Pharmaceutical IndustryFactor ConditionsScience education in the USThe US pharmaceutical industry is currently still booming (http://education-portal.com/articles/ ).The US Bureau of Labor Statistics forecasts that occupations in the pharmaceutical field should increase by 26% in the next decade which is 12% more than average growth rate for jobs in general economy (www.bls.gov ). However, if the US wants to retain its worldwide leadership in science, it will require substantial new resources. Part of the problem is the shortage of skilled and dedicated teachers of math and science (Altschuld, 2003). For people who are interested in career in R&D of drugs, pharmaceutical marketing or drug regulations, there are a wide range of Bachelor and Master??™s Programs in the US.
With those degrees, graduates may find employment with governmental departments, such as Food and Drug Administration, clinical trial agencies, or in research laboratories. According to Salary Wizard, a graduate who continues on to graduate school and eventually teaches in a post-secondary institution could earn 85,000$ to 165,000$ a year (www.salary.com ). In spite all the incentives there is a decline in number of educated scientists in the USA (http://www.
dk/action ). Foreign graduate students and postdoctoral fellows have become the mainstay of US university research laboratories. From the late 1980??™s through the mid 1990??™s, government funding of university-based research was very tight and many laboratories were forced to scale back promising research programs or close entirely.
Newly graduated PhDs had difficulties finding jobs. Many graduates abandoned science and decided on more financially rewarding jobs (Altschuld, p.637, 2003). From the mid 1990??™s after US scientific community efforts to increase research spending by the NIH, the US government doubled the NIH budget.
The US government also generously increased support for science trainees. In January 2002, the annual stipend for beginning postdoctoral students was increased to 31,000 a year (Altschuld, p.638, 2003).These improvements were made to stimulate US citizens to remain in science branch.
Despite the scarcity of domestic young scientists, the U.S.A.
still remains worldwide leader in most areas of science. Demand ConditionsAmerican Health Care SystemThe World Health Organization (WHO) released a report in 2000, with data on 191 countries (The World health report, p.5, 2000). This report defines a health care system to include all the activities whose primary purpose is to promote, restore or maintain health. The WHO reports introduce a framework for assessing health system performance. For the first time, it presented an index of national health systems??™ performance in trying to achieve three goals:??? Good health??? Responsiveness to the expectations of the population??? Fairness of financial contributionAccording to the report of 191 spots, the overall US health system performance was ranked 37 and the Chinese 144.The interesting fact is that the U.
S.A. has the most expensive health care system in the world, based on health expenditures per capita, and on total expenditures as a percentage of GDP.
The US spent US$4,178 per capita on health care in 1998. As a percentage to GDP, it was 13.6% in 1998. Another fact is the high proportion of people who are uninsured (15.5 %).
The US health care system is the subject of the debates. Some argue that American health care system is ???the best in the world??? and has freely available medical technology and high-tech facilities. Others say that the system is fragmented and inefficient and the system still suffers from high percentage of people who lack health insurance, uneven quality and administrative waste. The uniqueness of the US system is the dominance of the private element over the public element (Chua, 2006:1).
The US spends more of its GDP on healthcare than any other developed country. In 2004, they spent 16% of its GDP on healthcare(Chua, 2006). Although the USA spends a lot, the government does not provide guaranteed healthcare that covers for all citizens (Beynon, 2000: 32). It is the only Western country in the world that does not have a universal healthcare (Wager, 2007, http://kriswager.blogspot.com/2007/03/is-universal-health-care-affordable-in.html ). In 2004, there were 45,7 million individuals who were not insured (Overview of the Uninsured in the United States: An analysis of the 2005 Current Population Survey, 2005).
Related and Supporting industriesThe U.S.A. has been the world leader of biotechnology industry and in 2005 there were 1,415 biotechnology companies in the United States, of which 329 were publicly held (www.bio.org, 2008). The biotechnology industry has mushroomed since 1992, with U.S.
health-care biotech revenues increasing from $8 billion in 1992 to $50.7 billion in 2005. The total value of publicly traded biotech companies (U.S.
