The pharmaceutical industry is one of the primary industries and it is also one of the largest. It has existed for centuries but has seen major progress only in the last few decades. This is largely due to the development of the various sciences. But at the same time, there are also factors that hamper the growth of this industry.
This PESTLE analysis of the pharmaceutical industry will look into the current status of the pharmaceutical industry, its different driving factors, and the effects they have on the industry. The primary fields that will be studied are political, economic, socio-cultural, technological, legal, and environmental. Hopefully, with the help of this analysis you will have a better understanding of the progress and current condition of the pharmaceutical industry.
The following political factors affect the pharmaceutical industry.
All countries have a certain framework regarding the pharmaceutical industry. This includes safety standards, certifications, and drug-related laws. While in many countries these laws are not so strict, in not so developed countries they are quite harsh and do not allow the pharmaceutical industry to progress.
The pharmaceutical industry consists of various large corporations. And the global level of their distribution and marketing along with the regulatory framework makes it difficult for newcomers to enter the market. This shows strict competition within the market as well as provides a larger industry persona since most of the brands are established.
Many countries along with the United States are creating laws that place strict control on pricing of drugs. This has caused hindrance to the growth of the industry. However, there are also populist demands of cheaper drugs for lower classes of society. Many pharmaceutical companies are facing major losses, and further fall in prices may force them to quit.
Please find the major economic factors affect pharmaceutical industry.
Growth in Individual Income
The general trend of household spending is definitely increasing and they spend a large part of it towards the pharmaceutical industry. Purchase of drugs has become more common than ever and one of the primary causes is that people can now own drugs that were previously of a high price.
Since R&D is at an all-time high thanks to the tremendous growth in technology, many new drugs are being introduced into the market. As a result of this people are purchasing these drugs and providing further growth to the industry. We expect the release of more such drugs in the near future.
As the drug prices are slashed by governmental regulations, pharmaceutical companies are having to cut down on their production cost. This is a major downtrend for the condition of the pharmaceutical industry. However, it is expected that the global economy will flourish in the coming decade allowing these companies to expand and take back the market.
The following three social factors affect pharmaceutical industry.
The current population features people of older generation in a large number. This means the number of sick people is higher than ever. This has placed a high amount of pressure on the pharmaceutical industry leading to its growth. However, when this particular generation passes away there is expected to be a downfall in the demand of various drugs.
Obesity is a larger factor than ever before. The last few decades witnessed rapid changes in the global diet style, and this has led to obesity in a large part of the population. In most developed countries obesity is almost an epidemic, and this will soon be the condition in developing countries as well. The rapid growth in obesity rates has led to the requirement for many drugs and allowed those particular sectors of the pharmaceutical industry to grow.
Monitoring one’s own health has become a trend of the current generation. While this may lead to lesser requirement of doctors and general physicians, people are now consuming more drugs than ever. However, exercising and fitness trends are also leading to lesser requirement for drugs as they lead to healthier lifestyle without the need for drugs.
Below are the two major technological factors that can affect the pharmaceutical industry.
Growth in the Biotech Industry
Biotechnology allows the decoding of animal and plant aspects to help humanitarian causes. It has a large part to play in the creation of drugs and the current growth in this industry is producing many new medicines and also developing new methods to make cheaper alternatives. There are high expectations from the biotech industry to grow even further and constantly fuel the growth of the pharmaceutical industry.
Marketing has come a long way from its origins. Now pharmaceutical companies are able to market their products directly to the consumers. This has led to consumers purchasing more drugs and creating demand for more consumer drugs.
Strong legislation and cyber security are the two main legal factors of pharma industry.
Frauds in the healthcare and pharmaceutical sector is quite common. This is why most governments have placed strict laws that audit the growth of these companies. As a result, pharmaceutical companies have to be careful to meet all the governmental requirements while operating.
Pharmaceutical companies are now largely data-based. Hence, they need to ensure protection from cyber threats. If a company is open to cyber threats their customers might not trust their products and services.
Following are the environmental factors of pharma sector.
Manufacturing drugs leave a large carbon footprint. And with the current environmental concerns, demands for regulation of pharmaceutical waste has become a major concern for these companies. Most of them are large businesses and are expected to meet highly stipulated environmental regulations.
Alongside regulating their own carbon footprint these companies often take part in donating for environmental causes. As a result, the newcomers are also expected to take part in such activities, and this makes the market more stringent.
These are the primary factors affecting the current pharmaceutical industry on a global scale. While there are various factors such as growth in purchasing power and technological innovations are fueling its growth, factors such as strict regulations and health-conscious lifestyles are leading to its downfall.