Consumer Behavior

The pharmaceutical industry is highly competitive an thus must be very sensitive to consumer behavior trends in order to sell their product. There has been a subtle drift towards generic brands of pharmaceuticals, but "perscription drugs are less sensitive to consumer income variations" because people would still need their medicine. Yet they are very meticulous of certain aspects of purchasing their drugs. The ease of convenience is very important in order to remain competitive in the pharmaceutical industry, customers are requiring additional services in order to remain loyal to what they purchase. That should lead companies to think about their marketing mix, focusing on place. The channels of distribution have grown increasingly important as people now require the additional ease of acquiring their own medicine, and have lately preferred to get their medicine from twenty four hour pharmacies and those that provide a drive threw service. Technically, if companies can perfect the place factor of the marketing mix then they would increase their sales tremendously. By targeting mail-order pharmacies the business could cut costs that could be redirected towards research and development which would give the company a competitive advantage in the market. Also the recently aging population would suggest that more people need more medicine and therefore targeting to sell drugs that they would need would increase sales, as the baby boomers grow in age. With this shift in the demographic pie, companies would better  target this market segment to increase revenue. To facilitate this looking into distribution channels would be effective, yet with the increase in demand for generic drugs this could affect sales. Except for the increase in third-party purchasers which would lower their revenues, so perhaps the companies should not completely follow this trend and continue to focus on research and development while still catering to their other market segments.



References
IBUS WORLD (2012). Industry at a glance: Pharmacies and Drug Stores. Retrieved from:
http://clients1.ibisworld.com.proxyau.wrlc.org/reports/us/industry/ataglance.aspx?indid=1054 

The CSR And Marketing of Teva Pharmaceuticals

Teva Pharmaceuticals has a respectable CSR policy. Teva strives to provide a safe working environment for its employees, and includes such measures as safety training and recognizing a Job Safety Analysis. To support the community, Teva goes green by limiting energy consumption and recycling and properly handling waste. Teva reaches out to the community by supporting non-profits and also donating money towards the Haiti Earthquake Relief Effort (CSR).

Teva Pharmaceuticals is a leading generics brand company and in marketing standards, produces the largest product portfolio in the pharmaceutical industry. Teva products specialize in treatments of neurological diseases, oncological diseases, and autoimmune diseases. In global standards, Teva is a main supplier of ingredients for pharmaceutical products (Marketing).

CSR: Social Responsibility. Received from
http://www.tevapharm.com/Social/Pages/Lobby.aspx

Marketing Strategy: Our Business. Received from
http://www.tevapharm.com/About/CompanyProfile/Pages/Our%20Business.aspx

Blog 3: Marketing Segmentation

The pharmaceutical industry can be divided into multiple segments. First of all, the pharmaceutical industry is segmented by customers. This is not difficult to guess, since not every medicine is designed for every customer, and customers have varying needs. Some medical products have warnings labels alerting consequences of consumption towards pregnant women or children, or even customers which health problems (Smith 2012). Some companies, like Teva, make products pandering to the needs of different types of consumers, whereas other companies make products for specific consumer needs. For example, Novo Nordisk makes products for patients with diabetes, including growth hormone therapy and hormone replacement therapy.  Additionally, another important part of the pharmaceutical industry is the cost of the product. Pharmaceutical products are always in high demand because people are always sick. For brand name products, this can lead to price inelasticity, in which they raise the price of their product, knowing that the consumers will still purchase the product. However, in order to reach a targeted market (and to compete with generic products at cheaper price points), products must be maintained at an appropriate price. Another segmentation in this industry is the geography and product distribution. Products should be readily accessible to consumers. The United States is one of the world’s top leading competitors in product distribution, along with Europe and Asia. United States used to be the lead competitor of product distribution, but in recent years, Europe and Asia have been dominating the market. These segmentations continue to morph and expand the pharmaceutical industry.

Smith, Brian. (April 2012). Super segmentation in pharma marketing. Retrieved from
http://www.pmlive.com/pharma_news/superior_segmentation_pharma_marketing_397304.

Blog #3 Differentiation

One of the biggest differentiations of pharmaceutical companies are their patents. Their patents hold the most value when it comes to product distribution, but when the patents begin to expire; competition heightens when generics appear on the shelves. A battle between brands versus generics ensues and differentiation becomes extremely important for the companies.

