GLOBAL PHARMACEUTICAL INDUSTRY

Global Pharmaceutical Industry



Global Pharmaceutical Industry

Introduction

In response to multiple tragedies related to the pharmaceutical industry during the 1950's and 1960's, the world saw a substantial increase in the number of regulations, guidelines, and laws regarding the "safety, quality and efficacy of new medicinal products" over the next decade. As the industry expanded production into international markets, pharmaceutical standards still remained a national responsibility and global standards did not exist. Soon, there was a need to standardize quality and safety regulations in order to provide consumers with safe products in a timely manner.

Analysis

It was the EC (now the European Union) which urged for the creation of a single market for pharmaceuticals in the 1980's. However, it was until 1989, at the WHO Conference of Drug Regulatory Authorities (ICDRA), that plans began to develop for the creation of a global pharmaceutical regulator. In April 1990, the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) was created. Now, the ICH is composed of more than six parties that represent the regulatory bodies and the research-based industries that are responsible for the decision making processes related to the pharmaceutical industry in the United States, Japan, and Europe. Included in this group are the European Union, the Ministry of Health, Labor, and Welfare (Japan), the Japan Pharmaceutical Manufacturers Association (JPMA), the Food and Drug Administration (FDA), and the Pharmaceutical Research and Manufacturers of America (PhRMA). There are also ICH Observers that act as a liaison with non-ICH countries, including the World Health Organization (WHO) and The European Free Trade Association (EFTA).

The ICH guidelines are currently divided into four main categories: Quality topics, Safety topics, Efficacy topics, and Multidisciplinary topics. Quality topics incorporate guidelines for the stability testing of new drug substances and products, the impurities in new drug products, and the specifications for test procedures and acceptance criteria for new drug substances and new drug products. Safety topics focus more on providing the guidelines for toxicity tests and carcinogenicity studies. Efficacy topics include clinical safety measures, ethnic factors, and special population situations and finally, multidisciplinary topics range from medical terminology to data and electronic standards.

Barriers to Entry in the Global Industry

Like many industries, any new entrant into the pharmaceutical sector will be faced with various "hurdles" that have been previously erected by already established businesses and by national and international standards and regulations. These include, but are not limited to:

economies of scale - manufacturing, R&D, marketing, sales

distribution product differentiation - established products, brands and relationships

capital requirements and financial resources

access to distribution channels: preferred arrangements

regulatory policy: patents, regulatory standards

switching costs - employee retraining, new equipment, technical assistance

The barriers to entry are extremely high in the pharmaceutical industry. Many of the top firms have "significant manufacturing capabilities that are hard to replicate". Also, they have extensive patents that guarantee the protection of their products while they defend their brands with large marketing budgets. Since any emerging pharmaceutical company can expect a sharp retaliation from the established competitors ...