Introduction

The pharmacological industry in the United States suffered a dip recently in fortunes due to the loss of patent rights for the major vendors. The market is now more susceptible to imitations and generic competition. Majority of the corporations in the United States specializing in the production and sale of drugs have to prepare to deal with the changes in operations in the market. This paper will analyze the current situation of AstraZeneca, a major pharmaceutical vendor in the country, in the face of recent developments which rock the industry. The influence of major stakeholders in the market, coupled with the dynamics of globalization will potentially spell a change in operations by vendors and regulators alike moving forward.

Analysis of the current situation facing AstraZeneca Pharmaceutical Organization

The current situation at global pharmaceutical company AstraZeneca involves changing the financial performance at the organization. The company, like many others in the pharmaceutical industry, was facing generic competition resulting from a wave of expirations known as the “patent cliff” that rocked the United States drugs industry in 2012. Brands such as Seroquel, which AstraZeneca enjoyed exclusive access, suddenly became unavailable for sale in organizations owned by the drugs franchise. AstraZeneca had previously recorded sales of $4 billion in 2011 of the brand in 2011 alone. Loss of patent rights of some of these blockbuster drugs severely affected the drugs store resulting in early profit warnings and negatively impacting on profitability.

The loss of patent rights for some of the brands of drugs which drew in significant values in sales was set to continue past 2012. For example, the right to exclusivity on “Nexium” would expire in 2014. The brand alone contributed to $6.2 billion in sales on an annual basis for the pharmaceutical organization. Further, other brands such as Crestor, which makes an average of $4.4 billion annually, would see the exclusive patent loss occur in 2016. The loss of these lucrative business deals would happen without an obvious candidate to replace them. As one of the largest pharmaceutical sellers in the United States economy, AstraZeneca has to find an effective solution to turn around the financial situation. The future in terms of sales looks bleak as competitors gain access to the drugs the organization enjoyed exclusivity. The process of achieving a complete transformation of fortunes of the business appears to be the biggest situation currently facing AstraZeneca.

Strategic Options Available to AstraZeneca

The response to the challenges facing the major firms in the pharmaceutics industry has to be both radical and comprehensive. For AstraZeneca, beyond the appointment of former Roche Chief Operating Officer Pascal Soriot as the new head, the pharmaceutics seller also has the option of embarking on disease management initiatives. AstraZeneca could explore on the option of embarking on a broad-based option of improving disease outcomes and then positioning the drugs sold by the company as viable options to improve the outcome of diseases. The option of approaching the market using an outcome-based approach offers an added dimension to beating generic competition occasioned by the loss of patents which guarantees exclusivity of the drugs.

For established pharmaceutical firms, another strategic option is extensive investment in traceability and authentication technologies to beat the growing problem of counterfeit products. The problem of counterfeits in the pharmaceutical industry is a growing problem which risks putting the health of unsuspecting patients at risk. Also, counterfeits are a mockery to the patenting efforts which organizations such as AstraZeneca have invested a substantial amount of money to acquire. The effect on the business fortunes of counterfeits on the major players in the drugs industry indicates a global sale of $100 billion by 2010. The problem of counterfeits even beyond the United States is typified by the astronomical growth in the number of seizures made at various border points in the European Union. For example, authorities at various posts at the border recorded an increase of articles from slightly over 500000 in 2005 to 4 million in 2007. Addressing the issue of counterfeits through technology to trace drugs and verification techniques is a strategic option for AstraZeneca to mitigate adverse financial performance occasioned by the loss of patents and the problem of counterfeits.

AstraZeneca could choose to expand its biologics drugs portfolio. Unlike the other drugs in the market, biologics have the advantage of being immune to generic competition. Also known as biopharmaceuticals, the drugs are administered through injection and are used to treat specialist conditions such as cancer and rheumatoid arthritis. The drugs are much more effective than the small-scale molecules hence to secure higher prices than normal drugs in the market. The production of biologics involves a significant injection of resources, with the plants used in the production process being costly to facilitate the fermentation process. Investment in the production of biologics is a viable strategic option for the AstraZeneca Company in the face of increased threats emanating from the sale of counterfeits in the drug market.

