Salix Pharmaceuticals located in Raleigh, North Carolina, licenses and markets innovative medicines to treat gastroenterology disorders. The US healthcare professionals use many of Salix products such as COLAZOL, XIFAXAN550, APRISO, GIAZO, RELISTOR, OSMOPREP, SOLESTA, FULYZAQ, and METOZOLV ODT for gastroenterology related disease treatments (Salix Pharmaceutical, Inc., n.d.).
The unique approach of Salix in providing innovative medicines, which is different from other Pharmaceuticals companies, is the use of the method search and development instead of research and development." Salix, a Nasdaq registered public company with the current market capitalization of $4.125 billion (Yahoo Finance, n.d.), in 1989, started the business only with $9,500 investments (Swayne, Duncan, & Ginter, 2008, p. 453). The strategic decision taken by the founders, Randy Hamilton and Lorin Johnson, at the beginning of the establishment of the company has brought todays tremendous success.
Before the establishment of Salix, both Randy and Lorin were the employees of California Biotechnology (CalBio). Randy, at the age of 35, was the Manager of Business Development for CalBio, and Lorin, at the age of 37, was the Chief Scientist of CalBio. After being caught in the management change of CalBio, both Lorin and Randy decided to start their own business. Both of them were left with the choices between research and development, and search and development. Randy preferred the option research and development, but Lorin dismissed it explaining that it required raising a lot of money from the investors. Their strategy was to begin worldwide search for products that are in advanced developed stage, but require marketing. Randy and Lorin realized that their goal was to secure marketing right of products that had successfully crossed the road of rigorous researches. Lorins knowledge of inflammatory bowel disease and Randys knowledge of pharmaceutical industries helped them to identify the first product, balslazide disodium. A London-based company, Biorex, researched this product, and Lorin identified that the product would be promising in the treatment of gastroenterology disorders. Randy and Lorin were able to convince Biorex, and in 1991, obtained the global right of marketing balsalazide disodium. The brand name of the product in the USA is COLAZOL, and it is used to treat Ulcerative Colitis, and inflammatory bowel disease. The FDA approved this medicine in July 2000; however, before it, the medicine was merchandised in Europe through Astra, a Swedish company, and Menarini, an Italian company. In the spring of 2000, Shire Pharmaceutical, a UK company bought from Salix the right to sell the product in Europe excluding the southern part of the continent. Randy and Lorin were able to cross the initial financial hurdles with the help of John Chappell, a former chairman of SmithKline and Mark Schlesinger, MD, a noted gastroenterologist. In addition to Chappells and Schlesingers $150,000 initial investment, Randy and Lorin were able raise additional $10 million by registering the company on the Toronto Stock Exchange in 1996. In the same year, the entrepreneurs were able to obtain a license for rifaximin from Alfa Wasserman. Rifaximin treats travelers diarrhea in adults and children over 12 years of age. In 2002, Salix obtained a license for granulated version of mesalamine from Dr. Falk Pharma. The drug is used to treat ulcerative colitis that affects any part of the colon.
The above story of success of Salix Pharmaceutical, Inc. describes the insight of strategic views of two innovators: Randy Hamilton and Lorin Johnson. They have proven that in 1898, they selected a road, which needed less travel time to achieve success than any other option. After serving many years in the biotechnology industry, they were able to identify that instead of developing their own research-based products, they could develop and market products of other companies. In 2005, Salix had four FDA approved products and the company was still growing. According to the financial news of September 09, 2013, Leerink Swann, the healthcare investment bank, upgraded Salix Pharmaceuticals. The firm raised its price target for shares to $80 from $73 (They fly on the Wall, n.d.). Today, Salix is a reputed company in the health care industry with strategic partners in the different continents of the world.
Answer to question 1. The statement, Healthcare has become an increasingly competitive market perhaps is true; however, the system has registered unsatisfactory performance in both costs and quality over many years (Porter & Teisberg, n.d.). American healthcare is owned and operated by the private sector businesses. One would expect relentless improvement in processes and methods to drive down costs, and steady rise of quality of the product and services from a private sector business. Healthcare costs, in the last 40 years, have increased at a higher rate than inflation or the economy as a whole (Medical News Today, 2012). According to the Institute of Medicine (IoM), an estimated $750 billion was wasted nationwide on administration costs, fraud, pointless services, and some other problems (Medical News Today, 2012). Despite the efforts, the rising costs cannot be explained by the improvements in quality; medical services are rationed, many patients receive care that lags accepted procedures and standard (Porter & Teisberg, n.d.). The outcomes of the US healthcare are inconceivable in a well-functioning market. According to Harvard Business Review, competition is the root of the problem with the U.S. health care performance, and it needs to be redefined (Porter & Teisberg, n.d.).
Answer to question 2. The goal of competition in healthcare is to increase the value at the level of individual disease; however, those, who are involved in health care, have entered into the kinds of competition that adversely impact the delivery of healthcare to the patient. Among them the following ones may be mentioned (Porter & Teisberg, n.d.); (1) the annual competition among health plans for sign up subscribers, (2) providers competition to be included in a health plan networks by giving large discounts to payers and employers that have large patient populations, (3) the squabble over who pays.