Teva Pharmaceuticals Strategy Case Paper

Many countries such as Canada, India, and the UK have price controls. The governments of these countries impose regulations that control the prices of new drugs as well as generics without compromising safety but at the same time they do not burden pharmaceutical companies

What driving forces do you see at work in this industry? Are they likely to impact the industry’s competitive structure favorably or unfavorably? (Did we answer this question?)

It is the (sub)industry leader (market share >85%), industry is an oligopoly which implies high barriers for potential competitors to enter the market

* Monopoly Power. Pharmacists often face questions from patients regarding how prices of medications are determined and why, in some cases, they are so expensive. Unlike markets for other goods, in the pharmaceutical marketplace there are a limited number of manufacturers and the medication being sold are not identical, but rather are differentiated. There is a guarantee via patent protection that no potential competitor may manufacture an identical drug and sell it at a lower price in the short run. As a result, the branded manufacturer is able to make profits. Since there is only one seller, the monopolist determines the price of the medicine. This establishes the monopolist as a price setter, permitting prices above the perfectly competitive price by controlling the quantity of medication produced in the marketplace. This is in stark contrast to being a price taker, and accepting a price established within a perfectly competitive marketplace. The end result is that prices are higher under these market conditions than they would be in a purely competitive marketplace.

Substitutes — Low to Moderate. For some consumers there is no substitute for an electronic toothbrush, but there may be substitutes for certain types of toothpaste. In this industry, a company can have a product where there is no substitute or competition for that product but also have a product where there are so many substitutes that a consumer has the bargaining power.

Another one of Porter’s five forces is the threat of new substitutes, which is the main problem in the generics market. A new firm must be cognisant of the fact that every company in the industry will be able to produce the same

The power of buyers in the industry varies at different levels depending on the field. For pharmaceutical drug companies, which have thousands of patients, customers have lower price sensitivity as they are rarely able to refuse the treatments they need and they have low bargaining leverage due to commonly lack of information as well as knowledge on the drugs. For biotech firms that distribute specialized products to the government and hospitals, their customers actually have more of a bargaining power due to being the sole consumer sources

| | | |generic drug manufacturer based in Israel. The parent company established Teva to develop and market |

The industry leaders, CVS, McKession and Unitedhealth Group, each gross over $100 billion dollars a year and rank under 15 in the Fortune 500. These companies are constantly growing, advancing and competing to discover and patent new drugs and technology. New entrants to the market would face a significant competitive disadvantage. Threat of New Entry From both the service and product perspective the barriers to entry are relatively strong.

Teva manufactures 71 billion tablets a year in 77 pharmaceutical and API facilities around the world. Over 1.5 million Teva prescriptions are written each day in the US alone, 1,052 prescriptions per minute. Our numbers speak for themselves, more generic medicines mean more health for more people. This is what we do: we make quality healthcare

Low – Highly competitive nature of the industry and high risk involved shuns the new entrants. Also High Investment in R&D with no guarantees that a new drug can be created increases risk of no ROI

highly fragmented with at least 20 major manufacturers in each technology segment. Because of the

The third largest industry in the world in terms of volume is the Pharmaceutical Industry. As per the report revealed by the Ministry of Chemicals and Fertilizers, the Department of Pharmaceuticals, in the year 2008-2009 the pharmaceutical industry’s contribution to the turnover of India was USD 21.04 billion. The market share of Pharmaceutical industry in the United States Market is around 14 billion USD.

Teva Pharmaceuticals- Founded in 1901, Teva is a large Israeli pharmaceutical company based in Petah Tikva. This company focuses on generic and proprietary products. They are the largest generic pharmaceutical manufacturer in the world and the 15th largest pharmaceutical company. This company has operations in 5 continents and is listed in the NYSE and in the Tel Aviv Stock Exchange. Teva Pharmaceuticals has 4 facilities in South America, 12 in North America, 8 in Asia, 2 in Africa and the bulk of their representation is in Europe where they have 35 facilities. Teva had 20.3 billion dollars of revenue in 2012 and a Net income of 1.9 billion in the same year. They employ 46,000 people and have had rising stock prices in 2014(Currently $51).

Theon Pharmaceuticals is a manufacturing concern which does not sell its products directly in the market. It manufactures products for third parties like Abott, Cipla, etc., and is therefore only involved in Business to Business sales in the domestic market. Since the company is doing well with its existing client base with timely deliveries and ever-increasing revenues (as mentioned in the case), it clearly indicates that its business model is doing just fine. The only improvement that it requires is in terms of value addition which can be gained by company’s expansion either by enhancing its production capacity, adding to its product line or increasing exports. With its already sound reputation, Theon Pharmaceuticals should consider a shift