Healthcare Assignment Investigating Growth of Australian Pharmaceutical Industry

Question

Task: Your Task:
Students are to write a 1500-word report on healthcare assignment that analyses an industry segment of the Australian Healthcare sector.

Assessment Description:
This assessment provides students with an opportunity to research and analyze a particular healthcare segment to gain an initial insight into the opportunities and challenges that currently exist for organisations that deliver healthcare services in Australia in that segment. Students will present that research and analysis in the form of a formal report which requires student to adhere to a report structure including an Executive Summary.

Students are to investigate an industry segment of the Australia healthcare sector and examine and evaluate its model of operations and growth over the last ten years.

Answer

Executive Summary
In terms of this report on healthcare assignment, the pharmaceuticals can be stated to a non-prescription as well as prescription drugs, and these medicines are purchased by individuals without or with prescription of doctors and are highly safe to consume for treating various illnesses. The Australian pharmaceutical industry has experienced steady and significant growth over the last decade and is expected to 2.1% CAGR growth in the forthcoming years. However, the competition in the market is aggressive due to the main and dominant players including MaynePharma and AbbVie Inc. The major ethical issues faced by the Australian pharmaceutical industry are drug safety and price. Lastly, the trend of the pharmaceutical industry reflects the growth and increasing demands of drugs and therapies for treating chronic diseases such as cancer, diabetes, and the covid-19 crisis.?

Background of the industry
The Australian pharmaceutical industry was treasured at USD 25,250 million in the business year 2020 as well as it is projected to reach USD 28,750 million by the business year 2026, indicating a 2.1% CAGR growth, (Mordorintelligence.com, 2021).The Australian pharmaceuticals market can be segmented by prescriptiontype, ATC or therapeutic class, and drug type. Other than that, the main factors to initiate the growth rate of this particular industry are the increasing load of chronic diseases, the growing geriatric population as well as the increasing investments in R&D expenditurein terms of novel therapeutics in Australia. As indicated by Hinton (2021), over the last 10 years (2011-2020), the pharmaceutical and cosmetic goods retail industry in Australia has reposted to grow significantly with an annual turnover of 2019 of 18.8 billion Australian dollars. Despite the challenges brought by the covid-19 crisis; the multi-billion-dollar pharmaceutical market of Australia has been growing steadily over the past decade. With around 500 pharmacies located across the country, an increase in demand has been experienced throughout 2020.

Main activities
It has been well suggested by Wang and Jie (2020), several biotechnological and pharmaceutical companies had shifted theirattention on research and development departments for identifying new leads for the treatment of diseases. For instance, in January 2021, the covid-19 vaccine developed by BioNTech and Pfizer was approved by the Therapeutic Goods and Administration which contributed towards the healthcare services for the general public in Australia. In addition, the government spentapproximatelyAUD 363 million in R&D activities based on thetreatmentand prevention of novel covid-19 which is projected to accelerate market growth, (Mordorintelligence.com, 2021).Other than that, the increasing load of diabetes has been significant in the country that indicates around 1288300 people suffering from diabetes. Therefore, the companies within the pharmaceutical industry are focusing on developing new solutions for the treatment of chronic diseases that is projected to increase gradually.Hence, with an intense focus on these core activities to prevent and treat chronic diseases and comply with increasing demand, the pharmaceutical sector of Australia has experienced steady and stable growth over the years and is projected to rise in the forthcoming years (Refer to the below figure).

Fig: 1 (Australia’s pharmaceuticalindustry segment summary)
Source: (Mordorintelligence.com, 2021)

An overview of the competitive landscape
The pharmaceutical industry of Australia is aggressively competitive and encompasses several major players. Based on market share, few of the major players have a dominant position in the market. In addition, Mayne Pharma has been the leading pharmaceutical company in Australia with a market capitalization of 564.75 million Australiandollars, (Hinton, 2021). In order to analyse the competitive landscape of Australia’s pharmaceutical industry, Jha and Sharma (2020) suggested the application of Porter’s five forces to identify the influencing factors and profitability.

The threat of New Entry:It is medium as new entrants in the health care services bring innovation which directly puts pressure on existing players to lower pricing strategy and reduce costs while offering new value propositions to the customers.

The Threat of Substitution:It is high as there isa number of substitute products in this industry.
Supplier Power:It is high as there is dominant suppliers’ position in the market which lowers the overall profitability of companies.
Buyer Power:It is high as with the covid-19 pandemic, the economic structure has become vulnerable which indicates the increasing demand of customers for discounts and offers, (Mulinariet al. 2020).
Competitive Rivalry:It is high as the existing players in the industry reflects intense competition which influences pricing and overall profitability of the industry.

Major competitors within the segment
On the other hand, some major players are also making joint ventures and acquisitionsofotherfirms to enhance their position in the market along with market share in the country. However, the major players presently have been dominating the market are Mayne Pharma and AbbVie Inc., as indicated by (Karanges et al. 2020).

The business model of Mayne Pharma
As put forward by Maynepharma.com (2021), the pharmaceutical company Mayne Pharma is has experienced potential growth and success over the past decade due to its portfolio selling approach, channel strategy as well as hybrid brand or generic business model. In terms of its hybrid brand or generic business model, it encompasses three kinds of business models including creator (manufacturing of drugs and therapies), distributor (sells to users), and landlord (owns the product and licenses it to customers). This has offered the organisation growth and a competitive advantage.

The business model ofAbbvie Inc.
On the other hand, AbbVie’s business model offers a competitive advantage due to its patent portfolio structure. As the company spends heavily to innovate new drugs and therapies, it uses a patent portfolio, business model. This assists the company to capitalise the opportunity when one of the competitors loses patent protection, (Visnji, 2019). In addition, the company uses both indirect (Sponsorship programs like CME and offers assistance to advocacy groups) and direct channels (provide product ads in medical journals, detailing the merits of products through field force and invite influencers to promotional meetings) to generate the need and shape the brand.

