Магистерский диплом на тему New product introduction in the OTC pharmaceutical market: risk management

Содержание:

INTRODUCTION 3
CHAPTER 1.THEORETICAL ASPECTS OF RISK MANAGEMENT 5
1.1. Risk management system and types of risks. 5
1.2. Special considerations regarding risk management for the launch of OTC brand 15
1.3. Methods of risks identification and analysis 17
CHAPTER 2. KEY SPECIFIC FEATURES OF RISK MANAGEMENT 23
2.1. Industry-specific features of risk management 23
2.2. Risk management considerations for the pharmaceutical category of anti-allergic drugs (external perspective) 28
2.3. Risk management considerations for the flixonase brand launch 42
CHAPTER 3. RECOMMENDATIONS ON THE RISK MANAGEMENT 47
3.1. Recommendations on the risk management for the comparable brand launches in the OTC industry 47
3.2. Substantiation of the economical effectiveness of the implementation of the recommendations on the comparable cases 63
3.3. Methodological recommendations for the implementation of the practice in comparable situations 81
CONCLUSION 93
BIBLIOGRAPHY 96

Введение:

Over-the-counter pharmaceuticals in Russia is one on the most sizeable and profitable B2C markets, attaining 773 billion rubles revenue in 2018 [13]; no wonder this segment of the economy attracts numerous companies, both local and international. As the market is increasingly saturating, and the competition intensifies, the regular modus operandi is challenged, therefore key players have to continuously introduce incremental innovation to protect their market shares and sustain revenue flow. This process is strongly linked to the overarching trend of industry transition to the innovation economy, where the human capital, as well as the knowledge and information, are the drivers of economic growth.
In 2018 alone 1023 new products were launched in the market, and only 11 of them obtained share of 0,5% [13]. This is a clear manifestation of escalated complexity and new imperative of thorough diligence regarding risks of the launches, as they absorb various company’s resources, from money and time – all the way to talent and intellectual property. The situation is aggravated by the fixed character of the investments, as OTC market is notable for the necessity of upfront spending directed advertising and sales promo, reflecting in revenue stream only during second year of launch, and providing definitely positive cash-flow in year three. Mentioned considerations render this study interesting both from theoretical and practical standpoints, as we aim to cover theoretical basis of risk management tools and best practice, and highlight what is most applicable to the launch of OTC brands, basing on the example from experience of the introduction of anti-allergy nasal spray Flixonase in Russia in 2016-2017.
Thus, the subject being analyzed is the launch of Flixonase brand in Russia, performed by GlaxoSmithKline company (GSK) in 2016-2017, and the topic of research is the management of entrepreneurial risks at the stage of new product introduction.
The purpose of this study is to provide a thorough overview of the existing practice of risk management at the stage of brand launch in OTC market and develop high-level recommendations and approach for practical adjustments of the proposed actions to the real examples of future launches.
Our key tasks to perform would be:
• overview existing scientific literature on the topic;
• evaluate aspects of risk management specific to the pharmaceutical industry and to the brand launches;
• review measures of risk management basing on the example of Flixonase launch;
• provide recommendations for the future cases of new product introduction in OTC market.
The paper is structured in the following way: title page, table of contents, introduction, text main body, bibliography, appendices.

Заключение:

In the first part of the work, risk management has been reviewed and its types. Evaluation aspects of risk management specific to the pharmaceutical industry and to the brand launches have been described. In the second part of the work was made a review measures of risk management basing on the example of Flixonase launch In the third part were provided recommendations for the future cases of new product introduction in OTC market. The purpose of this study is to provide a thorough overview of the existing practice of risk management at the stage of brand launch in OTC market and develop high-level recommendations and approach for practical adjustments of the proposed actions to the real examples of future launches.
U.S, Europe and Russia firms play a key role in the world pharmaceutical industry. Eight out of fifteen leaders of this market are headquartered in the United States. The United States represents the largest and the most attractive pharmaceutical market in the world. The majority of the largest U.S. companies are not segment and product diversified. Some of them receive almost all of their revenues from the sales of pharmaceutical products, and others receive over half of their revenues from them. Other products with minor revenue shares include: medical devices, consumer, nutritional and animal healthcare products.
Americans pay more for brand name prescriptions than anyone else in the world, due to hefty prices associated with “research and development” of drugs. The university research shows that the U.S. pharmaceutical industry spends almost double amount on promotion as it does on research and development. The aggressive advertisement helps to boost sales. The newest trends point to the facts that pharmaceutical sales and marketing (out of which the most do not have the adequate pharmaceutical and medical background) in many instances manage to persuade the physicians to accept and offer their more expensive medications, even though these new medications do not produce any better medical outcomes in comparison with the previously utilized cheaper ones. The cost for pharmaceutical products, in the environment of very limited government price regulation, which is reported among the largest among the developed countries, remains one of the major problems fuelling aggregate health care cost inflation.
Pharmaceutical companies need a strategic plan for innovating their corporate cultures, creating a new business models and building new capabilities as future scenarios unfold and the external environment changes. If anything, the challenges that pharmaceutical companies face seem to be mounting, especially in the U.S., the biggest market for prescription drugs. Generic drugs now account for more than 75 percent of all prescriptions in the U.S., versus 56 percent in 2005. Pharmaceutical firms have fewer resources, having lost 150,000 jobs, many of them in sales. The Food and Drug Administration (FDA) as the U.S. Government agency has become much more restrictive and control-oriented as far as safety is concerned. Many of the specialized drug treatments that are coming to market — priced at $30,000 a year and higher — confront stiff resistance from powerful intermediaries between doctors and patients, the insurance companies, that are questioning their value and refusing to pay. In present time the pharmaceutical industry is entering the stochastic periods, but this period is not expected to last for a long period of time. Cyclically, it is expected to be replaced by the deterministic period which will enable the firms to leave behind the old ways of strategic planning and pursue a new, more effective strategies.
For U.S. and other big pharmaceutical companies in the world, the challenge will be to make strategic actions, first in order to survive today, and second to position themselves for the next phases of deterministic growth. When this transition occurs, the U.S. based pharmaceutical companies will be very differently shaped enterprises in comparison from what they look like today.
In conclusion, the conclusions and proposals arising from the logic and results of the study are formulated.

