The prescription drug industry is an oligopolistic market where a few firms dominate the industry and entry into the market by new firms is generally considered arduous. The orphan drug market had been even more difficult to enter, as the population of potential customers of any new drugs was very small, yet to develop the drugs still required significant R&D investment despite government subsidies. Genzyme found significant success by entering the orphan market, exploiting the lack of competition. However, its success had drawn competition, leading to key management decisions on how to sustain its position.
Entry Barriers
Entry barriers such as high cost structures, patent protection, pricing pressures (post-exclusivity), regulatory approval process, and legal restrictions form the important sources that make it extremely difficult for new entrants into the prescription drug market. Heavy spending in R&D, as well as in Sales, Marketing, and Manufacturing, required that prescription drug firms possess significant capital to survive—let alone be profitable. The path to market was also treacherous. Clinical trials spanned multiple years and were extremely expensive to execute, and also
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As an innovator with strong scientific knowledge base and technology infrastructure, Genzyme has the brand and reputation to attract a lot of other drug manufacturers for partnerships. Genzyme can also significantly improve its brand among patients, doctors, insurance companies, and regulators to better position itself during crises. This could expand Genzyme’s presence and position Genzyme as the rare disease