Abstract
This study attempts to analyse the problems that have a risen in the blockbuster model of GlaxoSmithKline and how this company has attempted to diversify itself as a means of maintaining its high profit levels. The study covers patent challenges, shape of the pipeline, as well as share prices in order to come up with a proper analysis of effects of new strategies at GlaxoSmithKline. The paper concludes with a discussion of whether the new strategies that have been adopted by this company are working or not.
For most pharmaceutical companies in the modern world, there has been a reliance on heavily marketing their most popular products in such a manner that they ensured their continued profitability and this has created a situation where these products have become blockbusters. GlaxoSmithKline (GSK) has essentially been heavily reliant on this strategy and this has been to such an extent that its blockbusters have become its biggest revenue-earners. Despite the profitability of this business model, it faces many potential challenges and these put it at risk of becoming obsolete within a few years. This is because market demand will most likely turn towards better drugs while GSK will also be facing the problem of the patents to its blockbusters expiring. There is a need for GSK to develop newer strategies other than blockbusters in order to be able to survive the changing market dynamic once the patents for these drugs have expired.
While the blockbuster strategy at GSK has been so successful in the past, it is nearing a period where it is more likely than not to become obsolete. This is as a result of a diverse number of challenges which have made blockbusters less profitable when compared to the past few decades. Among these challenges is the decline in R&D productivity where only a single compound out of nearly 13 discovered enters the market after clinical trials have been carried out and this is a big blow on pharmaceutical companies such as GSK. Moreover, because of the need to make the public aware of newly discovered drugs that enter the market, it is essential for companies to commercialise it (Brown 1986). This takes increased funding and creates a situation where recent years have seen an increase in the costs of commercialisation for GSK in such a way that the processes of discovering, developing and launching new products have increased substantially (Geddes et al 2007). In addition, in recent years, patents to blockbusters have increasingly been challenged not only by smaller pharmaceutical companies, but also by governments and this has created a situation where GSK has come face to face with serious limits to the revenue potential of its products. The shorter exclusivity periods that have come about as a result of competition has seen companies develop similar yet cheaper drugs than GSK’s blockbusters which have received the approval of numerous governments across the world. This situation has increased pressures on GSK’s patent protections which have increasingly come under attack. It is for this reason that GSK has taken the initiative to adapt to the new business environment because without such adjustments, it might end up suffering serious loses.
