Pharmaceutical industry in strategic crisis, report says

Jan. 10, 2013

Increasing price and cost pressure, regulatory changes and expiring patents are leading to shrinking margins in the pharmaceutical industry.

Increasing price and cost pressure, regulatory changes and expiring patents are leading to shrinking margins in the pharmaceutical industry, a new report by Roland Berger Strategy Consultants concludes.

Almost three in four companies believe their industry is in a strategic crisis, according to the results of the "Pharma's fight for profitability" study.

For this reason, 78% of the study participants are of the opinion that pharmaceutical companies must adjust their business models to fit the new market requirements. This includes focusing investments on the high-growth emerging markets, which will make up almost 40% of the global pharmaceutical market by 2016.

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This view is shared by many pharmaceutical companies: Almost half of those surveyed are willing to relocate their administration, R&D and sales departments to emerging markets.

"Pharmaceutical markets such as Europe and the U.S. are stagnating due to rising price pressure, regulatory changes in the healthcare system and more stringent admission requirements for new drugs,” said Roland Berger consultant Martin Erharter. "But in emerging markets we are seeing strong growth. Nevertheless, the margins here are lower and driven heavily by non-patent protected products."

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