Clinical Trials Industry - A Sector analysis
... of several years (in the case FDA requires more clarification), the company may begin to market and distribute the drug. This completes the clinical trials process. Phase IV After the drug comes into the market, the company must continue to perform observational studies to evaluate the safety and toxicity profile of the drug on an ongoing basis. The company also evaluates the use of the drug for conditions other than the ones targeted by the studies. Any promising results will initiate further clinical trials to widen the potential market of the drug. Supply Chain The stages of a clinical trial business process are depicted in figure below7 Planning: This stage involves planning for the study protocol and forecasting. Forecasting includes estimated of drugs, materials, resources and equipment required during the clinical trials and also to plan for contingencies to avoid delays. Manufacturing and packaging: Involves manufacturing of drugs, devices, labeling and packaging, inventory management. Quality Assurance: Manufacturing, labeling, packaging and inventory systems meet many standard quality assurance requirements Distribution and sites: This involves shipping materials to the sites and investigators administering the drugs to patients during the conduct of the protocols. Reconciliation: Involves returns of unused or unusable commercial products. Reconciliation and accountability contribute to assessments of patient compliance, the degree of which can influence the reliability of the clinical data. Situation Analysis Industry Analysis Some of the key factors affecting the industry have been categorized into internal and external factors Internal Factors „X Highly profitable market attracting new entrants „X Legislation supporting generic drugs „X Growth of global work processing „X Mergers and acquisitions and consolidation of services „X Collaborative and research partnerships „X Information systems for Electronic data capture and supply chain processing „X Patents held by existing players „X Established brands and distribution channels „X Huge R&D investment required „X Huge financial and capital resources required „X Regulations to increase patient recruitment in trials External Factors „X Low awareness among the general masses about clinical trials „X Misconceptions about clinical trials „X Political pressure to lower prices „X Regulations imposed by FDA and other regulatory bodies regarding the conduct of the trials „X Delay in the approval of drug applications leading to reduced profits „X Innovation in bio-technology resulting in discovery of new compounds „X Innovation in nano-technology leading to invention of new equipments „X Innovation in communications technology Competitive Analysis (Five Forces) Porter¡¦s model looks at the competitive arena in which an industry operates and describes five basic competitive forces that directly impact on how successfully an industry operates. Bargaining power of suppliers Suppliers for this industry can be the providers of raw materials and intermediates, the manufacturing and production plants, overseas head offices, local co-marketing partners, third party suppliers who supply finished products. They also include the labeling and packaging companies, shipping and distribution companies, service providers, contract research organizations, site management offices who provide clinical trial services. Large number of suppliers, cut throat competition within the supplier industry and standardization of the clinical trial processes, low switching costs, the internet technology etc factors in reducing the bargaining power of the suppliers. The cost of labor, high quality of goods/services required by the industry and the use of technology are some factors that have the potential to alter the bargaining power of the suppliers. Study planning and forecasting, reporting and analytical, drug accountability and reconciliation services tend to be highly skilled services and has the potential to increase the bargaining power. However the availability of information systems and competition in the industry tends to offset this power. Patient recruitment agencies also form a part of the suppliers group for the clinical trials industry. Due to the low awareness of clinical trials among the masses and the requirement of a decent population size for the trials especially the phase 3 trials, these agencies hold a high bargaining power. To summarize the bargaining power of the suppliers can be deemed as low to medium strength Bargaining power of buyers: For the clinical trial industry, the buyers are FDA, IRB, DSMB, regulatory bodies, patients, healthy volunteers, their family members, hospitals, pharmacists etc. The bargaining power of the regulatory bodies is very high since their approval is required for the conduct of the trials. The bargaining power is only slightly offset in case of drugs targeting conditions that do not have a promising therapeutic cure available. For common drugs the switching costs are low and hence the bargaining power of the consumers is high. However drugs promising new therapeutic cures increase the bargaining power of the industries sponsoring clinical trials. Also the government and health authorities consistently seek price reductions To summarize the bargaining power of the buyers are very high. Threat of new entrants: In the clinical trial industry, there are many barriers of entry for a new entrant that prevents of slows their arrival. The barriers to entry include huge capital and financial resources required, patents, regulatory standards, existing preferred arrangements within distribution channels, established products, brands and relationships, R&D, high switching costs in terms of employee skills required etc. In the clinical trial industry, the barriers to entry are high. Companies have significant R&D and manufacturing capabilities that are hard to replicate; they have patents to protect their products and they invariably have big marketing budgets designed to protect their brands. However the clinical trial industry is expected to be one of the fast growing sectors and is expected to generate a lot of revenue in the coming years. This may attract the new entrants who have huge financial resources at their disposal to set up their infrastructure or form collaborative partnerships with existing players or the supply side industry players. As a result the threat of new entrants is of low to medium strength Threat of substitutes: Substitutes can be in the form of products, technology etc. Substitute products include generic brands that form substitute for original products, devices that can substitute for pharmacological treatments. Internet technology and information systems are being used to conduct e-clinical trials and are being used to substitute many components of the clinical trials process. One of the factors that raises the threat level is government policies and legislation that favors generic drug manufacturers. The threat of substitutes is of low to medium strength Competitive rivalry between existing players: There is not much competitive rivalry in the industry since the industry is highly fragmented. Also the regulatory and patent policies keeps into check a lot of competition till the life of the patent. However there is intense competition for drugs whose patents has expired and for new therapeutic cures. Outsourcing in the clinical trials industry and the use of technology is further bringing down the cost and renders the players more competitive. The rivalry takes the form of exclusive partnerships and collaborations, race to complete clinical trials, accrual of more patients, race to find new compounds, aggressive marketing tactics and advertising battles etc. The competitive rivalry can be summarized to be of medium strength Industry strategies Strategies in action The past few years have seen aggressive mergers and acquisitions among pharmaceutical companies as well as site management organizations and contract research organizations. In addition bio technology companies have come to the forefront of the pharmaceutical industry and with the maturation of the outsourcing process, trial management has become a global issue. Pharmaceutical companies continuously increase spending on research and development and the trial industry players are improving trial efficiencies through improved quality, consistency, emerging markets, regulatory harmonization, research partnerships, and human subject legislation. As the players became larger they began consolidating services by diversifying into global trial managers, providing most of the services required in the supply chain. Also with the maturation of the outsourcing processes and the emergence of global services company with strong track record and innovation, many companies are running their clinical trial operations in large facilities across multiple regions. The clinical trial industry is advancing through global expansion, process improvement, and innovative technology and processes. Tools for planning, forecasting, modeling and managing clinical trials have been developed and improved, thus accelerating patient enrollment, reducing wastage and delays. ...