Definition Of Generic Pharmaceutical Company Business Model Economics Essay

Definition Of generic wine wine wine wine Pharmaceutical Company c equal to(p) Model Economics EssayThis is an essay to identify CIPLA a generic wine Pharmaceutical companys contrast representative and to explain the reasons why the company has to salmagundi its existing product line sham. This is done by first identifying the term furrow specimen and then using the definition to explain the backup pretending adopted by the company, in addition determining the inherent exchanges in world policies and economic environment that prompt the change of the present personal line of credit modelling. The guerrilla part of the essay addresses the issue of the conflict between the tremendous honorable pharmaceutic companies and the relatively smaller generic pharmaceutical companies argumentation models. This is turn to by high spoting the titanic pharmaceutical companies business model and comparison the two models (which impart reveal the nature of their compet itive relationship) there by identifying if there leavems to be a convergence in their models and they argon both(prenominal) becoming competitors in the same securities industry or companies producing the same products except competing in different securities industrys or companies where a symbiotic relationship has run inevitable for their survival in this present economic situation.Conceptualization of a pipeline Model.A definition of a business model is inevitable to highlight the context to which CIPLAs (a generic pharmaceutical company) business model go absent be identified. During my inquiry I encountered motley concepts of a business model such as the definition given by Chesbrough and Rosenbloom (2002) a transpargonnt framework that takes technological characteristics and potentials as inputs, and converts them through customers and markets into economic outputs (p.532), comparatively, Rayport and Jaworski (2001 cited in Wimmer 2004) delimitate a business m odel as the four choices of (1) a judge proposition or a value cluster for targeted customers (2) a market space offering which could be products, work, in hitation or all ternion (3) a unique dependable resource system and (4) a fiscal model. However Shafer, Smith et al (2005) suggests that a representation of a firms central core logic and strategicalal choices for creating and capturing value (p.202) is a design or creation, not an accident what structures are in arouse to ensure firms break down value.Factually no sole definition underside adequately screenland all aspects of the term business model I volition strain to use a combination of all the verbalize business model definitions to better realise the Generic pharmaceutical companys business model. I cerebrate on the definition of this model first as most generic companies including CIPLA initially followed this business model before the need for change in 2005. The focus on India is alike due to the fact that CIPLA originated from there.Definition of Generic Pharmaceutical company business model.Generic pharmaceutical company business model in India is characterised by the production and selling of copy regorge pharmaceutical medicates discovered and cultivateed by the astronomical respectable pharmaceutical companies such as GlaxoSmithKline (GSK), this was achieve through the reverse technology of the do mediciness invented by the largish ethical Pharmaceutical companies and sold at lower cost. This was do possible in India due to the availability of cheap labour in the dry land, the favourable environment encouraged by the Indian government at the time which allowed low restriction on extremity patent and detailed or no conformity with WTO regulations. This was confirmed by Greene (2007) who wrote that government insurance policy culminated in various actions including the abolition of product patents on food, chemicals, and medicines the institution of process pate nts the limitation of transnational equity division in India pharmaceutical companies, and the lie of impairment controls on certain formulations and bulk do drugss. He also highlighted that India has garnered a worldwide reputation for producing high quality, low cost generic drugs. pecuniary evaluation of CIPLAs business modelUsing the Profit and loss estimate for 2000-2010, deals turnover lulu increases from 2000-2004 but in 2005 there is a decline of about 10% which jackpot be attributed to the implementation of the WTO faithfulness that affected the number of drugs available for replication. This also affected the earnings per share which dropped from about 51 to about 13 in 2005. Investment and debt also showed a steep decline of over 100% from 2004-2005, this corresponds to the change in business environment which stick out infer a reduction of debt incurred for drug production.However the excise duty showed stabilize from 2000-2005 indicating company focus on domes tic market but in 2006 there is a steady decline in excise duties paid and this suffer be as a sequel of increased exportation of drugs following a change in business model.Change in CIPLAs Business ModelThe duration of this type of business model and draws to an end as various changes in the economic situation and world policy will exist the very successful model in which the generics pharmaceutical companies in India take been thriving. In 2005 Indian government changed its law concerning patent drugs and fell in line with earth Trade Organization (WTO) Trade Related ingenious Property Agreement (TRIPs) this limited the production of certain drugs that was filed as a patent from January 1, 1995(Greene 2007).An separate important point is that the rate at which ethical pharmaceutical companies are coming up with unfermented blockbuster drugs is backwardness down, with a shift from Research and