) at market prices was $410 billion by the end of 2005 (ibid).ClustersThere is a trend that the biotechnology industry has formed strategic alliance with the pharmaceutical industry. The biotechnology companies focus on the R&D and later the pharmaceutical companies involve with clinic-test, approval of the drug, market operation and after-sale service.The clusters are the main structure of the pharmaceutical industry.
There are nine clusters in the States and are mainly focused around nine cosmopolitan areas: Boston, San Francisco, San Diego, North Carolina, Seattle, New York, Philadelphia, Los Angels, Washington- Baltimore (Li, Yuan, Chen, 2006). The clusters are close to the ???Talent Pool??™, where the world first class research institutes and universities are located. For example, there are Harvard, MIT, Boston university around the Boston area is the one aided by NIH the most (ibid).
The main characteristics of cluster which ensures the leading position of American biotechnology industry are: the industry possesses the world??™s first class research institutes; different type of capital??™s resources provides the sufficient capital support including venture capital; new enterprises are burgeoning; leading enterprises act as the pillar of the industry, and the registration is standardized. (Li, Yuan, Chen, 2006). R&DBiotechnology is one of the most research-intensive industries in the world. The U.S. biotech industry spent $19.
8 billion on research and development in 2005 (www.bio.org, 2008).The top five biotech companies invested an average of $130,000 per employee in R&D in 2005 (ibid).CapitalMost biotechnology companies are young companies developing their first products and depend on investor capital for survival. Biotechnology attracted more than $20 billion in financing in 2005 and has raised more than $100 billion since 2000 (ibid). American??™s financing service is the most competitive industry in the world.
The financial market is more tolerant with the risk and it??™s quicker to accumulate the capital than the other market for example European market. Strategy, Structure, RivalryStrategyThe structure and the goals of companies in the industry are different in different nations. However, there are also similar tendencies between the nations.
The common tendencies for the US pharmaceutical companies are investment in R&D and advertisement. As IPR protection in the US is very strong, the companies invest heavily in R&D, because invention of new products will ensure the future success of the company. Pharmaceutical research in recent years is more focused on chronic and degenerative illnesses, mostly due to the ageing population. Such illnesses require longer and more costly clinical trials (Matraves, 1999:180).
Longer development times involve more money for R&D. StructureThe corporate governance models of American pharmaceutical companies usually follow the shareholder capitalism model (Anglo-American systems). It is common that pharmaceutical companies sell the stocks in the market. The model posits that shareholders funding as a ???principle??™ who hire mangers as their ???agents??™ to actually run the business. The shareholder capitalism model relies on active external markets for corporate control through mergers and takeovers of listed companies (Tam, O.K, 1999: 25).RivalryThe US pharmaceutical industry is very competitive with several large players.
There are five dominant companies in the US pharmaceutical market- Pfizer, J&J, Merck & Co, GlaxoSmithKline, Novartis. These companies make up 92% of the total capitalization in the industry (Chatigny, 2003). Such high concentration in the industry makes an example of oligopoly. The rivalry is at the heart to the Porter??™s five forces diagram. According to Porter, basic patterns and changing characteristics of the four main forces will drive rivalry within the industry (ibid.).Domestic companies in related industries often share activities and sometimes forge alliances (Porter, 1990: 106).
Alliances are agreements between organizations that go beyond a legal contract. They are bilateral relationships characterized by the commitment of two or more organizations to a common goal (Lin, 1999).In the US there are as many as 73% of pharmaceutical companies have marketing alliances (Chatigny, 2003). Strategic alliances are becoming increasingly important in the pharmaceutical industry. Many pharmaceuticals, such as GlaxoSmithKline/Beecham, Marion/Merrell, Bristol-Myers/Squibb, and Rhone-Poulec/Rorer, forged strategic alliances with benefit management companies in an attempt to gain control over distribution channels and to expand market coverage of products (Pisano, 1997). Government??™s roleThe biotech industry is regulated by the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA) and the Department of Agriculture (USDA) (www.
bio.org). In 1980??™s, congress passed the Bayh-Dole Act. Under that act, certain inventors-those working for small business firms or non-profit organizations could patent inventions arising form federally funded research. Later the same rights were extended to other organizations, notably large business (Greely 1995).
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