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February 2022 marked my completing 47 years of working in Pharma Industry. Allah be praised. I am still working. My journey of near half century is also the journey of Pharma Industry in Pakistan. Great changes have occurred in this time and a lot could be written about it. In my blogs, which were started about four and a half years ago, I have covered several topics related to Pakistan Pharma Industry. This multi-part series shall do and review the SWOT – Strengths, Weaknesses, Opportunities, Threats – of the Pharma Industry.
It is now time to strategize, as this was the purpose of this long exercise.
Strategies are made on these parameters:
- Strategies based on Strengths
- Strategies to mitigate Weaknesses
- Strategies to exploit Opportunities
- Strategies to avert Threats
We shall follow the same line of thinking. We have completed Strategy Recommendations based on Strengths and Weaknesses.
Strategies to Exploit Opportunities
- Mergers & Acquisitions – There are very few books that are specific to Pharmaceutical Marketing, most books are about marketing in general. A year 2000 book titled ‘Pharmaceutical Marketing’ by John Glidden forecasted that by 2010 there would be only ten mega pharmaceutical companies after multiple mergers and acquisitions. It did not happen exactly though there had been scores of mergers and acquisitions, these are still continuing.
We need to understand the reasons for mergers and acquisitions, mergers first.
Mergers were necessitated by following reasons.
- The world was seeing economic boom and the access to drugs was opening even in the remotest parts of the world. It was becoming increasingly difficult for multinational companies to cover the entire geography. The MNCs were not all the same size, some had better reach than others. They merged and combined their strengths to gain better share of the market. Their access to regions increased overnight. This kind of mergers were mostly seen between larger and smaller companies. Many small European companies like Lepitit, Dr. Grunenthal, Siegfried merged and lost identity. May & Baker merged into Rhone Polenc who then merged with Rorer to become Rhone Polenc Rorer – RPR. On the other hand, German Hoechst merged with French Roussel, then merged with American Marion Merrell Dow to become Hoechst Marion Roussel – HMR. RPR and HMR merged to become Aventis, later merged with Sanofi and Synthelabo to become Sanofi Aventis. Now the whole conglomerate is simply Sanofi.
- Among the developed regions, US based companies did not know the European markets well while Europe based companies found it hard to gain foothold into US market. British Beecham merged with American Smith Kline & French – SK&F to become SmithKline Beecham. Around the same time, British Glaxo merged with American Burroughs Wellcome to become Glaxo Wellcome. Within a year or so, GW merged with SB to become what is known today at GSK – Glaxo SmithKline. GSK is among the Big Pharma with huge reach.
- Research pipeline dried up. No major, breakthrough, potential blockbuster molecules were on the horizon, and the research was getting more and more expensive. Another reason for mergers was to combine research facilities and research budgets to be able to increase research capability. Within the same regions companies merged. American companies Pfizer, Wyeth, Cyanamid-Lederle, Pharmacia, Kabi and Upjohn merged within Pfizer making it the world’s largest Pharma company.
The bigger is better mantra lasted for several years leading to mergers and re-mergers not just in Pharma, but in other industries also. In advertising industry in the US, Saatchi & Saatchi made headlines for merging multiple advertising companies into it.
Acquisitions are different. It is when a company desires a specific product, or design, or platform, or research capability, and decides to acquire. Acquisitions are happening in all industries including Pharma. Roche acquired Genentech is just one example. Google acquired YouTube. Facebook acquired WhatsApp and Instagram and so on.
Why should the Local Pharma consider M&A? Following points may be considered.
- Pakistan Pharma market is unevenly divided; 90% captured by only 50 companies. 700 companies are struggling with small market shares. If they combine together, they will increase their market share and ability to survive. In time to come, they will be able to invest more into marketing and get better results.
- Most companies are keeping sales teams which may be larger or smaller. The sales volumes are small, supplies are interrupted, running products are in shortage, the sales teams have poor preparation and even poorer morale because they do not get marketing support and do not get paid on time. This is the story of a large number of companies. Merging together may bring relief in these issues.
- Nutraceutical products have become popular beyond expectation and are generating sales volumes which may be bigger than Pharma. Merger between a pharma and a nutra company can combine their market presence to become a bigger player with larger capability.
- Generic companies do not spend money on research, but with newer molecules and more stringent requirements, new product development has become a necessary expense. Smaller pharma companies are struggling in this area. Merging and combining capabilities will bring better results.
- Pakistan Pharma market is littered with small units with poor facilities. They are struggling every day, indulge in survival mode, and engage in dubious activities. However, the sense of ownership is so strong that it does not allow them to lose identity. They will never allow anyone to acquire them because it is loss of face which is unbearable. Mergers may be a solution where they can keep face, retain ownership, and survive better.
Mushroom growth of Pharma companies under the sponsorship of DRAP is hurting rather than helping the Pharma industry of Pakistan. As has been pointed out earlier, the location, layout, equipment, working, compliance to GMP standards, compliance to quality standards, business tactics leave much to be desired for many local pharma units. The menace of fake, counterfeit and spurious drugs is also related with this matter. After all, making fake tablets and capsules and injections needs a proper manufacturing unit; none of this can be done in the backyard of a house. We first allow the establishment of poor manufacturing units and then give them opportunity for wrongdoing. Healthcare is not just a business; it is a public concern and should not be treated like other businesses.
To be Continued……
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