Pharmaceutical Industry | An Analysis of Innovation, Creativity, and Enterprise in Swiss and China
Pharmaceutical Industry in Swiss and China
2. Industry Analysis.
3. Innovation, Creativity, and Enterprise.
3.1 ICT in the Pharmaceutical Industry.
3.1.1 Principles and Processes of Innovation and Creativity in the Swiss and Chinese Pharma Industry
3.1.2 Enterprise in the Swiss and Chinese Pharma Industry.
The report’s objective is to analyze the different aspects of innovation, creativity, and enterprise in the pharmaceutical industry specific to Switzerland and China. The details taken into account in the report span from 1990 to 2012, and data pertaining to this period is in the report.
The present situation of the industry in both countries is taken into view, along with a discussion of the economic positions these industries hold in the global market. An analysis of how and what brought them to their present positions and what is to facilitate the industry in today’s competitive world.
The report follows initially with a brief analysis of the industry in both countries, followed by the principles and processes of ICT that have been or are being planned to be incorporated into the industry and the models of innovation the two countries are presently following specific to the pharmaceutical industry.
2. Industry Analysis
The Swiss pharmaceutical industry is among the world’s top pharmaceutical industries, contributing to a total of 5% of the global share, ranking as the eighth largest chemical and pharmaceutical exporter worldwide. The industry contributes 48% of the total exports, with 2011 figures touching 71 billion CHF (Science Industries, 2012).
Novartis and Haffman-La-Roche are the two large pharmaceutical groups operating from Switzerland; however, the increased dedication towards innovation and research in the Swiss local industry has proved to be a heaven for pharmaceutical companies as besides its home companies, 41 other life sciences companies have also chosen Switzerland as their international headquarter. In contrast, 29 others operate using the land as a regional headquarters (Site Selection for Life Sciences Companies, 2013).
Switzerland is among the six countries that collectively spend 92% of the entire R&D expenditure globally (Zeller, 2004).
According to 2012 sales figures, Swiss pharmaceutical company Novartis stood at the second position in terms of highest sales in the year with the second largest R&D budget at US $9.33 billion, whereas another Swiss company, Roche, according to annual sales, rested at the eighth position; however, the company spends the largest amount on R&D compared to any other country in the world amounting to US $ 10.44 billion (Current Partnering, 2013).
China, being the largest populated country contributing to 20% of the global population, has a pharmaceutical 9ndustry that contributes only 1.5% of the worldwide drug market share. In its 12th healthcare reform in 2011, China dedicated RMB850 billion towards developing its healthcare system (Deloitte, 2011). China has been concentrating on its pharmaceutical industry structure and has experienced an average growth rate of 16.72% in the last few decades; however, the level of operation is still on a small scale. One major hindrance besides other factors in the rapid development of the industry is outdated manufacturing technology, as the sector still needs more innovation and investments in R&D.. Presently, 3,000 pharmaceutical products are being manufactured in China out of 90% are foreign product copies. Only a handful of 5,000 R&D Chinese institutions can compete internationally.
3. Innovation, Creativity, and Enterprise
Innovation, Creativity, and Enterprise (ICT) is the general technology that emerged in the late 80s and gained momentum in the early 90s. ICT refers to the convergence of communication technologies and information technology, termed as ICT. The basic idea behind the ICT concept is to save costs and create value-adding innovations. ICT advances have thus contributed to different industries by reducing the costs of gathering data and storing, processing, retrieving, analyzing, and transmitting all information(Productivity Commission, 2004).
Thus, ICT has also contributed a lot to the pharmaceutical industry worldwide, and we will discuss examples pertaining to the selected countries in this report.
3.1 ICT in the Pharmaceutical Industry
Countries worldwide, especially in Europe, Western World, and some Asian countries in the past few decades, have increasingly invested in R&D, and the ratio of GDP investment is increasing yearly. ICT has increasingly helped the pharmaceutical industry introduce innovation in processes, the structure of organizations, and the end product itself. These improved processes add value to products, improving the quality, convenience, and timeliness for customers or end users, reducing waste and coordination costs, and facilitating specialization and outsourcing. ICT thus offers more effective and efficient output generation from capital and labor inputs (Productivity Commission, 2004).
