“For the first 50 years of your life the food industry is trying to make you fat. Then, the second 50 years, the pharmaceutical industry is treating you for everything.”
– Pierre Dukan
The wealth of information available to prospective buyers in B2B procurement can be overwhelming. While some industries and commodities remain relatively unchanged over time, it’s far more common to be faced with an avalanche of new data from year-to-year. This Annual Report will investigate the global pharmaceutical market, highlighting the most current and relevant information in B2B purchasing. Well-informed decisions help a buyer to achieve the best logistics path and value for commodities.
A market definition is required before we start experimenting with pharmaceutical concepts. For the purposes of this report, ‘pharmaceuticals’ consist of ethical drugs only. Pharmaceutical grades are based on the product meeting a level of purity, which determines the amount of binders, fillers, excipients, dyes, and/or unknown substances permitted in the product. Depending on the purity level a pharmaceutical product will be ranked as A.C.S., Reagent, U.S.P., or N.F. (in order of descending purity).
All market values have been calculated at ex-factory prices – the value at which manufacturers sell drugs to distributors. The top ten largest distributors control a third of the market, so companies such as AstraZeneca PLC, Johnson & Johnson, Novartis, Merck & Co., and Pfizer Inc. have attained industry dominance. In the U.S., the most frequently prescribed therapeutic classes are analgesics, anti diabetic agents, anti hyperlipidemic agents, and anti depressants.
What does this mean for buyers and suppliers? To quote the World Health Organization (WHO), “there is now an inherent conflict of interest between the legitimate business goals of manufacturers, and the social, medical, and economic needs of providers and the public to select and use drugs in the most rational way”. The industry is being monitored, but still lacks transparency: many “responsible business standards” are actually developed by pharmaceutical companies in order to secure a global niche, and/or create a marketing platform. In the UK, promotional spending by Big Pharma is fifty ti mes greater than spending on public health information. As controversial as this may be, such business standards are likely better than nothing, as most do address issues such as child labour, workplace conditions, and environmental welfare.
A company wishing to enter the pharmaceuticals market must first demonstrate that its drugs are safe and effective, to the satisfaction of a national regulator, such as Health Canada (specific to within Canada). From start to finish it can take 10-15 years to make a new drug accessible to the public – a process that requires manufacturers to expend substantial costs on R&D and marketing, which further increases the capital requirements for new entrants.
The major suppliers to the market are manufacturers of active pharmaceutical ingredients (API’s), which form a sub-sector of the chemical industry. These API’s are supplied on a contractual basis, so companies risk high switching costs if they consider taking their business elsewhere.
The quality of materials, equipment, personnel, and third party clinical testing services are variables that can affect a buyer’s negotiating position. Trends such as escalating healthcare costs, an aging population, the availability of generic drugs, and the development of personalised medicine stemming from genomic research have created new opportunities for buyer movement in the market. Granted, this movement may be circular: the relationship between pharmaceuticals, healthcare systems, corporations, and diseases has the public on a carousel of confusion.
E-procurement solutions are an ideal tool for sourcing managers to identify optimal materials. Traceable, easily accessed contracts can be managed to secure maximum savings and efficiencies. The purchasing process does not have to be time-consuming, complicated, and disorganised.
New entrants to the pharmaceutical market should also keep in mind some guidelines for product transport. To avoid the possibility of counterfeit goods, mix-ups, adulteration, and contamination, all shipments should be secured in dedicated vehicles and include the documentation necessary to indicate regulatory compliance. Regulations are mainly set by national legislations in order to monitor the activities of pharmaceutical distributors. In general, these distributors follow a system of inventory control that ensures upcoming expiration dates are taken in account. This forms part of the larger good storage practices (GSP).
Fortunately, a solution like Tradogram is able to accommodate these documentation needs in a cost and time efficient manner.