In the past 30 years, the operating context of the pharmaceutical
industry has evolved and becomemuchmore challenging.
The establishment of regulatory authorities and market maturity
have led to an increase in the costs and time to develop
new drugs, decreasing the productivity of the research and
development (R&D) stage and shortening the effective patent
lives of new molecules. These two factors, in conjunction
with the appearance of many substitute drugs in several therapeutic
areas, have led to the reduction of the exclusivity
period of new products. Another factor having an impact onin the international market, local companies based in only
one country, contract manufacturers without their own portfolio
and biotechnological companies mainly concerned with
drug discovery. The first group, the intensive R&D based industries,
is economically the most important and tends to have
large and complex supply chains due to the global nature of its
activity. In addition, these companies are the most vulnerable
to the global financial, regulatory and social changes so this
work will focus on their supply chains.
The industry’s preferred mechanism to overcome the productivity
crises has been to increase investment in current
business activities, primarily R&D and sales, the two extreme
ends of the supply chain. This has been implemented by
organic growth or by mergers and acquisitions (M&A) to
exploit economies of scale. However, statistics show that
productivity continues to decline after a decade of vigorous
growth in investments on these areas (Coe, 2002). There are
no significant economies of scale in sales activities. The revenues
generated by a pharmaceutical company are directly
proportional to its sales, general and administrative (SG&A)
expenditure, suggesting that two merged companies will not
the operation of this industry was the transition of the paying
responsibilities fromindividuals to governmental agencies
and insurance companies, which in association with high
demands for pharmaceuticals, due to aging populations, put
strong pressure on prices and prescription policies (Shah,
2004.From the point of view of manufacturing, the global pharmaceutical
industry can be divided into five sub-sectors: large
R&D based multinationals, generic manufacturers operating
In the past 30 years, the operating context of the pharmaceuticalindustry has evolved and becomemuchmore challenging.The establishment of regulatory authorities and market maturityhave led to an increase in the costs and time to developnew drugs, decreasing the productivity of the research anddevelopment (R&D) stage and shortening the effective patentlives of new molecules. These two factors, in conjunctionwith the appearance of many substitute drugs in several therapeuticareas, have led to the reduction of the exclusivityperiod of new products. Another factor having an impact onin the international market, local companies based in onlyone country, contract manufacturers without their own portfolioand biotechnological companies mainly concerned withdrug discovery. The first group, the intensive R&D based industries,is economically the most important and tends to havelarge and complex supply chains due to the global nature of itsactivity. In addition, these companies are the most vulnerableto the global financial, regulatory and social changes so thiswork will focus on their supply chains.The industry’s preferred mechanism to overcome the productivitycrises has been to increase investment in currentbusiness activities, primarily R&D and sales, the two extremeends of the supply chain. This has been implemented byorganic growth or by mergers and acquisitions (M&A) toexploit economies of scale. However, statistics show thatproductivity continues to decline after a decade of vigorousgrowth in investments on these areas (Coe, 2002). There areno significant economies of scale in sales activities. The revenuesgenerated by a pharmaceutical company are directlyproportional to its sales, general and administrative (SG&A)expenditure, suggesting that two merged companies will notthe operation of this industry was the transition of the payingresponsibilities fromindividuals to governmental agenciesand insurance companies, which in association with highdemands for pharmaceuticals, due to aging populations, putstrong pressure on prices and prescription policies (Shah,2004.From the point of view of manufacturing, the global pharmaceuticalindustry can be divided into five sub-sectors: largeR&D based multinationals, generic manufacturers operating
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