In a year of transition, global pharmaceutical sales will grow 5-6 percent to over US$735 billion in 2008, compared with 6-7 per cent in 2007, driven by the declining costs of drug treatment in major therapy areas, increased uncertainty over safety, pricing and market access, and intellectual property issues. There will also be a shift in growth from the top seven markets to emerging markets, and from primary care-driven to specialty care-driven drugs. Pharmaceutical players will be required to change their game plan in line with these evolving dynamics in order to stay ahead. This is according to the latest IMS Health Global Pharmaceutical Market and Therapy Forecast.
Record low growth for the US
In the U.S and Europe's top five markets, growth of 4-5 per cent is expected - an all time low for the U.S. - while Japan will see an even smaller increase of 1-2 percent. Among the factors driving this anticipated performance in these markets are a levelling-off of growth from the introduction of the Medicare Part D prescription drug benefit in the US; patent expiration of branded products, and an associated increase in the use of lower-cost generics; intensified payer pressure to control costs and limit access to certain treatments; and heightened safety scrutiny and healthcare legislation that is slowing, and in some cases halting, the introduction of new medicines.
Increased contribution from emerging markets
By contrast, the seven "pharmerging" markets of China, Brazil, Mexico, South Korea, India, Turkey and Russia will experience growth of 12-13 percent to reach $85-90 billion, driven by greater access to generic and innovative new medicines as primary care improves and becomes more available in rural areas, and as more people take out private health insurance.
Says Murray Aitken, Senior Vice President, Healthcare Insight at IMS, "In several respects, 2008 marks an important inflection point for the global pharmaceutical market. For the first time, the seven largest markets will contribute just half of overall pharmaceutical growth, while seven emerging markets will contribute nearly 25 percent of growth worldwide."
Generics continue to grow
The growth of generic medicines, at 14-15 percent, will be a key market dynamic in 2008 as payers continue to encourage their use through various means - including requirements for pharmacists, substitution check boxes on prescriptions, no-pay and co-pay provisions and budget limits.
In Europe, greater use of generics will be driven by new government contracting initiatives in Germany, and educational programmes in Spain and Italy. In the U.S., generics are expected to account for more than two-thirds of all prescriptions written. These factors, combined with loss of market exclusivity for leading products such as Risperdal®, Fosamax®, Topamax®, Lamictal® and Depakote®, in one or more major markets around the world, will see generics grow to more than $70 billion in 2008.
Innovative specialty products on the rise
As the impact of established pharmaceuticals losing patent protection accelerates, there will be a decline in the size of the US$370-380 billion audited market for primary care-driven drugs. Value growth will be limited to areas of unmet need, with most growth in specialist-driven classes (such as oncology and biotech), that are not as constrained by cost pressures. Overall, the specialist-driven market is forecast to grow 14-15 percent to US$295-305 billion next year. Says Aitken, " In the coming year, biopharmaceutical and generics companies will more aggressively adjust their business models to manage through these inflections, capturing new opportunities in this challenging market environment."
In 2008, up to 29 innovative new medicines will be launched, 80 percent of which will be primarily prescribed by specialists. These include new oncology drugs for treating melanoma and acute myeloid leukemia. Sales of products used in the treatment of oncology are expected to exceed US$45 billion in value in 2008, contributing nearly 17 percent of the audited market growth. IMS anticipates an increased willingness by payers and drug manufacturers in this area to enter into "payment for results" arrangements. This comes on the back of an expected rise in the use of evidence to support the value of medicines which will see pharmaceutical companies, governments and other payers implement more sophisticated economic analyses to understand the impact of pharmacotherapies on healthcare budgets worldwide.
Greater uncertainty around safety issues
Throughout 2008, IMS expects that independent bodies will conduct more meta-analyses of broadly used drugs and that risk will be assessed not only on scientific evidence, but also according to the views of legislators and juries. At this point, the FDA and the European Medicines Agency (EMEA) are both focusing on glitazones, ADHD and erythropoietins. The FDA is also investigating proton pump inhibitors, bisphosphonates for osteoporosis and related disorders, and non-prescription cough and cold medicines. IMS anticipates more limited claims for newly approved medicines, the application of more "black box" warnings on labels, calls for more clinical evidence by regulators, and slower approvals. Overall, this raises the level of uncertainty that companies face in making products available to patients.