Фрагмент текста работы:

Risk management is everyday process in any business, even if it’s performed without systematic approach. At the same time, despite we practically participate in the process on daily basis, many professionals struggle to define it. Traditionally, risk management is described as the practice of identification of potential risks, evaluation, prioritization and development of mitigation plan. All in all, despite the fact that risk management is an intrinsic part of business management, it consists a vast field of knowledge that is still scattered in models, approaches, separate.
There are several aspects of risk most commonly reviewed: strategic, compliance, operational, financial, reputational. [45]
Strategic risk.
Everyone knows that a successful business needs a comprehensive, well-thought-out business plan. However, it’s also an unpleasant fact that things are changing and your best plans can sometimes look very outdated, very quickly.
This is a strategic risk. This is the risk that your company’s strategy will become less effective, and as a result, your company will fight to achieve its goals. This may be due to technological changes, the emergence of a new powerful competitor in the market, shifts in consumer demand, sharp jumps in the cost of raw materials or other large-scale changes.
History is littered with examples of companies that have faced strategic risk. Some have successfully adapted, others have not.
A classic example is Kodak, which had such a dominant position in the photography market that when one of its own engineers invented the digital camera in 1975, it saw innovation as a threat to its core business model and was unable to develop it.
It’s easy to say in hindsight, of course, but if Kodak had analyzed the strategic risk more carefully, it would have concluded that someone else would eventually start producing digital cameras, so it was better for Kodak to cannibalize its own business than for another company. Failure to adapt to strategic risk led to Kodak’s bankruptcy. It has now come out of bankruptcy as a much smaller company specializing in enterprise imaging solutions, but if it had done so sooner, it could have maintained its dominance. [6]
Before strategic risk should not be catastrophic. Think of Xerox, which has become synonymous with the only extremely successful Xerox product. The development of laser printing was a strategic risk to Xerox’s position, but unlike Kodak, it was able to adapt to the new technology and change its business model. Laser printing has become a multi-billion dollar business area of Xerox, and the company has survived the strategic risk. [48]
Compliance Risk.
This is not the type of risk that companies are willing to take, though, laws are constantly changing and there is always a probability that you will face additional regulations in the future. In addition, with the expansion of your own business you may be required to comply with the new rules, which previously you did not apply. For example, let’s say you run an organic farm in California, and sell your products in grocery stores across the U.S. things are going so well that you decide to expand into Europe and start selling there.
That’s great, but you also carry a significant compliance risk. European countries have their own food safety regulations, labeling regulations and more. Also, if you set up a European subsidiary to handle all of this, you will need to comply with local accounting and tax regulations. Meeting all of these additional regulatory requirements can result in significant costs to your business. [46]
Even if your business is not expanding geographically, you can still incur a new compliance risk by simply expanding your product line. For example, your California farm starts producing wine in addition to food. Selling alcohol opens up a whole range of new, potentially expensive rules for you. Finally, even if your business remains unchanged, you could get hit with new rules at any time. Perhaps a new data protection rule requires you to beef up your website’s security, for example. Or employee safety regulations mean you need to invest in new, safer equipment in your factory. Or perhaps you’ve unwittingly been breaking a rule and have to pay a fine. All of these things involve costs and present a compliance risk to your business. In extreme cases, a compliance risk can also affect your business’s future, becoming a strategic risk too. Think of tobacco companies facing new advertising restrictions, for example, or the late-1990s online music-sharing services that were sued for copyright infringement and were unable to stay in business. We are breaking these risks into different categories, but they often overlap.
Operational Risk.
So far, we have been looking at risks stemming from external events. But your own company is also a source of risk. Operational risk refers to an unexpected failure in your company’s day-to-day operations. It could be a technical failure, like a server outage, or your people or processes could cause it.
In some cases, operational risk has more than one cause. For example, consider the risk that one of your employees writes the wrong amount on a check, paying out $100,000 instead of $10,000 from your account [3].
That is a “people” failure, but also a “process” failure. It could have been prevented by having a more secure payment process, for example having a second member of staff authorize every major payment, or using an electronic system that would flag unusual amounts for review. In some cases, operational risk can also stem from events outside your control, such as a natural disaster, or a power cut, or a problem with your website host. Anything that interrupts your company’s core operations comes under the category of operational risk. [38, p.4]
While the events themselves can seem quite small compared with the large strategic risks we talked about earlier, operational risks can still have a big impact on your company. Not only is there the cost of fixing the problem, but operational issues can also prevent customer orders from being delivered or make it impossible to contact you, resulting in a loss of revenue and damage to your reputation.
Financial Risk.