      Product strategy is a way which companies help their products have a longer market life. When a companies product’s sales begin to slow down due to generics coming out, the company will find other clinical usages for the drug, thus strengthen its market life. Also, advertising directly to consumers helps to promote the product so that patients would be encouraged to ask their physicians to prescribe them that product. For example, my company, AstraZeneca, has a drug called Nexium which topped advertisement to consumers at about 255 millions of dollars, increasing public awareness and sales. 

      Altering product form can also differentiate companies, just by simply changing the form of the medication; like from a liquid to a tablet. Giving consumers a variety of one product can help differentiate a company from a generic, as well as brand loyalty. Brand loyalty stems from experience of using a product and having a good reaction toward it. This gives the consumer a tendency to buy from the brand rather than the generic, in fear of the generic not having the same effect.

In the end, pharmaceutical company differentiation is really based on how the companies promote and differentiate their products. The more they make their drugs have more benefits, the more likely consumers will buy that drug.

Dubey, Rajesh. "Journal of Medical Marketing:Device, Diagnostic and Pharmaceutical Marketing." SAGE. SAGE, n.d. Web. 24 Oct 2012. <http://intl-mmj.sagepub.com/content/9/2/104.full.pdf html>.

Behner, Peter. "2012 Healthcare - Pharmaceutical Industry Perspective." Booz&co.. Booz&co, 07 2011. Web. 24 Oct 2012. <http://www.booz.com/global/home/what_we_think/featured_content/perspectives_12/health_pharmaceutical_2012/49983621>.

CSR and Marketing- Pfizer

Pfizer’s has a great CSR policy. They are creating new ways to lessen impact on the environment, diversity in inclusion, conduct responsible business practices and have ethical standards. Pfizer is also building partnerships in communities to strengthen health systems, access to medicine and find sustainable solutions (pp1).

Pfizer is the second largest distributer in the pharmaceutical industry behind Johnson&Johnson. Pfizer uses direct to consumer marketing with their healthcare providers, for example doctors (pp42). Pfizer is committed to responsibly promoting their products and educate providers and consumers of their new products (pp42).

Sales and marketing (pp40-43) 2008. Received from

http://www.pfizer.com/files/corporate_citizenship/cr_report/sales_marketing.pdf

Responsibility (pp1) 2012. Received from

http://www.pfizer.com/responsibility/

Price Trends

In the pharmaceutical industry, there is a relatively inelastic demand for medicine (OECD page 14).  The pricing is based on a free market concept, meaning there is no regulation, especially for over the counter drugs (OECD page 14). To set prices, The most commonly used methods involve comparing proposed prices for new products against those prices paid by other payers, a practice known as external price referencing, or against those prices already paid for products judged to be similar (OECD page 14). Profit controls, Pricing and regulation of the distribution chain is undertaken in many systems are also used (OECD page 14). For the people purchasing the products in the pharmaceutical industry, reference price systems are often used to set common reimbursement amounts, Consumers than pay an out-of-pocket difference on the products (OECD page 14). Pharmaceutical prices are also determined by market powers (OECD page 14). This means the perceived value of the product and competition from other companies. For example, a more well know company like mine, Pfizer, sets the price of many drugs because they are a well known brand with the consumers. Retail prices of pharmaceuticals also are affected by the country’s income (OECD page 10). This means higher income in the country can affect consumption positively. This means in the US there is a higher consumption of pharmaceuticals and resulting in higher prices and because it is inelastic expenditure changes with income, but not as fast (OECD page 10). Pricing is heavily determined by the company of the produced and not regulated in the US; some critics say it is too high and should be lowered for people to afford the medicine they might need to stay alive.

OECD Health Policy Studies Pharmaceutical Pricing Policies in a Global Market (pp.10-14) 2008. Received from  

http://www.oecd-ilibrary.org/docserver/download/fulltext/8108041e.pdf?expires=1351113230&id=id&accname=ocid194320&checksum=F374541A8A30BEA51FC5D5423D7C3230

Blog #3: Current Events in the Pharmaceutical Industry

A recent Wall Street Journal article provides information on an "patent cliff" that is sweeping through the pharmaceutical industry. This article talks primarily about the effects of this patent cliff on three companies: AstraZeneca, Novartis, and Sanofi. The article says that "the patent-expiration predicament has been worsened by broader economic problems that have resulted in deep price cuts from health-care customers in Europe and the growth of cheaper generic products. The third quarter is expected to be tough for all three of these Big Pharma companies. Analysts are predicting severe revenue declines from each of these companies (Hodgson 2012).

