Farmacia Similares: Innovating in the Health Industry
Farmacia Similares: innovating in the health industry, in Peng, M. “GLOBAL BUSINESS” 4th ed., to be published by Cengage Learning, Cincinnati, Ohio, copyrighted 2015-2016 Forthcoming
10 Pages Posted: 18 Jan 2015
Date Written: January 15, 2015
Best Laboratories, a Mexican-owned company founded in 1953, concentrated exclusively on the production and supply of generic drugs for Mexican public health institutions, for over four decades. This model had a significant weakness: a single client the government, the government, a lot of competition and low profit margins (see appendix 1). Faced with these challenges, in 1997 Best Laboratories saw a huge opportunity with a change in the law allowing the sale of generic medicine directly to the public (Generic medications are those sold under the name of the active ingredient, in contrast to brand-name drugs which are manufactured worldwide by different pharmaceutical companies for brand-name owners).
At first Best Laboratories tried to sell the generic drugs through private pharmacy chains. However, due to a campaign to discredit generic medicine, existing private pharmacy chains in Mexico refused to sell the generic drugs, and as a result the current distribution channels were of no use to Best Laboratories. This situation motivated them to create their own distribution channels in order to fulfil the needs of the bottom of the pyramid (BOP), by offering cheap generic drugs in direct contrast to the expensive brand-name drugs sold by the current private pharmacy chains. However, the majority of private doctors continued to prescribe brand-name drugs and although the generic medicine was cheaper the fees of the private doctors themselves meant that they were unaffordable for those at the BOP.
Keywords: Bottom of the Pyramid, business models, emerging economies
JEL Classification: L22
Suggested Citation: Suggested Citation