Global Business For Pharmaceutical Company

Pharmaceutical Industry in Australian and the Expansion Strategy

Discuss about the Global Business for Pharmaceutical Company.

The Alphapharm Company just as any other pharmaceutical firm is involved in the production, development, and marketing of drugs for medical use. The organization is a generic drug provider across the Australian healthcare market with over 13% national share annually. Such a position enables the firm to provide brand and generic medication to the existing and emerging markets. The manufacturing process is subjected to various laws and policies, which governs the patency, analytical tests, product safety and efficacy as well as markets. Currently, new firm relies on and base their source from the local primary apothecaries that were recorded from the tradition of botanical drug distribution. In addition to this is the trending use of synthetic chemicals that enabled researchers to vary the structure and growth of chemical substances in pharmacology. Therefore, it has led to the evaluation of the biological effects of the changed compound structures (Friedli et al. 2016). On the same note, the innovation costs incurred in discovery and development is high, such that the pharmaceuticals must be thoroughly worked on for approvals. Most nations investigate the products, especially for human use, through boards before release into their markets. Consequently, during implementation, pharmaceutical fraud must be avoided at all costs, to gain consistencies with the potential clients. The need to increase the market coverage for the Alphapharm Companyhas resulted to the establishment of global expansions, which is considering an option between China and South Africa.

Australian pharmaceutical industries are incorporated in bio-medical research, production of medicines; originator and generics, biotechnology and wholesaling and distributional services. Exportation of the pharma products is one of the lead manufacture experts in the country. For instance, in 2012 -2013 financial year total of US$ 3.9 billion sales were made. Also, it creates employment opportunities to citizens approximately 17,000. Operations in the industry are regulated by the Therapeutic Goods Administration (TGA) that has a unit in the health department and responsible for standardization under the” Therapeutic Goods Act.” Such legislative control ensures equity that protects the community. However, the supply control of medicinal products in Australia involves pre-market evaluation and approval, development of listing systems, licensing, post-market survey, and drug assessments (Schuhmacher, Gassmann, and Hinder 2016).

According to a study of the international businesses, it is true that there is a significant increase in the emerging markets globally that is sufficient. About 52% of those interviewed in this regard stated precisely that they expectations from global sales were to be more than 30% of their total. Despite the fact the public organization to still dominate in the markets, an existing opportunity is from the second-tier are becoming more relevant, such as Southeast Asia. Consequently, the growth and prosperity in nutrition, disease patterns are on the rise and changing into lifestyle diseases and disorders that are becoming standard. Such trends open up more and new opportunities for the existing products. For example, it is estimated that the number of patients with diabetes is expected to increase by 20% in the next five years; also, the cardiovascular and oncological diseases progress in an almost similar trend (Huynh-Ba 2016). Such motions, indicates the general rise in the number of healthcare facilities are likely to be erected for service provision (Huynh-Ba 2016). However, in all of these markets accessibility remains a challenge since a number countries lack adequate infrastructure and public funding to facilitate treatments that bring forward issues of affordability. Consequently, Africa is viewed as a long-term opportunity in foreign business due to poor infrastructure thus investing pharmaceutical companies tends to maintain and look for partnership from the already existing. Despite this, high development rates are expected to rise, and fewer pharma societies are anticipating to employ their sales and marketing forces in such regions for the next five to ten years. To maximize sales, companies that best balance between their competencies globally with useful approaches will emerge the winners for foreign markets (Malhotra 2010).

Evaluation of the Pharmaceutical Industry in South Africa

The growth of pharmaceutical industries in South Africa is hindered by the existing structural constraints that include inadequate skills and poor infrastructure. However, the healthcare expenditure is slightly above the WHO recommendation where households in medication use 7% of the GDP. In addition, the health system is two-tiered that gives a reflection on the economic disparity amongst private and public sectors. Whereby, 16% of the population can afford the expensive quality care while public health institution is crowded with the remaining percentage. On the contrary, the private sector has the highest expenditure on pharma products where specialists make provisions in 211 major private hospitals and general practitioners, as the state-owned institution are comprised of tertiary facilities (Haakonsson 2009; South Africa 2015). Consequently, private healthcare is availed via medical schemes that are financed by employees and employer contributions, so different contributions offer different coverage levels. Whereas, the central government that gets revenues through taxes to run the facilities funds the public health and in many cases gives subsidies to the services and drugs provided. Further, the South African markets are driven by prices majorly; therefore, generics do have significant sales volumes while the originators stagnate in the markets (Adobor 2011; Djolov 2004)

Financial Risk

South Africa poses various financial risks in the operation of local medical companies due to the shortfalls accrued in capital and skills that involve industrial scientists and pharmacists in the laboratories. For instance, lack of incentives to attract and retain the foreign investors, high tariffs on imported products, unfavorable interest rates from credit facilities, shortages on energy sources, and generally poor infrastructure hinders local production.

