A PESTLE Analysis for the Pharmaceutical Industry

PESTLE Analysis

It never ceases to amaze me why so many businesses fail to take the time to look at the macro and the micro environments when completing their business plans and strategies. These external forces will play a big part in shaping the final outcome of the ultimate corporate achievement. Yet, most managers focus only on internal factors and it is fair to say that sales growth and profits remain high on their agenda.

The macro environment tends to have a long term impact and requires extensive research. Couple this with the fact that many managers are over worked and under resourced and we begin to see why the process is often not completed. There is no published evidence to confirm this hypothesis, just anecdotal hearsay.

The remainder of this article will illustrate an example of a Macro or PESTLE analysis for the pharmaceutical industry. It is set at a very general level but it can be used as a template or adapted to be more specific if required:

Political

There is now growing political focus and pressure on healthcare authorities across the world. This means that governments will be looking for savings across the board. Some of the questions the industry should ask are:

  • What pressures will be put on pricing?
  • What services will be cut?
  • Will the same selection of drugs be available to everyone?

In addition to this, could there be more harmonization of healthcare systems across Europe or the USA? What impact will reforms have on insurance models?

Economic

The global economic crisis still exists yet government reports still show that the spend on healthcare per capital continues to grow. Will the current healthcare models exist tomorrow? The growth in homecare (as seen in the Nutrition sector) demonstrates how nursing services have moved to the private sector and have become a key business offering.

The reduction in consumer disposable income will have an impact on those countries using health insurance models particularly where part payment is required.

These economic pressures are seeing an increased growth in strategic buying groups who are forcing down prices.

Increased pressure from shareholders has caused a consolidation of the industry: more mergers and acquisitions will take place over the coming years.

Social / Culture

The increasing aging population offers a range of opportunities and threats to the pharmaceutical industry. The trick will be to capitalise on the opportunities.

There is also the problem of the increasing obesity amongst the population and its associated health risks.

Patients and home carers are becoming more informed. Their expectations have changed and they have become more demanding. Public activism has also increased through the harnessing of new social networking technologies. How can pharmaceutical companies get closer to consumers without over stepping the regulatory boundaries?

Technological

Technological advancements will create new business prospects both in terms of new therapy systems and service provisions. The online opportunities will see the growth in:

  • New info and Communications technologies.
  • Social Media for Healthcare.
  • Customized Treatments.
  • Direct to Patient Advertising.
  • Direct to patient communications.

Legislation

The pharmaceutical industry has many regulatory and legislative restrictions. There is also a growing culture of litigation in many countries. The evolution of the internet is also stretching the legislative boundaries with patient’s demanding more rights in their healthcare programmes.

Environmental

There is a growing environmental agenda and the key stake holders are now becoming more aware of the need for businesses to be more proactive in this field. Pharma companies need to see how their business and marketing plans link in with the environmental issues. There is also an opportunity to incorporate it within their Corporate Social Responsibility programmes. Marketing and new product development should identify eco opportunities to promote as well.

The information above illustrates just a fraction of the likely macro factors involved in the pharmaceutical industry. A better way to summarise it would be in a table:

Macro Analysis

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Dr Alan Shaw is a Senior Lecturer and Marketing consultant focusing on a range of sectors. His main interests are in strategy development, social marketing, digital marketing, advertising, consumer behaviour and marketing application.

31 thoughts on “A PESTLE Analysis for the Pharmaceutical Industry

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  10. Thanks. This is extremely helpful and general enough to research current status quo.

    I’m new to the Pharma industry and researching it to promote information and analytic capability (incl data) to make better decisions across the life cycle – R&D to Patent Expiry.

    Do you by any chance have a competitive analysis / industry attractiveness analysis on Pharma. That will be greatly appreciated.

    If I can help in any way through my line of work, please let me know.

    Thanks,

    Darin

  11. Hi Darin,

    Thanks for the comment, in terms of a competitive analysis / industry attractiveness analysis, I haven’t done a generic summary as yet. It is not as easy as the PESTLE review because you should really start to focus on specific areas (the conditions / therapies). Do you have any of these in mind yet?

    Regards

    Alan

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