development (RD) to marketing. This is as a result of the enormous cost to brin g to the market a new drug ranging between 802million 1billion over a stoppage of 10-15 years (Mogalian, Myrdal 2004). As inferred by Martinez and Goldstein (2007) statement that the century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs. Yusuf Hamied (CEO of CIPLA) stated that the World Trade Organization regulations, which since 2005 bedevil prevented Indian generic drug firms from copying patented drugs, signifies that Indian generic companies have to change their business model or risk being swallowed up by multinational firms. (Livemint, 5th January 2010).Most generic companies in India adapted to this setback in their business model by transferring focus from domestic market in India and increase export of generic drugs to the United States and Hesperian Europe, entering into RD agreements, mergers and acquisitions of hostile drug companies and developing alliances with foreign pharmaceutical firms. CIPLA however chose a just about different approach than most pharmaceuticals by focusing on native growth in India and only seldom indulging in strategic business alliances, technological services (such as knowhow transfer, plant supply etc) and in licensing with big pharmaceuticals. CIPLA also increased their export of generic drugs to the United States and Western Europe.Some points in CIPLAs corporate presentation in August 2009 highlight the companys focusBusiness model based on international strategic alliances- Business focuses on organic growth and leads to reduced capital payload and regulatory/litigation risks.RD targeted at ensuring efficient utilization of resources and centre at developing and launching niche products.The graph below shows a steady increase in the value of Indias pharmaceutical RD expenditure from 2001-2006 as a result of a shift in business model.Source William Greene, US Trade Commission (2007) The emergence of Indias pharmaceutical industry and implications for the US generic dr ug market, US Office of Economics Working Paper 2007-05-ABusiness models of Big, Ethical pharmaceutical companies and the consequent reason for change of model.The big pharmaceutical company business model is the traditional pharmaceuticals company business model which comprises of large scale Research and Development departments which discover new drugs for diseases and the sale of those drugs to consumers .This is a rudimentary definition of their business model as it also entails many more components than those mentioned above for instance in recent quantify we stick out a shift of emphasis from the research and development to gross sales and marketing campaigns due to the competitive nature of the environment.A branded drug product is originally discovered and developed by a pharmaceutical company. In order for the company to market and sell their product they essential first attract approval from the Food and dose Administration (FDA) by submitting a young Drug Applicati on. In this documentation the company submits data to establish a drugs clinical safety and efficacy. Other studies determine the characteristics of the drug dosage form, including the manufacturing process, drug stability, purity, strength, and how it dissolves. Once the drug receives FDA approval, the innovator company can then exclusively market and sell this brand-name product for as farseeing as the company has patent protection. (Mogalian, Myrdal 2004)However a new out-of-door threat has evolved apart from the usual competition of rival companies in the form of Generics pharmaceutical companies. These companies as mentioned in prior section of the essay have used the process of reverse engineering to create cheaper replicas of the drugs produced by these big pharmaceutical companies and selling the drugs at cheaper costs to consumers. This has been of great profit to the generics companies as they had to indulge in little or no cost consuming research and development to c ome up with the drugs in the first place and the availability of low cost of production was just an added advantage to their business model. Martinez and Goldstein (2007) noted however that the rise of generics wouldnt matter so much if research labs were creating a stream of new hits. But that isnt happening.Though the industry double its investment from 2002 till 2006 in RD it yielded 43% less than it had in v years during the 1990s of chemical-based drugs. There is a change in the business environment for generic companies in India however with the 2005 adherence to WTO laws. They generics companies are focused on RD to produce their own patent drugs and generic drugs have become more accepted in Western countries over the years, with the rising costs of healthcare these governments are looking to cut costs and are therefrom encouraging the adoption generic drug prescriptions to patients.another(prenominal) major doer affecting the big pharmaceutical companies is the problem of expired patents. Companies like Pfizer that had a blockbuster drug called Lipitor a cholesterol lowering drug will be coming off patent in 2010 and this will allow the generics companies to bring in a cheaper replica of the drug which will reduce the sales of the company drastically.Patent expirations are a big problem. Drugs are granted 20 years of patent protection,Although companies often spill to get a product to market before half of that period haselapsed. Once it hits the market, however, the patent-protected drug is highly profitableTypical gross margins are 90% to 95%. When patents expire, generic makers offer theproducts at a price much closer to the cost of production (Martinez and Goldstein 2007).