5 Strategies to Expand Your Pharma Company

The pharmaceutical industry plays a significant role in America's economy, accounting for roughly 3.2% of the total U.S. GDP.¹

It is also an essential player on an international scale. As of 2023, the U.S. market accounts for 43.7% of the global pharmaceutical market.² America's dominance within this sector is partly thanks to its support systems for development and commercialization, which includes an intellectual property system that rewards innovation and minimal barriers to market.³

With experts predicting that the global pharmaceutical industry will have a compound annual growth rate (CAGR) of 7.41% until 2026, organizations must work on expansion strategies to keep pace.⁴ Here are five strategies to expand your pharmaceutical company:

5 Strategies for Expansion

1. Research and Development (R&D) Investment 

In a market where the product landscape is driven by change, it is no wonder that research and development (R&D) investment is a standard expansion method. Pharmaceutical companies must adapt to stay ahead of the curve as innovations and new modalities, like RNA drugs and gene therapies, bring a new wave of growth to the development sector.⁵⁶ Allocating resources towards R&D activities assists with discovering new drugs and improvements for existing products while pushing pharma businesses ahead of the competition.

R&D expenditures in the U.S. by members of the Pharmaceutical Research and Manufacturers Association (PhRMA) have risen from $2.6 billion in 1983 to $79.6 billion in 2021.⁷

While R&D spending has increased, so has the number of new drugs being approved each year. For example, the number of FDA-approved drugs from 2010 to 2019 was 60% higher than the previous decade.⁸ And this dedication to developing new and improved drugs is continuing. As of July 2023, the U.S. is host to roughly 141,783 registered studies and 20,695 recruiting studies,⁹ and the FDA has already approved 29 new drugs this year.¹⁰

Investing in R&D can lead to breakthrough innovations and expand product portfolios, though it requires thoughtful planning. Throwing a larger and larger budget towards R&D is not guaranteed to translate into more significant growth rates. According to an analysis by Brookings, the effect of R&D spending on the number of new drugs is moderate at best.¹¹ It is also an expensive endeavor — the average cost of developing new drugs in 2022 was $2.3 billion.¹² So while strategically-driven R&D is essential, it is not the only strategy worth investing in for expansion.

2. Market Diversification 

Exploring new and emerging markets can help pharma businesses discover areas to expand their reach. New markets present fresh opportunities and new target customers away from stagnated growth in more well-developed or established markets. A clean slate for patents is one such opportunity, as the expiration of patents within existing markets increases the availability of less expensive generic drugs, driving down potential revenue.¹³

Businesses can start this exploration by identifying regions with high demand for pharmaceutical products. Then establish a presence using a market entry strategy that considers factors such as regulatory requirements, local competition and distribution channels. Regulatory compliance will not only facilitate market entry and product registration but help build and maintain the trust of patients and healthcare providers. This may be a time to re-evaluate the company's marketing strategy, as pharmaceutical marketing efforts are important in establishing connections, building brand awareness and providing product education to new target audiences, whether healthcare professionals, patients or others in the industry.¹⁴

According to an Insider Intelligence report, U.S. Healthcare and Pharma spending on digital marketing is projected to reach nearly $20 billion in 2024.¹⁵

Another opportunity for market diversification is entering specialty markets, which can be done by identifying specific therapeutic areas or patient populations with high unmet medical needs. By developing specialized drugs or targeted therapies, pharma businesses can establish a competitive advantage and capture a niche market segment. An added benefit of this strategy is that it provides a very focused application of resources, thereby limiting excessive expenditures.   

