Why big pharma values a secure supply chain

What it means to be ‘big pharma’ in a $980 billion industry (Part 6 of 10)

(Continued from Part 5)

Why big pharma is so big

Big pharma companies dominate the pharmaceutical industry. This is because of their patented products, unique R&D (research & development) facilities, and optimum supply chain that includes a wide network of manufacturing units and distribution channels.

Supply chain and market reach

Supply chain and market reach are crucial elements in the timely and reliable delivery of drugs. Most big pharma companies operate in multiple countries:

  • Johnson & Johnson (JNJ) operates in more than 60 countries
  • GlaxoSmithKline (GSK) operates in more than 150 countries, with 86 manufacturing units in 36 countries and large R&D centers in the US, the UK, Spain, Belgium, and China
  • Teva Pharmaceuticals (TEVA) operates in 60 countries and distributes its products to over 120 markets
  • Eli Lilly and Company (LLY) has manufacturing facilities in 13 countries, R&D facilities in 8 countries and markets its products in 125 countries

Big pharma companies are focused on developing expertise and monopolies in specific drug segments. Pursuing inorganic growth strategies by acquiring many smaller units over a period of time helps these companies develop expertise in the treatment of various diseases related to oncology, cardiovascular ailments, etcetera. These strategies also increase big pharma’s market reach.

Securing the supply chain

With wide distribution networks, companies have become more selective about their supply chain. Suppliers to big pharma include chemical raw material suppliers that have minimal bargaining power given the ample selection of suppliers for any given product. Some suppliers are vertically integrated and have their own generic pharmaceutical units.

Counterfeit medications, also known as fake drugs, are a major threat to drug markets. Companies spend millions to ensure a safe supply for their products, particularly when their manufacturing units are located in many places. For example, GlaxoSmithKline (GSK) spends over $4.5 billion each year manufacturing and supplying products.

Some of the biggest companies are headquartered in the United States, including Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), and  Gilead Sciences (GILD). Combined, these companies make up 30.34% of the Health Care Select Sector SPDR Fund (XLV).

Continue to Part 7

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Source Article from http://finance.yahoo.com/news/why-big-pharma-values-secure-180556864.html
Why big pharma values a secure supply chain
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