Timely transformation

ARTICULO
COMPETENCIA LECTORA II
PROFESOR: VICTOR GIL CARDONA
LAURA CATALINA AGUIRRE SALAZAR
CC: 1128426161
UNIVERSIDAD DE ANTIOQUIA

Timely Transformation

Drug firms implement new business strategies to deflect mounting market pressures and accelerate into new geographies

As they pop the champagne corks and sing “Auld Lang Syne” on New Year’s Eve, pharmaceutical industry executiveswill likely be glad to put 2009 behind them.
Throughout the year, drug companies were buffeted by the all-too-familiar problems of patent expirations for superstar products, rising generic competition, and pipelines that can’t churn out as many big-ticket products as they did in the past.
On top of that, pharmaceutical firms faced the possibility of U.S. health care reform legislation, which, ifadopted by the Obama Administration in the coming months, could depress future drug pricing. The lingering global recession, although it ultimately pinched drug companies less than those in many other businesses, further boosted industry anxiety levels.
However, 2009 did have its bright spots. Many companies benefited from selling dramatically increased quantities of vaccines and antivirals tostem the global outbreak of the H1N1 virus, or swine flu. And growth rates for branded pharmaceutical products—although still nowhere near what they were in the industry’s blockbuster-fueled heyday—actually recovered slightly from 2008.
When 2009 comes to a close, global pharmaceutical sales are expected to have grown 5.5–6.5%, to between $775 billion and $785 billion, up from 5.3% growth in 2008,according to Michael Kleinrock, director of thought leadership at IMS Health, a provider of market information and consulting services for the health care industry. For the U.S. pharmaceutical market, by far the world’s largest, 2009 brought a marked improvement. IMS Health expects 4.5–5.5% growth, to about $300 billion, up from just 1.5% growth in 2008.
The improvement over 2008 is due in partto the weakening of the pharmaceutical supply chain in the final quarter of last year, when the recession was at its darkest moment, the holidays dampened drug sales, and pharmacy inventories remained low. Kleinrock reports particularly high sales growth in the first quarter of 2009 as pharmacy chains rebounded. This year’s growth also reflects pharmaceutical companies’ success in “maintainingtheir pricing practices and competing on the basis of clinical evidence and value” even as insurance companies and other payers “seek to limit price increases and boost the use of lower-cost generics,” he says.
To stand up to payers and myriad other challenges, drug companies continued efforts they started in 2008 to overhaul their business models. They are still cutting costs, slashing jobs, andrefocusing business units in an attempt to be leaner and more customer-focused. Many drug companies are also setting up creative licensing deals, partnerships, and acquisitions—three megamergers closed this year—all aimed at improving operating efficiencies and beefing up less-than-robust new product pipelines.
At the same time, firms are devising ways “to broaden access to their medicines in bothmature and emerging markets,” according to Carolyn Buck-Luce, head of the global pharmaceutical practice at Ernst & Young, which provides tax, accounting, transaction, and other business services.
“The business environment is driving the greatest era of change the biopharmaceutical industry has ever experienced,” says Tony Zook, chief executive officer of AstraZeneca in North America andexecutive vice president of AstraZeneca global marketing. “The companies that execute well while transforming themselves to compete effectively in this environment will emerge on top.”
As part of its strategy, AstraZeneca continues to take “a number of steps to strengthen our pipeline and broaden our scientific base,” Zook says. “We have doubled the number of projects in every clinical phase of the...