3.1.1 Principles and Processes of Innovation and Creativity in the Swiss and Chinese Pharma Industry
Innovation goes a long way in the pharmaceutical industry of Switzerland. Especially since pharmaceutical companies hold patents for any new drug or medicine introduced, prohibiting others from producing the same drug using the same process; however, there is room to constitute the same drug using a different approach, method, component, or material. For this, extensive levels of innovation are patenting leaves room for an innovator who can develop the same drug or a new one by introducing a new technique.
As much as pharmaceutical companies need innovation to bag a larger market share, pharmaceutical innovation often results in costly products, which is added on by the further cost marketing of new pharmaceutical products, making the end products for the user financially heavy. Also, due to the patent law in many top pharmaceutical market share holder countries, consumers residing in poor countries are often hurt as these medicines do not reach them (Boldrin & Levine, n.a).
In China’s case, the country lacks the kind of investment needed for R&D, especially in the pharmaceutical industry. Even though the rising global share of Chinese pharmaceutical sales were almost 97% of the chemical products until 2007. It includues pharmaceuticals were generic and roughly only two drugs were domestically developed (Huang, 2013). The government plans to invest mainly in the R&D sector, evident from the figures that state China was the second highest R&D investor in the world in 2011 from number 9 in 2007 (China Bio, 2012).
Many factors are playing their role in promoting innovation in the Chinese pharmaceutical industry today, as the government’s pressure to lower the prices of generic drugs forces domestic producers to shift towards innovative high-priced medicines. To introduce such high-value pharmaceutical products and reduce the process’s development risks, China is planning to look towards the proven in-license technology used in the West. This trend will also motivate and lure international MNCs to invest in the Chinese market. International collaborations and cross-border strategic alliance activity further pave the way for introducing innovative drugs. Novartis, a leading Swiss-based pharmaceutical company, is opening its R&D center in Shanghai, which will further facilitate the innovation process in the industry for both countries. (China Bio, 2012).
Both the Swiss and Chinese pharmaceutical industries are aligned with high potential, with the Swiss industry already enjoying a top position in the global pharmaceutical market while the Chinese industry is rapidly gaining on the way.
3.1.2 Enterprise in the Swiss and Chinese Pharma Industry
The Chinese pharmaceutical market had about 3,500 companies in 2011, compared to 5,000 in 2004. Even though China is a fast-growing pharmaceutical consumption market, the number of local companies is in decline, mainly due to the rising competition. China has been following the imitating innovation method to date to compete with the highly developed and financed industry of the West; however, presently, the government has dedicated itself towards more rapid and accurate innovation processes and is now incorporating cooperative innovation processes, bringing in use the previous researches and methods used in the West and investing in new techniques both in the scientific research area and in academics as well.
The Swiss industry, however, is very much developed, even in the field of R&D, and follows the self-innovation process, adding creativity to the previous cycle and adding more value. The Swiss industry innovates and does not depend on new technology to formulate; instead, it introduces new technologies (Chu & Han, 2008).
The pharmaceutical industry in both countries is at different points regarding ICT. The Swiss industry with the world’s top pharmaceutical companies operating from the government and dedicating one of the most significant R&D expenditures in the field. In contrast, China is increasingly investing in R&D and biosciences as well. However, the local pharma industry in the country has yet to sustain the overall industry growth.
The Swiss pharmaceutical industry is innovative. Presently, its companies are considered the big players in the global market. They are increasingly working towards maintaining this high share and exploring new opportunities for growth. China is way behind compared to Switzerland. However, it is a growing industry as China has the most prominent pharmaceutical product consumption capacity. Previously, China has followed the imitating innovative practices and produced only copies of famous drugs. However, the government has entered into contracts that support collaborative innovation practices. They are using the technologies that Western countries have so successfully applied, China plans to move ahead in the pharmaceutical industry in the years to come.
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