The Pharmaceutical Industry: Pfizer Inc.

Today’s global pharmaceutical market is a powerful conglomerate of manufacturers and sellers of the healthcare products. Its key goal is to meet the needs of the population in terms of improving health and preventing the occurrence of possible diseases. In other words, international pharmaceutical market can be considered a vital necessity for the global community. This feature has a significant influence on the demand, supply, product range, market conditions, market capacity and other factors of the modern market. It implies that efficient development of the pharmaceutical industry is a matter of national security for every state. Therefore, given paper aims to provide an overview of one of the world’s largest pharmaceutical companies Pfizer Inc. The paper discusses how the business model of Pfizer Inc. will change depending on the growth strategy it adopts as well as analyze what skills and supply chain structure Pfizer will have to obtain depending on its business model. The paper will also define the risks of buying/acquiring growth vs. internal/organic growth for pharmaceutical companies. In addition, it will forecast new business models that pharmaceutical companies might adopt in the future including Pfizer’s Inc.

Pfizer Inc. Overview

Pfizer, Inc. is the US pharmaceutical company located in New York. It is one of the world’s largest producers of a wide range of medicines and vaccines. In fact, the company produces the world’s most popular drugs including Lipitor, Atorvastatin, Diflucan, Zithromax, Celebrex, Sermion etc. (Gardiner, 2009).

Constantly applying innovation, Pfizer Inc. aims to improve the health and well-being of the population at every stage of life. The company strives to set the highest quality and safety standards for the research, development and production of medicines for both humans and animals. Its diversified product portfolio includes molecule and biologic vaccines as well as the products for healthy nutrition and OTC (over-the-counter) drugs. Today, the company has 166 years of experience on the market. Since its establishment in 1849, Pfizer Inc. has managed to win the trust of millions of people across all continents. Putting great efforts into development of innovative medicines, Pfizer Inc. creates unique products, many of which become significant medical discoveries. Pfizer drugs have repeatedly received the Galen Award, i.e., the highest award in the field of the applied medical research. The main credo of the company implies search and perfection of the most effective ways to produce the high-quality products to meet the needs of its customers. It means that the business model and strategy of Pfizer Inc. are based on the reputation and loyalty to traditional approach as well as the quality of produced goods.

Nowadays, Pfizer Inc. has a great number of divisions in more than 100 countries around the world. The company has established various research centers engaged in pharmaceutical, agricultural and chemical development. Through a series of transactions devoted to the mergers with the large pharmaceutical companies, Pfizer Inc. has significantly expanded and diversified its portfolio of prospective drugs in the therapeutic areas taking a leading position in the pharmaceutical industry (Staton, 2010). Among the most important are the mergers with Warner-Lambert in 2000, Pharmacia in 2003 and Wyeth in 2009.

How Will the Business Model of Pfizer Inc. Change Depending on the Growth Strategy It Adopts? What Skills Will Pfizer Inc. Have to Obtain Depending on the Business Model? What Will Be the Change in the Supply Chain Depending on the Business Model?

The business model of Pfizer Inc. is significantly dependent on the efficient interaction with the drug approval authorities, healthcare providers that prescribe the drugs to patients as well as the payers, who approve drugs for the healthcare insurance. Therefore, it can be stated that the key elements of Pfizer Inc. performance and development strategy include R&D, manufacturing, marketing, distribution and sales (Karnitschnig & Jonathan, 2009). Current business model of Pfizer Inc. exploits horizontal expansion through merges with other companies. In addition, company’s business model implies the development of new drugs with the patent protection valid for the limited period of time. As soon as its products lose this protection and the generic competition reduces the price, the company introduces innovations repeating its business cycle.

However, recently company’s department of research and development has faced a number of major changes, challenges and problems (Johnson, 2009). For example, there was an increase in regulatory barriers, costs of clinical studies and the number of elderly people as well as the exacerbation of the disease severity. In order to respond to these challenges proactively, Pfizer Inc. began its full-scale implementation of a comprehensive strategy. The company plans to increase the quality of the drug portfolio and research performance indicators, while reducing the drug development time and the overall costs.

According to company’s management strategy, Pfizer Inc. no longer plans to be dependent on the success of traditional medicaments. This is the main reason for its acquisition of Wyeth, one of the first major companies that invest in biotechnology. Pfizer Inc. plans to focus on the drugs of biological origin including the vaccines and drugs for the treatment of Alzheimer’s disease and cancer, rather than give a preference to the conventional medications such as cholesterol-lowering, antihypertensive agents and antidepressants. The company also intends to work actively in the drugs market of the elderly people (Hirschler, 2014). Thus, it should be mentioned that the updated business model will influence company’s supply chain adjusting it more to the production and distribution of the biological drugs.

What Are the Risks of Buying/Acquiring Growth Vs. Internal/Organic Growth for Pharmaceutical Companies? Why Did Pfizer Inc. Spin-Off Its Successful Animal Health Business?

The experience of Pfizer Inc. proves that the number of active buyers is growing much faster than the companies that rely primarily on the internal/organic growth. The abovementioned is primarily based on the advantages of mergers and acquisitions, which imply the economies of scale, synergy effect and diversification of the product range as well as reorientation of the market or expansion to the new market segments. In addition, combined resources of the merged companies can complement each other creating the competitive advantage on the market. The risks of organic growth imply the lack of company’s ability to manage the available resources, while the risks of buying/ acquiring growth refer to the possible inefficiencies of company’s performance, which can remain the same or even get worse after the acquisition.

Pfizer Inc. spins-off its successful animal health business in order to develop new market segments and gain additional market share. Given strategy will help the company retain its current position of the market leader within the pharmaceutical industry as well as increase the revenue rate and overcome possible competitors.

Which New Models Can Be Expected from Pharmaceutical Companies in the Future? What Might Happen to Pfizer’s Business Model?

It has been proven that current stage of the pharmaceutical industry development depends on a rapidly increasing number of mergers and acquisitions. However, it is noteworthy to mention that there are alternatives to mergers and acquisitions. For example, joint action is more flexible in terms of its focus on the company’s success in the long term. In fact, it can be forecasted that global economic situation will cause more companies to seek the ways of cooperation. Joint activities can solve the current shortage of funding for the biotech companies. However, it should be noted that companies’ need to transition to new business models can be dictated by the factors that go beyond the pharmaceutical industry. For example, regulators, investors and authority representatives of the health care sector.

Transformation of the global healthcare market requires the pharmaceutical companies to implement an integrated approach toward the development of their strategies. It means that in the future pharmaceutical companies will have to interact more with the representatives of other industries (Hollis, 2010). To do this, they need to cooperate by joining forces with a wide range of organizations from academic institutions, hospitals and technology providers to companies offering compliance programs, regulatory and legal requirements, advice on nutrition, services for stress management, physiotherapy treatments etc. The new business model for the pharmaceutical company can be viewed as an integrated (or unified) model, which entails creation of a network of individual companies with the single infrastructure support services. This network may include companies located in different countries, universities, hospitals, clinics and others that focus on the improvement of the quality of life of their patients. This implies that the business model of Pfizer Inc. can be changed from the merger and acquisitions approach to the joint action, which entails cooperation with other companies within the pharmaceutical industry.

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