Recommendations for AstraZeneca

The decline of the blockbuster sales in the United States drugs market coupled with the propensity of unscrupulous traders to produce counterfeits demands remedial actions for the pharmaceutical stores. The organizations have to be creative in the sales and movements of their products in the U.S. markets and beyond. One of the remedial action in response to the current state of affairs is an investment in research and development. The United States government is the major financier of R&D in the field of biotechnology. AstraZeneca could consider investing in the field to uncover knowledge on the manufacture of various drugs in the market. The injection of capital research will uncover the various methods of production immune to counterfeits, associated with low costs and high attrition and high selling prices. The production of quality medicines and the ability to sell them at high prices could be a welcome reprieve in the face of dwindling fortunes caused by the loss of patents.

AstraZeneca should also consider diversification of its portfolio to cushion its financial performance against vagaries of the pharmaceutical industry. For example, investment towards acquiring biologics capabilities could provide an avenue to access the lucrative market segment. The rationale of including biologics in the organization portfolio of AstraZeneca is that they are difficult to imitate, offer a high-value selling point, and have high attrition properties. Although the investment required to facilitate productivity biologics is substantial given the capital-intensive nature of the production plants, the drugs offer a return on investment given their popularity in the market. Biologics have gradually become a mainstream source of income for the major pharmaceutical firms, recording sales of about $157 billion in the year 2011. Market forecasts project that the biologics will form seven of the ten top brands in the market by 2016. Also, the market figures show that those companies which invested early in the production of biologics reaped early benefits from their diversification strategy. The rationale of recommending an injection of biologics in the products portfolio of the AstraZeneca is to help cushion the company from adverse effects of counterfeits and imitation by various competitors in the market.

The pharmaceutical company could consider using building a formidable brand in the Over the Counter prescriptions. The United States market alone is worth about $127 million in 2010. The top manufacturers control half of the market as brand loyalty plays a significant role in influencing the consumer market trends in the United States. For AstraZeneca, the recommendation is to build a credible brand for over the counter drug market in the U.S. Research shows that the market trends are driven by the brand recognition among the consumers both within the American borders and beyond. Based on this rationale, the recommendation for AstraZeneca to revive its ailing financial fortunes in the pharmaceutical market is market take-overs of established brands specializing in the sale of over the counter drugs. The market value of these specific type of drugs appears too lucrative to be ignored by the organization.

Drivers towards Globalization in the Pharmaceutical Industry

The main driver of the globalization of the pharmaceutical industry is the ease of communication occasioned by the development of technology. Consequently, the field of medical science and practice has converged, aided by the ease of travel and information exchange. The leading corporations in the pharmaceutical industry have globalized and registered their presence in markets all over the world. The dominance of the United States in pharmaceutics is under the threat of government-backed research and development institutions in Asia, specifically China. Global companies closed shop in the United States and the European Union but continued to open research and development sites in various Asian destinations. The shift in the investments regarding capacity building is an imminent threat to the dominance enjoyed by the U.S. in the drugs market.

Several governments in the world have been major drivers of globalization witnessed in the pharmaceutical industry. The Chinese government, for example, declared its intention to become a global leader in the drugs industry in the year 2004. Consequently, financial backing was extended towards science parks and universities to facilitate the ambitious project. Further, India has articulated its desire to be a major R&D hub in the world. The country is regarded as a cost-effective location for clinical trials. The global expansion of the pharmaceutical industry could provide an opportunity for the United States to offer its services in terms of human resources and information for these ambitious countries in the world which may be keen to outsource from the world leader in the drug industry.

The extent of Influence of Major Stakeholders in the Industry

The government is the largest single-source participator in the pharmaceutical industry in the U.S. most healthcare sectors in various countries in the world. Government legislation has the potential to influence the volume of pharmaceutical products in the industry, for example through the enactment of the Affordable Care Act in March 2010. Powerful public sector consumers have also shaped the market strategies adopted by companies aiming to achieve competitive advantage. The business entities have built their marketing strategies around the cohort of powerful consumer groups; aiming to satisfy their needs on multiple dimension fronts. Companies which recognize that they have to be flexible to cope with the rigorous demands of the pharmacological industry know the power addressing concerns of major stakeholders to avoid the adverse effects of generic competition.

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