GlaxoSmithKline sells its products worldwide through an extensive network of subsidiaries, licensees and distributors.

The gross profit margins earned on sales of pharmaceutical products are generally higher than those earned on sales of consumer products, reflecting the many risks and uncertainties inherent in developing and marketing pharmaceuticals. These risks include the high level of research and development expenditure required to discover, test and obtain patent protection for new products and the competition from new and generic products.

GlaxoSmithKline’s worldwide business is subject to a number of risks inherent in conducting business in certain countries, including possible nationalisation, expropriation and other restrictive government actions such as capital regulation. In addition, currency fluctuations and other changes in economic conditions occur from time to time, which can have either a favourable or unfavourable effect on trading income. GlaxoSmithKline does not regard these factors as deterrents to further expansion of its international operations. However, the company closely reviews its methods of operation, particularly in developing countries, and develops strategies to respond to changing economic and political conditions.


Marketing and distribution – Pharmaceuticals

An analysis of pharmaceutical sales by geographic region is set out below:

GlaxoSmithKline sells its prescription medicines primarily to wholesale drug distributors, independent and chain retail pharmacies, physicians, hospitals, clinics, government entities and other institutions. These products are ordinarily dispensed to the public by pharmacies through prescriptions written by physicians.

In the USA, the world’s largest pharmaceutical market, the pressure to contain healthcare costs has encouraged the growth of managed care organisations and pharmacy benefit managers. These intermediaries use a range of methods to lower costs, including the substitution of generic products or other cheaper therapies for branded products prescribed by doctors. GlaxoSmithKline contracts with the managed care sector due to its increasing importance as a supplier of healthcare to the community.

In each market, GlaxoSmithKline deploys sales forces of representatives and supporting medical staff to promote its prescription products to medical prescribers and healthcare purchasers through personal visits.

Promotion of GlaxoSmithKline’s products is supplemented by scientific seminars, advertising in medical and other journals, television advertising, the provision of samples, the direct mailing of printed material and information contained on the company’s site on the World Wide Web.

Direct-to-consumer (DTC) advertising is a major component of product marketing in the USA. DTC advertisements are now the primary source of information for patients requesting specific brand name products from their physicians in the USA.

Outside the USA, DTC is either prohibited or has a more limited role in informing patients. In the European Union and in Canada, DTC is currently prohibited. In Australia, the government allow DTC advertising of pharmacy-only products subject to certain safeguards. In New Zealand, DTC is allowed and self regulated by the industry in collaboration with the Advertising Standards Agency. Other markets allow DTC, but to date the impact has been more limited.

In addition to the direct marketing of products by its subsidiaries and associates, GlaxoSmithKline has entered into agreements with other pharmaceutical companies for the co-marketing and co-promotion of its products in many markets.


Marketing and distribution – Consumer Healthcare

The principal markets for Consumer Healthcare’s OTC medicines are the US, the UK, Germany, Australia, Argentina, Italy, Mexico, Japan, South Africa and France. The nutritional drinks business is particularly strong in the UK, Ireland and India, though the range of products is available in other markets. The principal markets for the Oral Care products are the US, Germany and the UK.

OTC products are distributed to retail outlets directly or through wholesalers.

Distribution of oral care and nutritional healthcare products are made through a wide selection of outlets either directly or through wholesalers. The organisation of the selling teams is dependent on the outlet pattern of individual countries.