The majorities are headquartered in the U.S., but several are based in Western Europe particularly Switzerland, Germany, and France. The recent trend toward consolidation, a trend that seems to be gaining momentum with the merger between Glaxo Wellcome and SmithKline Beecham. Known as GlaxoSmithKline. One driver for such mergers is that patents are expiring on a significant number of blockbuster drugs such as Prozac and Zantac. When patents expire, the market is open to competition from lower-priced generic versions of the drugs.
Sales can drop, leaving drug companies scrambling to pick up the slack.
While some look to consolidate resources through a merger, others believe that signing pacts with other companies is the best way to shore up their product pipelines. The pharmaceutical industry consists of numerous players, all of whom hold only a small market share of the industry. Figure 1 is an industry snapshot from Fortune Global 500 list which ranks companies in terms of global revenues. Vertical integration occurs when a company is involved in all levels of production for a product, from gathering the raw materials to distributing the finished goods. Horizontal integration occurs when a business expands in size and scope.