Operational Risk

Various healthcare institutions have been faced off due to lack of working capital or even mere access to it to enable recapitalization. Such situations offer limited global links and technicalities for technology transfers in the intellectual property protection. Also, there is a shortage of professionals and no training facilities for the same that weaken the human resource.

Compliance Risk

Considering the existence of a weak system of central governance in the region offers no support to domestic investments in the pharma industry. More so, the gaps that exist in the regulatory capacities and enforcement capacity to ascertain quality, safety, and efficacy of the products do not exist thus allows for compliance risks.

Strategic Risk

Most of the laid approaches for entry in the markets have always failed in South Africa due to complex structures in the population. Also, small markets in the country discourage direct market entry since the sales force is likely to be stronger than output, therefore creates room for losses to be incurred.

Risks Associated with South African Pharmaceutical Industry

Several situations are associated with the Chinese market that must be considered to ensure success in trade. Consider the existence of poor relations amongst patients and physicians in the healthcare system, whereby a patient has the freedom to attend to a doctor of their choice. Such scenario promotes absurd cases since a patient may present himself or herself to a specialist at a higher level for a little fever that can be dealt with in low hospital level. Thereby, pharma has got the responsibility of managing the idea that the two parties have no open discussions on treatment. On the other hand, patients may doubt the doctor’s prescription to especially high-cost drugs and opt not to take them. Particularly, this is of concern to young adults and those with chronic conditions, which can make personal decisions (Wang 2007; KPMG China 2011). As well, there is limited access to physicians in the public sector due to workload from the high number of patients. Thus, provide insufficient time to engage and properly interact with the pharmaceutical or medical sales representatives on new treatments and products. Such calls for innovations by the companies to engage increasingly the clients, for instance, utilization of the Chinese memorial events reach the target groups where they can give attention and be more receptive. However, this challenge is not unique to China due to their sales culture and relationship building networks in the markets (Chenly 2016).

Meanwhile, the effect of rationing high-cost drugs and self-pay has become a challenge to pharmaceutical companies in China due to the increasing coverage of healthcare by the government without involving the proper funds to facilitate the process in public hospitals. Such a case has made physicians opt into an impossible task of offering treatment with a lesser budget that is within the provisions, thereby, reducing the number of pharmacies that provides costly products in the public sector. In addition, rogue patients may decide on postponing the therapy until the condition worsens to avoid the associated long and expensive queues for consultation. Consequently, these factors discourage markets for therapeutic products where most of the patients as well do not comply with the correct therapy. More so, the undeveloped private sector in health care is also an obstacle for pharmaceutical companies, where the bigger percentage gives preference to the state-owned facilities. Most of the wealthy Chinese citizens seek for the better care and resulting high costs provided by the non-governmental organizations. Despite some of the multiple reasons that could be true, the negative attitudes on private healthcare are in-depth and shared all over the population. In this regard, a vicious circle was difficult to underestimate being the idea that even doctors feel that public institutions offer them a good chance for advancement in their career. Therefore, they would be absorbed by the public rather than attracted by the private hospitals. Regardless of these factors, individual dominance is picking up slowly as it is being encouraged by the government to relieve the burden on itself and an alternative option. In such effect, restrictions on therapists that practice in more than one locality are relaxed; unfavorable regulatory conditions are being removed to foster growth and break cycles in private locations.

Operational Risks

Evaluation of the Pharmaceutical Industry in China

China’s pharmaceutical distribution market is worth US$ 44 billion though still poses a risk to the global enterprise. The nation has a high rural population that is defined by inadequate logistical expertise and infrastructure development. Therefore, it becomes difficult to satisfy the delivery of drugs to patients safely, in time and at a cheaper expense. As the government takes legal actions to combat these challenges, it becomes risky, since distribution network made of various local distributors takes up the initiative making it hard to monitor the products and track goods to ensure reliability in deliverance (Ecks 2008; Sustainalytics 2014). Although a combination of state guidance, market force, and foreign nations have taken the initiative to upgrade the system. The Chinese distribution channel is three tired, where we have the pharmaceutical companies, wholesalers, hospitals and pharmacies and finally patients.

Financial Risks

The cost of operating pharmaceutical firms in China is high because of the lack of a comprehensive tracking system between the various distributors, which makes it hard to guarantee product safety that is fundamental to human consumption. However, supply chains are complex that makes vulnerable to the entrance of counterfeited goods, which is a threat to the pharma industry. Therefore, the need to engage multiple distributors possibly tampers the interruption of cold chain and adversely affects the quality of the product thus increasing the cost of operation (Wang 2007).