IP rights challenged on multiple fronts
Intellectual property issues under review in 2008 could potentially have significant long-term effects on patent-holders. The issue of compulsory licensing by nations, court rulings on composition of matter and process patents, granting of patents in India, enforcement of intellectual property rights in China, and the reform of patent laws in the U.S. and Europe will all play out to some extent over the course of the following year. Each of these areas adds uncertainty to the fundamental model underpinning the R&D-based pharmaceutical industry.
Key watch-outs in major markets
Events to watch in some of the key markets include:
U.S.
- Ending of the Medicare Part D honeymoon, and increase in price/volume pressure
- Significant impact of global patent losses, with 5.3 percent of audited 2007 sales at risk
- Continued impact of safety issues as the FDA acquires more power over marketed products.
Japan
- Continued cost containment initiatives from the government, via incentives for prescribing generics and biennial price cuts.
Germany
- Increased demand for generics, stemming from new substitution rules
- New reference prices and rebate agreements that will further limit price growth
- Electronic patient cards
- Rise in parallel imports
United Kingdom
- Uptake of biosimilars
- Possible revision of the Pharmaceutical Price Regulation Scheme and changes to pricing of generic and branded generic products
- Increased level of parallel trade
- Continued pressure for generic prescribing
- Changes to distribution routes
- Growing power of practice-based commissioning groups (PBCs)
Italy
- Mixed success for therapeutic reference pricing, which is being implemented regionally
- New pricing system which will cut prices only for non-innovative products
- Further deregulation of retail pharmacies
Spain
- Pharmacies selling over-the-counter medications online, following the passage of a new e-pharmacy legislation
- Reimbursement levels based on innovation and therapeutic benefit
Therapeutic classes
Among the top drug classes in terms of absolute growth will be oncologics, anti-diabetics, angiotensin II antagonists, respiratory agents and anti-psychotics. Sales of anti-diabetics are forecast to reach US$19-23 billion in 2008 with 9-10 percent growth, driven by an aging population and an increase in the underlying prevalence of Type II diabetes. The year will also see the availability of new, long-acting insulins.
Angiotensin II antagonists will continue to experience strong growth of 10-11 percent in all countries. Sales of anti-psychotics will reach US$17-21 billion at 5-6 percent growth. Additionally, anti-psychotics will have the highest generic exposure in 2008 among the specialist-driven classes.
Implications
The dynamics at play in 2008 will clearly indicate a transitional period for the marketplace. To keep abreast of the changes, companies will need to act swiftly to reinvent themselves. Getting the basics right will be critical - including sizing the sales force appropriately for the portfolio of the future, optimizing total commercial spend, getting ahead of payer moves and planning for fresh challenges in pricing, safety and intellectual property protection. Success will hinge on their ability to develop product profiles that demonstrate and communicate the value of medicines and to engage all stakeholders.
"Today, commercial strategies and tactics are being re-assessed to better align with future opportunities, while portfolio strategies are being adjusted to capture growth in emerging markets and reflect shifts in product values," notes Aitken.
"In this market environment, building relationships directly with patients as they become better educated and take a more active role in their own healthcare also is essential. And the industry must continue to engage the broader healthcare community in a rational and positive dialogue about the delivery of higher-quality healthcare to patients at lower cost."
The widening gap between performance in mature markets and that of pharmerging markets will be the impetus for pharmaceutical companies to make meaningful changes throughout their operations-from shifting their sales and market expenditures and adopting new practices in launch excellence to revising their portfolio strategies and pursuing profitable growth in pharmerging markets.
View the Executive briefing November 29th
About the IMS 2008 Global Pharmaceutical Market and Therapy Forecast
The 2008 forecast for market and therapy performance is based on extensive analyses by IMS consulting and forecasting experts. It uses IMS Market Prognosis, a strategic market forecasting publication, and IMS Therapy Forecaster, a unique forecasting system based on detailed quantitative and qualitative methodologies. Combined, these two tools deliver the most accurate and statistically robust insight into pharmaceutical and healthcare trends in the world’s largest and most important emerging markets.
The forecasts take full account of key issues impacting the pharmaceutical and healthcare industries. Additional factors that may affect overall growth include major safety events resulting in product withdrawal or prescribing restrictions; shifts in regulatory approval standards from their current levels; the application of sudden cuts to drug spending levels; and public health crises. Growth is measured in constant dollars to avoid the influence of currency exchange rates; sales are calculated at the ex-manufacturer level.