3. Strategic Partnerships 

Forming strategic partnerships with other pharmaceutical companies, CROs, research institutions, or academia can provide access to new markets, expertise and resources. Collaborating on research projects, sharing technology or working on the co-development of new drugs can reduce costs and timelines while sharing the burden of risks and the rewards.¹⁶

Collaborative opportunities in the pharmaceutical sector can come in different forms, from short-term associations to long-term investments. Strategic partnerships and alliances are preferred options for development goals that require more than short-term associations, as they provide a stable solution that is easier to establish or dissolve than a full merger.¹⁷

A McKinsey & Company report states that over 50% of companies plan to enhance their partnership capabilities using service agreements, joint ventures and ecosystems.¹⁸

Strategic partnerships can be advantageous in many areas, from development to distribution. For example, companies established these collaborative strategies during the pandemic to accelerate the COVID-19 vaccine development process.¹⁹ Entering into licensing agreements with other pharmaceutical companies can grant greater access to additional products and technologies. Additionally, establishing distribution agreements with reliable partners will present routes for reaching new markets and channels.

Another application of strategic partnerships would be when pharma businesses connect with companies like imaware for biomarker testing solutions. imaware's partners gain access to a complete at-home health testing infrastructure and can build custom biomarker panels. Such a partnership may enable pharma companies to expand their research and clinical trial capabilities to include things like decentralized clinical trial models or a hybrid alternative.

4. Mergers and Acquisitions (M&A) 

While strategic partnerships may be the best option in certain situations, mergers and acquisitions (M&A) are still viable for exploring more permanent expansion opportunities. Mergers and acquisitions can have many advantages similar to strategic partnerships, such as a more extensive customer reach, access to new products and increased market share from eliminated duplicative work streams.²⁰ M&A activities also foster cost synergies through significant financial or operational gains from complementary businesses.²¹

According to GlobalData's Deals Database, $64.4 billion worth of M&A deals were announced in the U.S. pharmaceutical industry in the first quarter of 2023.²²

On the development side, many pharma businesses use mergers and acquisitions as sources of innovation — many new pharmaceutical ideas come from smaller creative companies, which are often acquired and used to produce a new finalized pharmaceutical product.²³ As development strategies change, pharma businesses may realign their portfolios by acquiring more relevant ventures and divesting assets, like expiring patents, that no longer meet business needs.²⁴

Mergers and acquisitions can benefit global expansion by providing other avenues for entry. However, businesses interested in new international markets should thoroughly analyze the market growth potential and challenges related to regulatory, cultural and other market differences for acting. A successful merger or acquisition plan should create ample growth opportunities for your pharma business.

5. Digital Transformation 

Digital technologies grow pharma businesses by streamlining processes, enhancing efficiency, providing smart insights and improving the customer experience. Technology innovations have rapidly increased over the last decade, producing valuable tools like smart devices and wearables, artificial intelligence (AI), software as a service (SaaS) and virtual reality. And while many markets fully embraced these changes, others were more hesitant. That is, until the pandemic. The COVID-19 pandemic resulted in what is estimated to be a six- to ten-year acceleration in digital transformation across various enterprises.²⁵²⁶

Embracing new technology can include creating portfolios specific to digital innovations or investing in systems that will enhance internal operations and broaden customer engagement. Implementing electronic health records (EHR) can improve efficiency and enhance patient care by supporting research, recruitment and general data management.²⁷ Incorporating systems that increase remote research capabilities, like telemedicine and at-home testing, can do much for clinical trials by broadening the potential patient base and making patient participation easier. 

According to a survey among product development executives, some of the top benefits of adopting a digital model are improved operational efficiency (40%), continuing to meet changing expectations (35%) and improved quality of new products (26%).²⁸

Digitalization fosters growth by improving data analytics, accelerating timelines, creating greater flexibility, and increasing control.²⁹ Pharma businesses that successfully complete key digital initiatives will continue to grow their capabilities and competitive advantage.³⁰

Summary

The pharma industry is competitive, expensive, and constantly evolving, requiring leaders to embrace multiple approaches to form a well-rounded expansion plan. For example, mergers and acquisitions can bring much-needed innovations to research and development efforts, while strategic partnerships can help facilitate market diversification. At the same time, new technology may be used to influence every aspect of the business, from internal processes and marketing strategy to portfolio investments and patient relationships. The key to making your expansion plan successful is analyzing trends, building a solid internal team and tailoring each strategy to fit the unique needs of your pharma company. 

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