Drivers of market share of generic drugs in South Africa

Date
2012-10-04
Authors
Maharaj, Lenisha
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Abstract
South Africa’s high burden of disease has resulted in a high demand for medicines, resulting in rising costs of healthcare in the country. For this reason, the generic sector has been identified as a sector with marked potential for growth, and is currently driving the growth in the pharmaceutical industry (BusinessMonitorInternational, 2011). The attractiveness of the generic market has changed its competitive landscape, challenging generic market players. Rising competition from new entrants, mainly Indian generic companies, the impact of brand defence strategies from authorised generics, and the scale and scope of generic industry giants, has put increased pressure on market share and profitability of generic companies (Karwal, 2006). Prior research identified market share to be one of the most important indicators of an organisations success, linking strongly into financial performance, customer retention and customer satisfaction, and is correlated with company profitability (Laverty, 2001).A clear understanding of the drivers of market share is thus critical in marketing planning Previous research in the South African generic market has identified a number of drivers of market share for generic drugs, among which being first to market, price, and reimbursement were cited as the most important drivers (Naidoo, 2006). Clone have also been identified as an important driver of market share, due to their advantage of entering a market earlier than independent generics (Hollis, 2003). The research problem is to evaluate these drivers of market share, to ascertain their consistency in driving market share across the entire generic market. The research adopted a triangulation methodology (Jack, 2006).First, a pseudo quantitative study was conducted, which evaluated available market share data for each driver, to ascertain whether the driver’s impact on market share was consistent across the generic market. This was followed by a qualitative study that involved face-to-face interviews with five industry experts to gain insights into the results of the quantitative study. The key findings for the research was that being first to market and clones are strong drivers of market share of generic drugs, but are not consistent drivers, in that they did not result in market leadership in at least 90% of the markets evaluated. Price and reimbursement were also not considered consistent drivers of market share. Price was only associated with market leadership in 5% of the markets evaluated, while reimbursement appeared to be a hygiene factor rather than a driver of market share, as all companies within each market seem to set their pricing at the reference price to ensure reimbursement.. The research also identified other drivers of market share, including company reputation, effective distribution channel strategy, vertical integration and sales forces relationships. In the South African generic market, there appears to be no one factor that consistently drives market share, but rather a successful, simultaneous manipulation of a number of drivers within the company’s value chain.
Description
MBA thesis - WBS
Keywords
Generic medicine, Pharmaceuticals, Market share, Medicine
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