System Dynamics Modeling on the Impact of Management Policies on Business Performance in Generic Pharmaceutical Manufacturing Industry

Abstract

The Japanese government is promoting the generic medicines to reduce medical expenses, therefore generic pharmaceutical manufacturing companies such as SAWAI PHARMACEUTICAL, NICHI-IKO PHARMACEUTICAL, and TOWA PHARMACEUTICAL have been growing rapidly. In this article, we develop a dynamic model that can explain the impact of management policies on business performance in the generic pharmaceutical industry. From surveys we make three assumptions as follows: (1) Under growing market, aggressive investment leads to profits and is enable to further reinvestment, (2) Low price strategy is effective in the short term but not in the long term due to the legal price revisions, (3) The importance of additional value increases with the spread of generic medicines. Then, we validate the assumptions by comparing the simulation results with actual business performance.