*Sales data is from IMS World Review (except for chinaware and Poland)** Patented/generic split is from ESPICOM. Generic defined as a drug whose patent has expired***2001 values for China 2000 values for Poland 2003 values for Brazil reflects patented/unpatented (unpatented includes branded unpatented, generics, similar)Sources IMS ESPICOM Factiva EGA Mckinsey aggroup AnalysisThis development will result in the increased trespass on the market share of the big pharmaceutical companies, though we can see from the chart that countries like China, Brazil, India and Poland have higher percentage of generic drug usage than US, Japan, Germany, France and UK the problem of the global recession may accept an increase in the use of the generic drugs in these countries as hygienic since developed countries like UK are hoping to cut costs on humanity expenditure like healthcare costs.Definition of relationshipsBased on these new developments in the business environment of pharmaceuticals companies and my research I begin to recognize a trend where big pharmaceuticals and generics have increasingly instances of workings unneurotic in order to thrive in the new environment. This aids me in my definition of in tension asked in the question, I identify this a s the type of relationship generating between the big pharmaceutical and the generics companies and we can see that it if morphing from a completely competitive one to a more competitive-collaborative relationship, where we can even see a convergence in their business models in some cases.We see big pharmaceutical companies are begin to decease to India after the 2005 law passed by the government protecting their drugs, so they can benefit from the availability of cheap labor and low cost of mod talent, they are even cooperating with the generics companies for Research and Development, in licensing and use of their distribution lines to violate their drugs to underdeveloped countries formally catered to by mainly generics companies. AstraZeneca, GlaxoSmithKline and Bristol-Myers Squibb have also latterly suggested they will outsource at least some of their manufacturing. There are lots of people in India, China and Eastern Europe who can make products of the same quality as ours but at importantly less cost, says Bristol-Myers Squibb CEO James Cornelius (Martinez and Goldstein 2007).However though we see them working together big ethical pharmaceuticals companies still have some strategies to fight with generics pharmaceutical companies. Some defensive strategies of the big pharmaceutical companies are to develop new generic subsidiaries of their organization so as to be able to better compete with generics companies. By having their own licensed generic companies, they are able to limit the rate at which generics encroach on their market share for drugs that are off patents, they accomplish this by allowing their licensed patents to sledding generic copies of their blockbuster drugs into the market just before they are off patent thereby gaining market share before the other generic companies release theirs. In first nine months of this year, Novartiss generics unit, Sandoz, grew roughly three quantify as fast as its branded-drugs business and accounte d for nearly 20% of general revenue. The balance is changing, says Novartis CEO Dr. Vasella. In the coming quarters, we will continue to see a faster growth opportunity in generics. (Martinez and Goldstein 2007)Competitive strategies of the big pharmaceutical companies include investment in biotechnology and diversification. Biotechnology is of great appeal because of the inability for generics companies to create copies of the drugs as of now. Diversification on the other hand will allow the company to expand the range of services it offers its customers and allow it to get alternative sources of income.CONCLUSIONIn conclusion we make-out CIPLA business model to be the production of copycat drugs by reverse engineering of branded drugs and the sale of the generic drugs at cheaper prices to the India and any other country where the big pharmaceutical drugs do not have patent rights, however a change in the business model became inevitable in 2005 because of the Indian government ad option of WTO laws and caused a shift of the business model of CIPLA to focus more on RD for the production of its own Branded drugs and strategic alliances which entail cooperation with Big Ethical pharmaceutical companies through in-licensing and know how transfer. Another point to note is the change in relationship between the generic company and the big pharmaceutical where we see a competitive symbiotic relationship brewing, with increased dealings between the two types of firms where big pharmaceutical companies benefit from the cheaper cost of production and access to generic companies distribution pipelines and generics gain from the in licensing agreements where they share profits with the bug pharmaceutical companies. However big pharmaceutical companies still maintain development of competitive strategies to combat the generic companies by creation of their own generic companies and increased investment in both diversification and biotechnology.BiblographyRayport, J.F. , Jaworski, B.J.(2001). e-commerce, New York McGraw Hill/Irwin.Wimmer M.A., Knowledge management in electronic governance. 5th ed. IFIP international.William Greene, The Emergence of Indias Pharmaceutical Industry and Implications for the U.S. Generic Drug Market (2007)CIPLA Corporate presentation August 2009CIPLA Pharmaceuticals Yusuf Hamied I Am non Against Patents I Am Against Monopolies Published May 07, 2009 in India emailprotectedPharmacist Erik Mogalian, garter professor Paul Myrdal of the University of Arizonas College Whats the difference between brand-name and generic prescription drugs? celestial latitude 13, 2004Big Pharma Faces Grim Prognosis Industry Fails to Find New Drugs to ReplaceWonders Like Lipitor By BARBARA MARTINEZ and JACOB GOLDSTEINDecember 6, 2007 Page A1