The life sciences industry: An introduction
The life sciences industry: An introduction

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The life sciences industry: An introduction

1 What does ‘life sciences’ mean?

During the twentieth century, particularly in its second half, the provision of human healthcare changed significantly because of scientific and technological developments. Before then, medical practice was limited and scarcely differentiated from other trades; in fact, barbers often acted as surgeons or dentists. Throughout the 1900s, there were major advances in most countries in sanitation, nutrition, vaccination, surgery, medicines and medical devices. At the same time, there was an increasing provision of specialist facilities (hospitals and clinics) and a greatly increased supply of trained healthcare specialists (doctors, nurses, dentists, etc.) as well as great progress in the availability of useful tools (such as drugs, diagnostics, medical devices and equipment).

As a result of all these advances, life expectancy increased sharply in many countries. By the late twentieth century, economically developed countries typically devoted around 10 per cent of GDP to healthcare and this was tending to increase year-on-year. On the other hand, less developed countries were (and still are) seldom able to spend even that proportion of their much smaller incomes.

Thus a large sector, which includes profit-making companies, charities and government-funded organisations, has grown up under this health banner and you need to be clear about what this sector entails. One way of starting to impose structure on the healthcare sector is to carry out a stakeholder analysis.

Activity 1

Compile a list of stakeholders that you believe are relevant to the life sciences sector. Organise your list to show groups of similar or related players and identify the key relationships among these groups.

You might return to this analysis as you work through the course and occasionally add to or refine it.


You probably identified at least the patient, medical professionals (doctors, nurses, radiologists, etc.) and suppliers (drug companies and manufacturers of scalpels, bandages, diagnostic tests, electrocardiograph machines, etc.) You may also have included the government and insurers in your list. However, a full analysis has to take account of complex issues such as the following.

  • What is meant by the term ‘patient’? Is a patient defined only by illness or should we recognise that everyone is a potential patient? Is the aim of a healthcare system to treat sick people or to prevent them from becoming sick, or a combination of these? What is the role of patient pressure groups? Many patients regard themselves as perfectly fit but need vaccination for travel or a medical check-up for a job, for example.

  • If you included the Government in your stakeholder list, what is its role? Is it there as a source of funds for basic research, or as a regulator approving new products, or as a purchaser of drugs and devices, or as a provider of healthcare through owning hospitals, or as a custodian of competition between companies, or as a guardian of the movement of goods between countries?

  • What is the role of international agencies such as the World Health Organization?

  • Key industries such as the pharmaceutical industry are obvious but would you include suppliers of more conventional goods to the healthcare system such as blankets and sinks? What about the industries that supply the pharmaceutical industry with its raw materials or machinery?

These examples suggest that stakeholder analysis is not a simple activity and requires considerable thought to organise the information. You may also have realised that the exact shape of a stakeholder analysis might well look very different depending on the purpose behind it. An analysis that suitably describes the situation in the USA may not necessarily be the same as one describing the situation in Germany or France or in a developing country such as Thailand.

Similarly, analysing the situation from different perspectives will give alternative views. Consider the four perspectives of:

  • a patient (‘I'm sick and want to be better’);

  • a pharmaceutical company (wants to make sales to earn a satisfactory return on invested capital);

  • a doctor specialising in a particular disease (wants to do research to find improved methods of caring for patients in the future);

  • a hospital administrator whose competence is assessed by a non-clinical measure (such as the length of a hospital's waiting list).

Each perspective will lead to a different view of the healthcare system. Yet, in many (if not all) cases, there is a mutual interdependence between certain stakeholders. In fact, pharmaceutical companies and doctors need sick people although, as far as the patient is concerned, being one is not an attractive prospect. Doctors want patients in hospitals as long as is needed to treat them; administrators want them treated quickly so that other patients can be admitted.

Activity 2

Critically reappraise your stakeholder analysis. Look at it freshly from the four different perspectives suggested above and, for now, in the context of your own country (recognising, for consideration later, that there are alternative country contexts that, as a manager, you may need to be aware of).

In constructing this course, we made certain assumptions about the boundaries of the relevant industry and, therefore, the relevance of the material that should be included. Clearly, many of the players discussed above would be included in any analysis of healthcare and, therefore, enter the issues of management in healthcare and the life sciences. However, in the following peripheral areas the boundary definition is not so clear cut.

  • Should a discussion and debate about the development and marketing of drugs that are prescribed by doctors also include over-the-counter (OTC) medicines that you can buy from a pharmacist (although the products available OTC may differ greatly between countries)?

  • Should products which could be called nutraceuticals, supplements and cosmeceuticals be included? (If you are unfamiliar with these categories, you should find definitions of them.)

  • What should be our attitude to acupuncture, homoeopathy, herbal medicines, and so on?

  • When considering devices, should healthcare products include some everyday items used in hospitals (pencils, oxygen cylinders, telephones and computers) or should they be excluded because they have no obvious medical function in the same way that scalpels and syringes do? Yet, heart-disease monitoring systems use telephones and/or the internet to report a patient's condition to a doctor at regular intervals.

We need to think very clearly about definitions here. One approach is to note that new medicines can only be marketed (in most countries) if they have been through a formal approval process. In general, the manufacturer must demonstrate that the proposed product is safe and efficacious. To demonstrate the last attribute, extensive trials must be carried out in which the agent is carefully compared with a placebo or with the best existing standard of care. In this course, we shall adopt as a boundary test the idea that any substance that has passed such tests can be assumed to be a medicine (or drug); such drugs can be made available to a patient by a doctor writing a prescription. Later, after an extended history of safe use, some drugs may be granted a more relaxed regime and be approved for sale as OTC products. Thus, when discussing the markets for drugs, the research and development (R&D) process that has led to them and the strategic management issues faced by their manufacturers, we mean products that have been subjected to such tests.

So, one way of defining the boundaries of what we mean by the healthcare sector is to focus on organisations involved in the supply (and purchase) of healthcare goods and services that are subject to some form of regulation. Clearly, this includes industries involved in manufacturing drugs and devices (discovery, development and delivery) and those within healthcare systems concerned with decisions relating to their purchase – including the patient.

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