1. Choose which of Porter’s five forces the following pharmaceutical industry characteristics represent. Use the abbreviations given below to fill in the blanks.
Porter’s Five Forces:
-Threat of substitutes (SUBST)
-Threat of new entrants (NEWE)
-Threats of supplier leverage (SUPPL)
-Threat of buyer leverage (BUYER)
-Threat of rivalry (RIVAL)
1. ________ Few alternatives (healthy lifestyle, herbal medicines) are achievable or as effective.
2. ________ New drugs are covered by patents that may extend for 17-20 years
3. ________ Government funded 63% of U.S. healthcare costs in 2013
4. ________ Most large pharmaceutical firms have large sales forces and manufacturing is tightly regulated by the FDA.
5. ________ New drugs must receive regulatory approval from the FDA
6. ________ The time to develop a new drug can be as long as 10 years
2. Based on the attributes above, would you suggest that the industry has been relatively attractive, neutral, or unattractive? Why?