Saturday, June 11, 2016

Blue Ocean and Specialty Medicine

Our week 5’s article, “Blue Ocean Strategy”, is certainly interesting and compelling. It illustrated many strategies for a successful business, which includes 1) create uncontested market space; 2) make the competition irrelevant; 3) create and capture new demand; 4) break the value/cost trade-off; and 5)align the whole system of a company’s activities in pursuit of differentiation and low cost.  By reading blue story, I assume that the ability whether a Blue Ocean creation rapidly overwhelms a market could be the key to succeed. I am in pharmaceutical industry and there are many examples of Blue Ocean creation in different disease areas. One of the very successful one is the specialty drug companies such as Genzyme, Horizon Pharam.

Specialty drug are broadly refer to those generally described as prescription drugs that are difficult to manufacture and require special handling or administration with limited distribution and target a narrow group of chronic diseases, Because of these, many giant pharmaceutical companies do not get involved in much because of the narrow market.  For example in 2014, only 1% of all prescriptions written were for specialty drugs [1]. Thus the specialty drug market provides opportunities for small and mid-size companies that create uncontested market.

For example, Horizon Pharam, a specialty company was a small company. But the managers developed strategies to create uncontested market space by identifying, developing, acquiring, and commercializing medicines for the treatment of arthritis, pain, inflammatory, and/or orphan diseases in the United States and internationally.  In short 10 years, the company lead this market in those disease and achieved an annual revenue of 1 billion. 


No doubt Horizon Pharam is a successful story, but bearing in mind that not all of blue ocean creation will not always work. Valeant Pharmaceuticals Intl Inc is one of the examples of failure. In order to increase revenue, it expands its business rapidly in a short two year by borrowing a huge loan of 30 billion. It tried to break the value/cost trade-off but failed to do so.  Although Valeant created new market, the loan put it in a very danger position [2]. Having written to this, I have to say that points in this article are good and blue ocean strategies have some a lot of merit. For any business, developing strategies have apparent benefits and potential risks.  As a company, managers should evaluate those risks to ensure a business successful. 

[1]http://www.bcbsm.com/index/health-insurance-help/faqs/plan-types/pharmacy/what-are-specialty-drugs.html
[2] http://www.bloomberg.com/quote/VRX:CN

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