately has led trials to be analyzed under strict scrutiny under legal and ethical lenses. On the plus side however, having a larger pool of candidates to choose from is allowing testing to speed up and getting the approval quicker. Global acceptance of drugs provided by pharmaceutical companies has also lead to an increasing search of globalized volunteers for the trials. For example, Aztra Zeneca is highly accepted in China and Japan, but not numbers aren't quiet as high in the Western World.

Certain drugs may be tested on a population from a specific country, but, since rules and legal regulations are different in each nation, it may take a longer time for the drug to reach that specific country once the drug has been already authorized in other nations. Due to this globalizing effect, many regulators, such as the FDA, are establishing offices in Eastern countries.  

Moreover, many companies are willing to allow regulators to pursue Phase 4 of the trials. Drugs that have higher approval ratings by the FDA are ultimately selling more and bringing more profit into the company. These "extra" regulations are giving drugs higher credibility rates, which allows the company to raise the price on specific drugs.

As Andrew Jack states in his article:
"As the number of patients from the developing world increases, researchers, regulators and ethicists alike need to be careful to get the right balance of benefit and justice."  

Supply vs. Demand

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Supply and demand in this industry is radically and totally different from supply and demand in any other industry.  The most important reason why it is so different is that the demand for the goods are generally inelastic.  This means that no matter how much the price of certain medicines are raised the demand will not lower.  If the price penicillin goes up then the amount bought wills stay exactly the same.  It is not something that one can ever do without no matter what the price is the amount of people wanting it will remain the same.  The supplies for the various drugs one the other hand is something that are always up in the air.  This is because there are constantly new drugs coming out that can solve new diseases.  Sometimes drugs can also become useless because the drugs were used to delay a disease could now cure a disease.

This is an article that summarises some of what I have said as well as expanding upon it

http://www.thepharmaletter.com/file/37084/containing-global-pharmaceutical-costs-supply-versus-demand-by-neil-turner.html

Economics, Ethics, and CSR

Parth Patel
Business 1.0
February 24th 2013


Blog #2: Economics, Ethics, and CSR

·      What are the basic economics of the industry? How do companies make money?  What are their costs?

The article that I read for this blog talks about the how pharmaceuticals are actually making their money.  The article also discusses about how the pharmaceutical companies are displaying information about drug costs and expenses in a way that makes it more beneficial to the company and displays the information in such a way as to disguise the real information.  This article is an interview with Marcia Angell who is a physician and the editor in chief of the New England Journal of Medicine.  Marcia talks about how the pharmaceutical companies display the cost of each drug to distribute by including the opportunity cost.  The company displays the cost of distributing a drug as around 800 million dollars, when really it is only around 400 million dollars.  The companies say that their numbers are more correct because they take into account the cost of the time that they didn’t spend producing another drug.  The opportunity cost ends up almost doubling the actual cost.  Angell also talks about how the drug companies mark up drug prices by “20 percent” from the manufacturing price.  This article may be from 2004 but still contains the important essentials for understanding how the pharmaceutical industry makes it money and the costs that they have.  Angell also talks about how the pharmaceutical industry has much more product than it needs.  She talks about how there are about 5 drugs for every purpose.  She feels that this does not need to be occurring because every drug does the same thing.

Pharmaceutical companies make their money from the production of drugs.  The profit is made from selling the drugs at a higher cost than what it took to produce.  As previously stated that could mean increasing the price by 20 percent to ensure a large profit.  To the consumer this just means high prices for drugs.  The pharmaceutical industry has an advantage.  People need their prescription medication.  For people on heart medication or cancer treatment they have no choice but to pay the high prices that the companies charge.  The pharmaceutical company has many costs.  Their costs include production, transportation, and marketing.  The article talks much about how the pharmaceutical companies attribute much of their costs to research and development.  Angell talks about how the companies attribute the high prices of the drugs to the fact that they need money for research and development.  The pharmaceutical companies put much of their profit back into research and development because research and development means different drugs.  The more types of drugs there are the more money companies can make.  The more money companies can make the more money they can put into research and development, and thus a cycle begins.

Reference: 

http://motherjones.com/politics/2004/09/truth-about-drug-companies

KSB-100

Anthony Chedid

February 14 1013

1-What opportunities are there in your industry for small businesses and entrepreneurs?

Entrepreneurship can’t be producers in the pharmaceutical industry because the big companies have more money, experience in the business and are well established. Entrepreneurs could be middleman because middlemen have more opportunity because they are the connection between the producer and the user. Plus the middleman is just shipping the products which is cheap compared to hospitals and factories produce and hold the drugs which costs allot.

2-In what areas of the industry are there opportunities for innovation?

The area in which this industry has opportunity in innovation is in the production of the product because they can find base materials that are cheaper and more efficient or faster machinery. They also find cheaper ways of holding the drugs in hospitals for example.

3-How has the competitive landscape changed as a result of leading entrepreneurs in the industry? 

Entrepreneurs are all about innovation, that’s what makes big companies produce. They don’t have enough money to make more so they make it better, they can’t go against big companies because they’re to big so they need innovation. Companies to spend money in research and development (R&D) the entrepreneurs can’t put that much money but thats good because it forces big companies to invest in research development. 

Industry Report

Carla Llaneza
Business 1.0
Professor Lamel
14 February 2013

Industry Report- Pharmacies and Drug Stores in the U.S.

1. ·       As you read about your industry, what did you find most interesting?
   While reading about the pharmaceutical industry I found most interesting the fact that because of the increase in competition amongst these companies in the most recent years, there has been pressure for pharmacies to open for longer hours and more drive thru locations to become available. This is all emphasized in order to create an influx in customers. I also found that the new process of "mail-ordering" pharmaceutical products has caused a heavy amount of competition because they typically carry cheaper prices.
   
   
   ·       What questions do you now want to explore further in your project?
   Some of the questions I would like to explore further in my project would be the question of what it takes to be a competitor in this business. I would like to understand the patterns and cycles that the company sees profit and why it seems to be this way. I believe in answering this question, I will learn a lot about the different factors that go into the structure of the business as a whole. I also would like to further understand how even though the industry has witnessed a pretty steady increase in business since the 20th century, what is in store for the competitors? What will they be faced to decide between for the future in regards to mail ordering and the internet?
   
   
   ·       What initial thoughts do you have about the future of this industry?
    I believe there will always be a need for pharmaceutical products and therefore the "life expectancy" of this industry will ultimately never fade away. However, I do believe that there will be some struggle in the near future with the government having plans to cut spending. In the moment, I strongly believe the pharmaceutical industry has a promising future because it will always be in high demand.
   
   
   ·       Share one interesting data point about your industry and/or assigned company. 
   One interesting data point about our industry is the fact that pharmaceutical products, mostly over the counter medication and prescription drugs, only make up 74% of sales in business. The other 26% is made up of purchases done in the convenience area of the stores with products known as "fill-ins". 
   
   
   References:
   
   
   http://clients1.ibisworld.com.proxyau.wrlc.org/reports/us/industry/currentperformance.aspx?entid=1054