Macro-economic factors influencing the architectural business model shift in the pharmaceutical industry

Introduction: Technological innovations, new regulations, increasing costs of drug productions and
new demands are only few key drivers of a projected alternation in the pharmaceutical industry and
its underlying business model. Despite significant articles in the press, there is little medical and
economic evidence on the rationale driving the transformation from the traditional Research &
Development (R&D) model to new alternative business models, such as Mergers & Acquisitions
(M&A). The purpose of this review is to understand the macro-economic factors responsible for the
revolution of the pharmaceutical business model, by understanding the needs, desires, new
behavioral patterns, but also challenges within the industry. Considering these changes will be the
key to possessing a competitive advantage over the market players.
Areas covered: Existing literature on new macro-economic factors changing the pharmaceutical
landscape has been reviewed to present a clear image of the current market environment.
Expert commentary: Literature and media sources show that pharmaceutical companies are facing
an architectural alteration in their business model, with more M&A deals and collaborations
headlining the papers. Although Q1 2016 did show a major slowdown in M&A deals by volume since
2013 (with deal cancellations of Pfizer and Allergan, or the downfall of Valeant) pharmaceutical
analysts remain confident that this shortfall was a consequence of the equity market volatility. It
seems likely that the shift to an M&A model will become apparent during the remainder of 2016,
with deal announcements such as Abbott Laboratories, AbbVie and Sanofi worth USD 45billion [1]
showing the appetite of big pharma companies to shift from the fully vertical integrated business
model to more horizontal business models.