The Pharmaceutical Industry: A Business Opportunity for Spas?

 

In previous posts, we have written about the current strain of national healthcare systems around the world, and the development of a synergy between spas and hospitals. This time, we are focusing on a new synergy that our industry can forge with another important player of the health field: The pharmaceutical industry.

This post explores the current scenario of the pharmaceutical industry and the approach this field is taking to deal with the challenges they are facing, which could ultimately create a new and interesting business opportunity for the spa industry. We firmly believe, all actors involved in health and wellbeing now need to see what they can do and offer in order to increase the quality of life of their consumers.

 

The Crisis of The Pharmaceutical Industry

Just like hospitals, the pharmaceutical industry is also facing its own crisis. According to ‘Fight or Flight,’ a recent survey elaborated by Roland Berger Strategy Consultants, “65% of the companies surveyed believe that the pharmaceutical industry is facing a strategic crisis”. Stephan Danner, a pharmaceutical expert, states that this crisis is the result of “public cost containment measures, difficult market access as well as massive patent expiries”.

Although the overall performance of the pharmaceutical industry is still strong, the 2011 CMR International Pharmaceutical R&D Factbook highlights a significant decrease in the production of new drugs. Along those lines, the ‘Fight or Flight’ report states that over US$ 400 billion of market capitalisation has been “lost over the past 10 years among innovative pharma companies”.

In addition to this, big pharmaceutical companies still rely heavily on revenue generated by well established products, a serious risk considering that “over the next three years (2012-2014) more than 110 products will lose patent exclusivity in the US’’. In other words, this means that “more than half of the industry’s sales going off-patent” within this period of time. The financial crisis and pressures on lower drug prices are also creating additional problems for the industry’s overall performance.

 

Focusing on Diversification

In this context, diversification has recently gained popularity within the pharmaceutical industry as an effective strategy to deal with the current crisis. According to the ‘Fight or Flight’ survey, “67% of pharma executives see diversification as a potential way forward”. Considering the lost market capitalisation we mentioned above, for the first time in history the financial community supports a strategy based on diversification for the pharmaceutical industry.

The Roland Berger study identifies three dimensions of diversification: the de-risk path, the innovation path and the integration path. At the moment, the conservative de-risk path seems to be the favourite one among pharma companies. Along those lines, “78% of executives perceive generics to be the most important area of diversification followed by consumer health (50%) and vaccines (42%)”.

 

A Business Opportunity for The Spa Industry

As we have discussed, there is an imminent crisis affecting the pharmaceutical industry today. In spite of this, this field is already facing this crisis with a new strategy based on diversification. As stated by Wayne Schnarr, a healthcare consultant, in a previous post on the Cross-Border Bio Tech Blog, “Expansion and diversification could also involve other types of drug products and healthcare activities”. The ‘Fight or Flight’ also states that in order to create value from diversification, pharmaceutical companies must leverage existing capabilities and forge new synergies.

It is precisely from this new approach in the pharmaceutical field that the spa industry can develop a new business opportunity. A good step forward would be for spas, hospitals and pharmaceutical companies to join forces as all industries need to innovate and change their business strategies.

By Sonal

Sonal Uberoi creates and delivers smarter spas around the world. Spas and hotel groups hire Sonal to help them design, set up and manage their wellness businesses. Her finance background and worldwide operations experience in the spa, wellness and hospitality sectors make Sonal the go-to expert for business optimisation solutions. Connect with Sonal on LinkedIn www.linkedin.com/in/sonaluberoi.

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