Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code :BSM0026

Year : 2005

Industry : Health Care

Region : Null

Teaching Note:Not Available

Structured Assignment :Not Available

Introduction:The pharmaceutical industry, the most profitable industry in the world, is reported to be fast losing its core competencies. In 2001, the profit margin on sales for the ten pharmaceutical companies included in the Fortune 500 list was 18.5% while the median return of all other companies in the list was 3.3%. In 2002, the ten drug companies outsmarted the remaining 490 companies in the Fortune list with a profit of $35.9 billion while the combined profit for the rest was $33.7 billion. By 2003, although the returns for the drug companies had fallen to 14.3%, they were still ahead of the median returns of 4.6% of other industries. But the analysts believe that the heydays of the pharma majors might not last for long. Patents worth $30 billion (one-fifth of annual sales in the US alone) would expire by 2008, leaving most of the drug companies without any potential blockbusters in the pipeline. To add to their woes, an onslaught of generic drugs (once the patents expire) is expected to erode their revenues.Under such circumstances, it is felt that the business model that had proved successful for the global pharmaceutical industry in the last decades of the 20th century has been irreparably damaged. Barrie G. James, president of Pharma Strategy Consulting, said, "you can't ride the old business model into the future — it is fast falling apart".

The completion of the Human Genome Project in 2003, unveiling the DNA sequence ofmost human genes, ushered in the science of genomics. With the DNA sequences determination, the genetic profiling of a patient was made possible. It is believed that eventually, with the help of genetic profiling, physicians would be able to determine the genetic profile of a patient, which in turn would allow individualised diagnosis and customised treatment for most of the common diseases. Experts opine that thismethod of treating ailments would be the new businessmodel for the pharmaceutical companies, which have for long relied on blockbuster-drugs model.