Four scenarios for the future of the pharmaceutical industry

Pharmaceutical companies are facing several major interrelated challenges, the most strategic being the decline in R&D productivity resulting in empty product pipelines to replace products nearing patent expiry. A common response has been mergers and acquisition of competitors and biotechnology firms, but rather than resolving the problems, this has created new ones. While biotechnology promises to reshape the pharmaceutical industry, it too faces challenges: the industry as a whole is unprofitable and there is uncertainty regarding market acceptance of its products. This paper examines the current issues in the two industries, and describes a scenario process resulting in the development of a set of scenarios depicting four possible future paths along which the pharmaceutical industry may develop over the next 15 years. Introduction There have been periods in history during which industries and their foundations have undergone profound mutations; the pharmaceutical industry may be on the verge of such a mutation brought about by the coalescence of various environment forces, including the emergence of a relatively new industry, biotechnology (biotech). Pharmaceuticals are a global industry and the industry has traditionally been a high performance and highly profitable Ofle, 'elite in terms of outsized rewards and excessive profits' (Trombetta 2005). The industry comprises hundreds of companies including biotech firms, generic drug manufacturers, researchers, wholesalers and retailers, but dominating the industry is a group of large multinational companies known colloquially as 'big pharma' whose combined sales accounted for more than half of the industry's retail sales in 2004. Although highly competitive, the industry is fragmented with Pfizer, the largest player in the industry, accounting for less than 10% of global market share by value in 2004, and collectively the top 10 companies account for only 4 I .7% (Trombetta 2005; Anon 2007). The biotech industry meanwhile is a relatively new one and unusual by conventional business standards in that there are biotech firms with multi billion market capitalisations that are 'not profitable companies, that do not have significant drugs in 'Corresponding author. late stages of development, that don't have fully worked out development engines' (Anon 2004). Despite this, biotechnology is fundamentally reshaping the pharmaceutical industry. Given the above, this paper sets out to examine issues currently facing the pharmaceutical and biotech industries, and to describe the development by a team of managers from a US-based pharmaceutical company, of four plausible scenarios depicting how the pharmaceutical industry may evolve over the next 15 …