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A Tale of Two Markets for Global Pharmaceutical Sales
The global pharmaceutical market can be best described as a market of shifting growth between developed and emerging markets. Although growth in the global pharmaceutical market will rebound over the next five years, the strong spot will continue to be emerging markets as developed markets in the United States, Western Europe, and Japan see relatively weak growth. Growth in generic-drug spending, globally and particularly in emerging markets, will continue to be robust through 2016.
Overview of the global market
Additionally, patent expiries, which will peak in 2012, as well as increased cost-containment actions by payers, will constrain branded-medicine spending growth through 2016, at 0–3%. Developed markets are expected to experience their lowest annual growth this year, at less than 1% or $3 billion, and then rebound to $18–20 billion in annual growth in the 2014–2016 period.
Growth in annual global spending is forecast to more than double by 2016 to as much as $70 billion, up from a $30-billion pace in 2012, driven by volume increases in what IMS terms the “pharmerging” markets and some uptick in spending in developed nations. The “pharmerging” markets are defined by IMS as counties with greater than $1 billion absolute spending growth of more than 2012–2016 and which have gross domestic product per capita of less than $25,000 at purchasing power parity. Using that criteria, China is classified as a Tier-1 country, and Brazil, Russia, and India as Tier-2 countries. Tier 3-countries are Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam.
Growth in developed nations
Despite the highest number of patent expiries in history, spending in the US will grow between $35 billion and $45 billion during the next five years, representing an average annual growth rate of 1-4% although this growth still represents historically low levels. The US share of global pharmaceutical spending will decline from 41% in 2006 to 31% by 2016 due to patent expiries and slower brand growth, according to IMS. In the US, $103 billion, or 44% of 2011 brand spending will shift to generic-drugs through 2016.
In Europe, growth will range from negative 1% to 2% through 2016 due to significant austerity programs and healthcare cost-containment initiatives. This weak growth compares to 3.8% for the period of 2007–2011. The share of global spending by the five major EU markets (Germany, France, United Kingdom, Italy, and Spain) will decline to 13% by 2016 due to slow economic growth and more aggressive cost-containment measures.
The Japanese market is forecast to grow 1–4% annually through 2016, slightly lower than the rate during the prior five years and reflecting biennial price cuts scheduled for 2012, 2014, and 2016. Japan’s share of global pharmaceutical spending is expected to remain at roughly 10% through 2016.
Overall, patent expiries in developed markets will yield a five-year “patent dividend” of $106 billion, reflecting reduced brand spending of $127 billion offset by $21 billion in higher generic-drug spending, according to IMS. Pharma manufacturers will see minimal growth in their branded products through 2016. The market for branded medicines will experience flat to 3% annual growth through 2016 to between $615 billion and $645 billion, up from $596 billion in 2011. In the major developed markets, branded medicine growth will be “severely constrained,” according to IMS, at only $10 billion during the five-year period due to patent expiries, increased cost-containment actions by payers, and modest spending on newly launched products. The pharmerging markets are expected to contribute $25 billion to $30 billion in branded-product growth over the same period. Off-invoice discounts and rebates will offset about $5 billion of global branded medicine growth, according to IMS.
Growth in emerging markets
Rising importance of biologics