IMS Health reported that the size of the global market for pharmaceuticals is expected to grow nearly $300 billion over the next five years, reaching $1.1 trillion in 2014.
The 5 – 8 percent compound annual growth rate during this period reflects the impact of leading products losing patent protection in developed markets, as well as strong overall growth in the world’s emerging countries.
These conclusions are included in the latest release of IMS Market Prognosis™, the company’s series of strategic market forecasting publications.
Global pharmaceutical sales growth of 4 – 6 percent is expected this year, consistent with IMS’s prior forecast. In 2009, the market grew 7.0 percent to $837 billion, compared with a 4.8 percent growth rate in 2008.
“Patient demand for pharmaceuticals will remain robust, despite the ongoing effects of the economic downturn being felt in many parts of the world,” said IMS’s Murray Aitken, senior vice president, Healthcare Insight. “In developed markets with publicly funded healthcare plans, pressure by payers to curb drug spending growth will only intensify, but that will be more than offset by the ongoing, rapid expansion of demand in the pharmerging markets. Net growth over the next five years is expected to be strong — even as the industry faces the peak years of patent expiries for innovative drugs introduced 10 – 15 years ago and subsequent entry of lower-cost generic alternatives.”
In its latest analysis, IMS identifies the following key market dynamics:
· Geographic balance of the pharmaceutical market continues to shift toward pharmerging countries. Pharmerging markets are expected to grow at a 14 – 17 percent pace through 2014, while major developed markets will grow 3 – 6 percent.
As a result, the aggregate growth through 2014 from emerging markets will be similar to the growth experienced in developed markets — about $120 – $140 billion. This compares to aggregate growth over the past five years of $69 billion in emerging markets and $126 billion in developed markets. The U.S. will remain the single largest market, with 3 – 6 percent growth expected annually in the next five years and reaching $360 – $390 billion in 2014, up from $300 billion in 2009.
· Therapy area growth dynamics driven by innovation cycle and areas of unmet need. As the pharmaceutical industry’s research and development programs adjust to the broad availability of low-cost generic options in many chronic therapy areas, higher growth will occur in those therapy areas where there is significant unmet clinical need, high-cost burden of disease, and innovative science that can bring new treatment options to patients. In the areas of oncology, diabetes, multiple sclerosis and HIV, annual growth is expected to exceed 10 percent through 2014 as new drugs are brought to market, patient access is expanded and funding is redirected from other areas where lower-cost generics will be available.
· Broad cuts in spending applied by public payers to reduce growth in drug budgets. Publicly funded health systems are under increased pressure to reduce growth in drug budgets following the global economic downturn. Countries including Turkey, Spain, Germany and France already have announced plans to apply across-the-board restrictions on access or reductions in reimbursements to reduce drug spending growth. Governments in other countries seeking to restore fiscal balance may take similar actions, or shift more costs to patients.
· Peak years of patent expiries shift major therapies to generic dominance. Over the next five years, products with sales of more than $142 billion are expected to face generic competition in major developed markets. Collectively, the impact of patients shifting to lower-cost generics in major therapy areas such as cholesterol regulators, antipsychotics and proton pump inhibitors will reduce total drug spending by about $80 – $100 billion worldwide through 2014. This impact particularly will be felt in the U.S., where nearly two-thirds of the total value of patent expiries will occur. Patent expiries in the U.S. will peak in 2011 and 2012 when six of today’s ten largest products are expected to face generic competition.
· Closer scrutiny of new products contributes to lower initial spending by payers. The number of new molecular entities launched annually over the next five years is expected to remain in the range of 30 to 35 products. However, these will be subject to more rigorous and complex assessments by payers before being accepted into clinical practice and reimbursed. In many countries — including China, Spain, Italy and Canada — funding and implementation of healthcare at regional or local levels is becoming more significant. This is expected to extend the time it takes for new medicines to become available to patients, and contribute to lower initial spending by payers.
Said Aitken, “The expected global economic recovery removes an element of uncertainty for the industry over the next five years, although the way payers address lingering budget deficits will remain an issue in many markets. Health system reforms, such as those to be implemented in the U.S., can spur fundamental change in the market — but the full impact may not be felt until the latter half of this decade. Leading up to 2020, IMS expects to see a continuing shift toward biopharmaceuticals, specialty-driven products, and changes in the mix of disease areas of interest.”