Global Pharmaceutical Growth Tempered by Lagging US Market

It looks like 2009 will be a year of increased uncertainty for the global pharmaceutical market. Fundamentals in the US pharmaceutical market are weak as growth is expected to reach recent historic lows during 2008 and 2009. Growth in the US pharmaceutical market is affected by overall economic conditions and the increased penetration of specialty and generic drugs. The outlook for emerging countries is more robust as double-digit growth is projected.

A sobering outlook
The global pharmaceutical market is expected to grow 4.5–5.5% in 2009, a pace similar to that of 2008, according to a recent analysis by IMS Health. Global pharmaceutical sales are expected to exceed $820 billion in 2009, reflecting sustained double-digit growth in key emerging countries, but tempered by a slower pace in more established markets such as the United States. US pharmaceutical growth is expected to be only between 1 and 2% for both 2008 and 2009.

“In many respects, 2009 will reflect the new shape of the global pharmaceutical market, the result of market factors that have gained momentum over the past several years,” said Murray Aitken, senior vice-president of Healthcare Insight at IMS, in a company press release. “Pharmaceutical growth next year will hold steady at 2008 levels. The market will continue to contend with a number of forces-among them the shift in growth from developed countries to emerging ones, specialist-driven products playing a larger role, blockbuster drugs losing patent protection, and the rising influence of regulators and payers on healthcare decisions. Layered on top is the uncertainty in the global economic environment and its effect on demand.”

IMS identifies the following as key market dynamics that will shape the pharmaceutical market in 2009: slowing growth in mature markets, rapid expansion of emerging markets, growth in specialty products and generics, fewer product approvals, uncertain macroeconomic conditions, and evolving healthcare policy.

Slowing growth in mature markets
In 2008, the US pharmaceutical market, the world’s largest, is projected to grow only 1–2% to $287–297 billion, down from the 2–3% rate expected earlier this year. Contributing to the slower growth is less-than-expected demand for recently introduced products as well as the economic climate, which appears to be having an impact on doctor visits and pharmaceutical sales, according to the IMS analysis. In 2009, the expected 1–2% growth rate in the US will result in sales of $292–302 billion and reflects the impact of continuing patent expirations, fewer new product launches, and a tighter economy.

The pharmaceutical market in the top five European Union countries (France, Germany, Italy, Spain, and the United Kingdom) are projected to grow 3–4% in 2009, reaching sales of $162–172 billion. In Europe, growth driven by the aging of the region’s population and rising demand for preventive care will be softened by the increased impact of health-technology assessments, the use of contracting by payers as a means to control costs, and the decentralization of government healthcare budgets, according to IMS.

Japan, the world’s second-largest pharmaceutical market, is expected to see growth of 4–5% and reach $84-88 billion. Approvals of new anticancer agents, disease-prevention programs, and the absence of the Japanese government’s biennial price cuts all will contribute to stronger growth, notes IMS. Government efforts to promote the use of generics will have only a modest impact on the Japanese market in 2009.

Rapid expansion of emerging markets
IMS projects that pharmaceutical markets in China, Brazil, India, South Korea, Mexico, Turkey, and Russia are projected to grow at a combined 14–15% pace to $105–115 billion. These markets are benefiting from the pharmaceutical industry’s increased focus on these markets as a whole, from greater government spending on healthcare, and from broader public and private healthcare funding, according to IMS.

Specialist-driven markets
Sales of products mainly prescribed by specialists are projected to grow 8–9% in 2009 and are expected to contribute 67% of total market growth. Sales of biologics are forecast to grow 11–12%, according to IMS. Sales of oncology products are expected to grow 15–16%, and HIV therapies 13–14%. In contrast, sales of products generally prescribed by primary-care physicians are expected to grow only 2–3% because of the loss of patent exclusivity for several blockbusters and fewer significant product launches.

Slowing new product approvals
New product approvals remain at historically low levels, with only 25 to 30 new chemical entities slated for launch in 2009, estimates IMS. “In addition, many of these are specialist-driven and niche products with relatively limited market potential. Expected launches for 2009 include four or five potential blockbusters for treating acute coronary syndrome, diabetes, rheumatoid arthritis, and meningitis,” says IMS.

The economic slowdown
Economic conditions will play a role in worldwide growth for the pharmaceutical market in 2009. In the US, the correlation between economic factors and pharmaceutical growth is stronger in the current slowdown than in previous downturns, given the continued shift of drug-related costs to patients, says IMS. IMS estimates that in 2009, the downturn will effectively reduce growth in the US by 2–3 percentage points. Other markets with large out-of-pocket spending requirements, including Brazil, India, and Russia, also are likely to be affected by economic changes.

Growth in generics
An additional $24 billion of branded products, including anti-epileptics, proton-pump inhibitors, and antivirals, will lose their market exclusivity in the top eight markets in 2009, according to IMS Health. This loss of patent protection will contribute to generics sales of more than $68 billion in 2009, and a 5–7% growth rate, which is similar to the rates in 2008 but lower than the levels experienced in 2006 and 2007. The decline is being driven by growth slowdowns in the US and UK, where competition among generic-drug manufacturers is strong.

Payers and health-technology assessors
In 2009, growth across the leading European markets will be affected by payer actions, which include increased rebating and contracting in Germany, expansion of regional formularies in Italy, a 5% decrease in branded prices in the UK, a 10% price reduction on several brands in France, and the expansion of the reference pricing system in Spain, according to IMS.Meanwhile, the impact of health-technology assessors will be seen in Germany by reimbursement limitations for new drugs not determined to be cost effective. In the UK, the pharmaceutical market may be affected by any policy change that allows patients to buy additional treatments not offered by the National Health Service, according to IMS.

Other issues identified by IMS as potentially having an effect on growth prospects for 2009 are healthcare policy changes in the US with the change of administration, the deregulation strategies of the pharmacy sector in Europe, and the rise of biosimilars, particularly in Europe.