Executive Briefings

Pharmaceutical/Bio-Tech: Defining Tomorrow's Industry

Analyst Insight: 2009 was filled with mergers and acquisitions led by mega mergers. During this time, the definition of "pharmaceutical company" evolved, as the big players began morphing into global health care providers. As the evolution continues, processes for integrating multinational supply chains, new product lines, and rationalizing LSP contracts will challenge even the most capable and visionary supply chain executives.

With the mega mergers of Pfizer/Wyeth and Merck/Schering-Plough, Big Pharma is consolidating industry players.  Additionally, many smaller, less conspicuous deals for medical product and bio-tech companies by Big Pharma are creating more diverse health care organizations with global operations.

The industry's historical success was based on internal R&D, self distribution, and market dominance. Today, with a significant amount of blockbuster patents expiring and pipelines lacking, the historical formula is producing diminishing returns.

• This evolution is being driven by an effort to balance portfolios, build pipelines, and leverage negotiating power, as increased government involvement in the health care sector looms. What universal health care will become is unknown. Regardless, it is believed that companies with larger portfolios will have better negotiation positions and more stable revenue streams.

• Understanding the evolution of licensing and increased collaboration between big and small players is critical. Collaboration between major players and other organizations increases innovation and leverages promising compounds. Potentially, the big players will have to invest, cooperate, and successfully manage hundreds to thousands of collaborative relationships.

• Big Pharma's aggressive investment in bio-tech, vaccines, generics and medical devices is redefining the industry. The broadening of portfolios is altering Big Pharma's supply chains and markets - how they service patients and what sales channels are managed. 

The industry sector walls are falling, as a slow and difficult change in the market has happened - moving from a focused product line within traditional pharmaceutical organizations to a more integrated, more patient-specific health care organization. Big Pharma is no more; big health care has replaced it.

The Outlook

As health care transitions, smaller acquisitions and collaborative deals, supply chain outsourcing, and global expansions have greater impact on the marketplace. Big Pharma and bio-tech players must focus on patients, global organizations, collaborative partnerships, diversified solutions, and global supply chains. Responsiveness to the market and the ability to service all customers and organizations - both locally and globally - will redefine the industry, as well as determine the profitability of surviving organizations.

With the mega mergers of Pfizer/Wyeth and Merck/Schering-Plough, Big Pharma is consolidating industry players.  Additionally, many smaller, less conspicuous deals for medical product and bio-tech companies by Big Pharma are creating more diverse health care organizations with global operations.

The industry's historical success was based on internal R&D, self distribution, and market dominance. Today, with a significant amount of blockbuster patents expiring and pipelines lacking, the historical formula is producing diminishing returns.

• This evolution is being driven by an effort to balance portfolios, build pipelines, and leverage negotiating power, as increased government involvement in the health care sector looms. What universal health care will become is unknown. Regardless, it is believed that companies with larger portfolios will have better negotiation positions and more stable revenue streams.

• Understanding the evolution of licensing and increased collaboration between big and small players is critical. Collaboration between major players and other organizations increases innovation and leverages promising compounds. Potentially, the big players will have to invest, cooperate, and successfully manage hundreds to thousands of collaborative relationships.

• Big Pharma's aggressive investment in bio-tech, vaccines, generics and medical devices is redefining the industry. The broadening of portfolios is altering Big Pharma's supply chains and markets - how they service patients and what sales channels are managed. 

The industry sector walls are falling, as a slow and difficult change in the market has happened - moving from a focused product line within traditional pharmaceutical organizations to a more integrated, more patient-specific health care organization. Big Pharma is no more; big health care has replaced it.

The Outlook

As health care transitions, smaller acquisitions and collaborative deals, supply chain outsourcing, and global expansions have greater impact on the marketplace. Big Pharma and bio-tech players must focus on patients, global organizations, collaborative partnerships, diversified solutions, and global supply chains. Responsiveness to the market and the ability to service all customers and organizations - both locally and globally - will redefine the industry, as well as determine the profitability of surviving organizations.