Strategic Risks

The strategic planning involved in operating in China is complex because of several factors of diversity within the health sector. The vast size and heterogeneous population that exist in the nation, which the marketers must adjust to, are complicated. Irrespective of the development in the economy, this factor holds just as the case of any other consumer product in the world. Disparities exist in the market force, for instance, the rural clinics cannot be compared to the level 3 hospitals in the main cities such as Beijing, Guangzhou, and Shanghai that have better economies as developed countries (Festel and Geng 2016). Second is the public sector that is composed of complex individuals, country’s government assists in the funding, distribution, and organizations of the main healthcare systems. Such motion has led to in-depth coverage that has facilitated supply shortages that require more and better services. Therefore, the stakeholders are seeking more resources, partnerships and improving on their efforts as they narrow the gap needed to implement the changes.

Compliance Risks

The industry in China is also complex based on the nature of the regulations available in the country. The health sector is flooded based on the need for health services. The loose regulations on drug testing and reliability research conducted in the state have polarized the market making it difficult for genuine drugs to attract high revenue. However, the strict operation in terms of market operation for international organization also limits the capacity of the foreign firms to control a higher level of production, sales, and distribution. The move is meant to protect the local industries but disadvantages the international investors (Chen and Jinag 2015; Yeung 2002).

Expanding Globally: Options Between South Africa and China

Choosing to expand to China is more profitable that to South Africa. One of the benefits is the Chinese healthcare reforms that revealed plans for removal of the overhaul and commitment of vast sums of money to develop the system. Such changes provided for the increase in the basic medical insurance coverage up to 90% of the population by 2011. Others were the revision of the national essential drug list (EDL) to accommodate for more and allow for more prices that are restricted. Currently, there is a second phase of the reforms where universal health systems are to be established to all citizens to access affordable drugs and medication that open doors for pharmacies. Some of the latest improvements include an increase in the number of urban and rural residents covered for in the BMI; this was facilitated for the rise in the annual treatment allowance. In addition, the central government funds have been allocated to upgrade and construct more new county-level hospitals, community health institutions, township healthcare centers, and village clinics in remote places. In the public hospitals, mechanisms for separating hospital operations and management together with distinct roles in drug prescription and dispensing have been explored (Wang 2007).

Moreover, implementation of the 12th five-year plan that guides the socio-economic and environmental development that helps in understanding the pharmaceutical market is another advantage that favors China over South Africa. Such implications will foster the rise healthcare consumptions and related demand for quality services due to the high incomes. Secondly, upgrade of the rural infrastructure and urbanization is likely to increase demand for pharma products with the shifting demographics. Such advancements are likely to call for consolidations and industrialization that goes in-hand with therapeutic companies. In return, the outdated and excess capacities get eliminated solidifying market structure and technology to create a business, thus the manufacturing and distributing pharmaceuticals shifts to the Eastern side to equalize on the development of central and western China.

Concurrently, the existence of the growing and distinctive Chinese pharmaceutical markets has provided great opportunities in the sector. China poses as one of the largest markets for pharma products globally, which are arguably due to the population size and maturity of the markets. Such consideration gives it the room to grow with the joint forces in the government stimulus, enhances health care, solidarity in market operations, improved R & D capabilities, economic and demographic development. Much more are the fundamental drives in the expansion of the market, which are the increasing need for healthcare, growth in economy, large and aging populations, and increased average and per capital spending together with the ongoing reforms. In correspondence to having the largest population of the elderly in the world, it stands a better chance for the expansion of therapeutic firms, due to the constant demand for healthcare from the resulting weak immune systems and incidences of illness (Vitry et al. 2016). Currently, the elderly generation makes up to 40% of the OTC drug market. Further, generic drugs are expected to dominate as patents to face significant growth since the world best-selling drugs will slowly lose patent protection, for example, Pfizer’s cholesterol – lowering Lipitor and Lilly’s antipsychotic- Zyprexa.

Companies venturing into the global markets have formulated various marketing strategies depending on the financial capacities and nature of the industry. One of the commonest is the direct penetration of already existing markets that has always been prioritized. The Australian Pharmaceutical Company will employ a direct entry into the market in China since dealing with pharmaceuticals is a sensitive health factor that has been compromised by agents and representatives (Mazumdar 2016). Regarding this effect, expansion of geographical area will be considered a vital initiative compared to the diversification of the portfolio. Implementation of these initiatives requires three key levers that include local operations, research and development, and manufacture of the products and sales excellence through a localized sales force and consistent collaboration with the working government. Such characterization will demand physical availability on the operating ground to gain the market share (Walid et al. 2015). Therefore, the move will be capital intensive. However, the same effect would not operate for South Africa and second-tier, as the developed markets focus on improvement of efficacy and costs harmonization. On this effect, there will be layoffs in departments of sales and marketing with a considerable share of funds and resource relocated to emerging market in China. Locally manufacturing pharmaceutical companies have become a useful tool for enhancing market positions in a competitive environment (Malhotra 2010).

Conclusion

In conclusion, it is clear that China offers a better ground for global business; however, it is not certain that a pharmaceutical company will quickly succeed due to the high risks involved that could come with greater rewards. Therefore, there should always be up-to-date information on the Chinese market and healthcare systems to have a better knowledge of the emerging bearings in the health system.

References

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