Cannibalization of drug in pharmaceutical industry

Cannibalization: while estimating demand forecast for a product if you drug is taking significant share from your existing product that is known as cannibalization.
It could be active cannibalization or passive cannibalization.
Active cannibalization is when you by will move patients from old product to new product. There can be multiple ways to do that for example you can remove your current product from the market and introduce a new product. Active cannibalization of drugs requires marketing and promotional efforts to physicians, pharmacist and healthcare professionals.
Passive cannibalization involves when patients on your old product by will switch to new drug by their choice. During passive cannibalization companies usually don’t discontinue their old medicine from the market
Forecasting medicine demand is very tricky in this case because sometimes new innovative medication doesn’t suit patients so if patient tend to move back to old medicine or drug.
Mainly cannibalization is used as line extension strategy for in-market medicine. Cannibalization in the pharmaceutical industry is used to introduce new formulation example moving patients form 3 dose a drug to replace with one dose a drug.
Cannibalization is also a drug product lifecycle management strategy.
  1. Companies can increase the price of a new product
  2.  To extend patient protection
  3.  To have market exclusivity

What is demand forecasting

Demand forecasting is done to predict future demand for product needs to be manufactured or how many clicks I will get on my website. Basically its anticipation of how much market consumption will be for the product or service in both controlled and non-controlled scenarios.
Units demand forecasting predicts future requirement and need of product mostly based on prevailing trends and historic events.
Sales demand forecasting help corporations assess the need of their product and maintain a proper storage inventory. This helps to avoid overstock cost and out of stock problems.
Mainly used by big firms. In a small business, people know my heart from their personal experience how much they need for next month or next year.
Why product demand forecasting is done, because the manager, a business owner would like to accurately estimate what is the potential of business or product. This make understand where our product is standing in the market in comparison to competitor.
Revenue forecasting based on demand will let you figure out what you will sell and when you will sell it. You can have a clear idea of what to produce and when to produce finally when to ship.
So you don’t overproduce to avoid extra inventory cost or under produce – end up losing some sale and most importantly customer. In sum, demand estimation will help you drive sales and reduce cost and optimize inventory.
Comment, what do you think demand forecasting is and how do you do it in your business?

What is Budget and Forecast



Budget are the numbers to achieve target
Forecast tell what can happen based on certain events predicted or foreseen
Budget is planned events
Forecast is done to predict events that may or may not happen in future
Budget is formal plan
Forecast are informal plans with in organization
Budget is prepared before forecasting and budget is prepared after reviewing strategic plan of organization
Forecasting of units is done before budget exercise
Budget is used to control the organization, and a reliable finalized forecast
Forecast is anticipation of future sales based on events
Budget preparation is done to plan next financial year
Forecast can be monthly, yearly, quarterly. forecast prediction numbers can vary from time to time
Budget is need to anticipate revenues and expenses for next year
Forecasting is done to predict demand and sales
Done before ending of current financial year
Forecasting is ongoing process, done through the year for existing products or new product launch
Budget is assessment done to allocate resources
Forecasting is planning and projecting for non-linear, unexpected or seasonal anomalies.
Budget guide on how much to spend
Forecast help in understand unforeseen opportunity or problems on the horizon
Mostly budget numbers are decided by Top management in organization and once published, organization stick to budget numbers – these number are locked, no scope of  revisiting numbers
Forecast numbers are flexible, company use forecast to tack every month in comparison to their budget target
Budget include, detailed labor, operating expense, revenue, marketing, capital expenditure and factory planning and done at cost center level for next 12 months or longer
Forecast are comparably less granular or detailed.
Forecasting help companies analyze 1) sales are coming faster or slower, 2) any significant change/ event in industry or market place, 3) are expenses are higher or lower
Mainly expected revenue and expense is projected
Forecasting help company understand are they meeting Budget target

In most cases you will find budget numbers, forecast numbers and actual numbers from market will not match.

Feel free to Comments below any business forecasting related topic you would like to have more detail in my future post
Tell your experience how budget and forecast is defined in your organization.