Industry trends
Overview of the operating conditions
As opined by Ariss et al. (2020), the healthcare expenditure in Australia has been rising and is expected to increase significantly over the next five years. In addition, the Australian Institute of Health and Welfare is expected to spend over AUD 115.5 billion in 2020-2021. Other than that, in the years 2018-2019, the healthcare spending was estimated to be AUD 7,772 per capita which is a potential increase of 8.3% in 2000-2001 which is mutually funded by private and public sources along with individuals. In addition, the increasing rate of diabetic individuals and other chronic diseases including cancer has been highly evident over the past 10 years in Australia, (Vos et al. 2020).

Factors influencing operating conditions
With the covid-19 emergence, the rising demands of drugs in terms of covid-19 treatment have increased extensively. This has been one of the major drivers in increasing spending within the context of health care sectors. The pharmaceutical industry has further experienced 68% funding from the government, 8% from private accounts, and 20% from individuals. In addition, around 2/3rd of the entire healthcare’s fundingisprovided by the Australia’s government, (Parker et al. 2020). On the other hand, the prescription drugs segment has been rising since the year 2000 and has achieved the largest proportion in the year 2020 due to covid-19 treatment and prevention. Hence, this market segment is highly supported by the market growth and increasing demands. Other than that, the focus on new clinical trials as well as technology development has offered investment opportunities for companies in the pharmaceutical industry as the governmentof Australia has declared a new Genomics Health Futures Mission in the business year 2019-2020 with approximately USD 56.6 million funding, (Mulinariet al. 2020). Hence, these factors have been influencing the operating conditions of the particular segment.

Ethical issues faced within the industry
Drug pricing: As stated by Chamsi-Pasha et al. (2020), the pharmaceutical companies can obtain profitsthrough patent laws that are envisioned for promoting social good. However, it can also generateobstinateincentives or fail to sufficientlyincentivize.Although patent protection offers significant rights to sell a group, there can be significant loss or minimal profit margins for these companies in the development of drugs due to stringent patent laws and critical public interest in consuming and procuring these drugs. This means that the companies need to comply with the policies to develop new treatments for humanitarian in terms of affordable pricing. Drug safety: As indicated by Marmat et al. (2020), thereare several ethical and social issues surrounding abuse and use of drugs. These are complex specifically due to conflicting values in terms of social, personal, and religious views concerning drug use within modern societies. Hence, the need to comprehend the values of the system and comply with legal and ethical measures are essential in this industry to solve the issue as it may breach a particular law.

References
Ariss, R.M. and Dowsett, G.W., 2020. Against death: The practice of living with AIDS. Routledge.
Chamsi-Pasha, H., Chamsi-Pasha, M. and Albar, M.A., 2020. Ethical dilemmas in the era of COVID-19. Avicenna Journal of Medicine, 10(3), p.102.
Hinton, T., 2021. Australia: leading pharmaceutical companies on the ASX by market cap 2021 | Statista. [online] Statista. Available at: [Accessed 3 December 2021].

Hinton, T., 2021. Australia: pharmacy and cosmetic goods retail revenue 2020 | Statista. [online] Statista. Available at: [Accessed 3 December 2021].

Jha, R. and Sharma, A., 2020. India’s pharmaceutical industry: Global supply chain and governance in the post-COVID-19 world. Available at SSRN 3622794.
Karanges, E.A., Ting, N., Parker, L., Fabbri, A. and Bero, L., 2020. Pharmaceutical industry payments to leaders of professional medical associations in Australia:'Focus on cardiovascular disease and diabetes'. Australian journal of general practice, 49(3), pp.151-154.
Marmat, G., Jain, P. and Mishra, P.N., 2020. Understanding ethical/unethical behavior in pharmaceutical companies: a literature review.Healthcare assignment International Journal of Pharmaceutical and Healthcare Marketing. Maynepharma.com. 2021. Mayne Pharma Annual Report- 2021. [online] Available at: [Accessed 3 December 2021].
Mordorintelligence.com. 2021. Australia Pharmaceuticals Market | 2021 - 26 | Industry Share, Size, Growth - Mordor Intelligence. [online] Available at: [Accessed 3 December 2021].

Mulinari, S., Vilhelmsson, A., Rickard, E. and Ozieranski, P., 2020. Five years of pharmaceutical industry funding of patient organisations in Sweden: Cross-sectional study of companies, patient organisations and drugs. PloS one, 15(6), p.e0235021.
Parker, L., Brown, A. and Wells, L., 2020. Building trust and transparency: health consumer organisation–pharmaceutical industry relationships. Australian Health Review, 45(3), pp.393-394.
Visnji, M., 2019. How Abbvie Makes Money? Understanding Business Model OfAbbvie - Revenues & Profits. [online] Revenues & Profits. Available at: [Accessed 3 December 2021].
Vos, T., Lim, S.S., Abbafati, C., Abbas, K.M., Abbasi, M., Abbasifard, M., Abbasi-Kangevari, M., Abbastabar, H., Abd-Allah, F., Abdelalim, A. and Abdollahi, M., 2020. Global burden of 369 diseases and injuries in 204 countries and territories, 1990–2019: a systematic analysis for the Global Burden of Disease Study 2019. The Lancet, 396(10258), pp.1204-1222.
Wang, M. and Jie, F., 2020. Managing supply chain uncertainty and risk in the pharmaceutical industry. Health services management research, 33(3), pp.156-164.