One of the companies in our industry group, AstraZeneca, is largely mentioned in this article. According to Hodgson, AstraZeneca is expected to lose patent protection on 50% of its revenue in the next five years. Additionally, AstraZeneca has made no attempt as of yet to to come up with replacement drugs or diversify in order to up their revenue sales. AstraZeneca's revenue is expected to decline by 18% in the next three months. The chief executive, David Brennan, actually resigned earlier this year because of the company's patent expiration problem and executive pay. Furthermore, their shares dipped sharply as they are now trading 2.8% lower that the beginning of the year (Hodgson 2012).

This is very interesting because AstraZeneca is an assigned company in my industry group. This article gives a lot of proof as to why we should not, as a group, recommend AstraZeneca as our company to invest in. Through the research given in this article, it is clear that AstraZeneca is not doing well at all. Their revenue sales are plummeting a lot even in three short months. The fact that they are expected to lose their patent protection on 50% of their revenue in the next five years is astonishing (Hodgson 2012). Our group should definitely keep this in mind when thinking about who to recommend investing in. AstraZeneca is not doing very well and is not predicted to do any better in the upcoming years. This is definitely important information that we got from this article.

The overall impact of this event on my industry is that the pharmaceutical industry seems to be going down a little bit. This article talks about three of the biggest pharmaceutical companies in the industry and how they are all doing poorly. The patent cliff is obviously severely impacting the pharmaceutical industry. It is kind of scary that the top companies in the industry are struggling in this way.

Works Cited

 

Hodgson, Jessica (24 Oct. 2012). Big Pharma Tries to Look Past 'Patent Cliff'. Retrieved from

       http://online.wsj.com/article/SB10001424052970203897404578076173187345806.html?        

       KEYWORDS=pharmaceuticals

CSR in Brand Name Pharmaceutical Manufacturing

The biggest brand name pharmaceutical companies are Pzier with 15.2% market share, Johnson& Johnson with 14.3% market share, Merck and Co. Inc. with 12.8% market share, and Bristol- Myers Squibb with 11.8% market share.  The overall industry revenue is $19.0 billion with an estimated annual growth rate of 0.4% from the year 2012 to 2017. "Although Brand Name Pharmaceuticals have proven resilient to the economic downturn, it has become vulnerable to threats from generic drugs."(IBISWorld, 2012, Industry at a glance). 

One way that brand name pharmaceuticals can remain in the good position that it acquired is through corporate social responsibility, where " the policies are being created voluntarily in order to secure a niche in a global market place where product liability is a key factor in determining success." (Global Pharmaceutical Industry [GPI], 2012). People feel more comfortable purchasing drugs from a credible source and one way that companies in the pharmaceutical industry can achieve said credibility is through transparency with the customer through corporate social responsibility. This will only help boost the image of the company so long as the medication is within itself effective and reliable, which gives them a competitive advantage over the generic pharmaceuticals.

Incidentally, the top three companies with the largest percentage of market share have extensive corporate social responsibility policies. Pzier has an integrity-based code of ethics that “spans from everything regarding how to ethically conduct research to reducing greenhouse gas emissions in a policy of corporate citizenship.” (GPI, 2012). This not only creates a sense of purpose other than profits within the company but can also be marketable to their customers, making them appear credible to customers.  Johnson & Johnson also have an integrity-based code of ethics that include both their political and social stand against child labor and outlines ethical research guidelines, also following in the environmental trend have implemented a plan to reduce their impact on the environment. (GPI, 2012).

CSR can assist even the already established pharmaceutical companies that they can gain market share and standing, including increasing revenue should they adopt and implement a corporate social responsibility policy reaffirming credibility to their customers and employees.

References

IBISWorld US. Industry Market Research- Brand Name Pharmaceutical

Manufacturing. 2012. Retrieved from: http://clients1.ibisworld.com.proxyau.wrlc.org/reports/us/industry/ataglance.aspx?entid=487

The Global Pharmaceutical Industry. International Trade and Contemporary

Trends. 2012. Retrieved at: http://www.duke.edu/web/soc142/team2/social.html#corporate