Global pharmaceutical market: state and trends
Michael Levitt, secretary of the Department of Health and Human Services of the United States, a country that is today the largest pharmaceutical market in the world, in one of his recent interviews outlined the future of healthcare in general: "The next 10 years will be transitional for the industry. Medicine will be transformed from the intuitive art of interpreting symptoms into a science where treatment will be built in strict accordance with the characteristics of each individual patient. The next generations will talk about the beginning of the XXI century as a time when treatment became preventive and personalized, and its results were predictable and guaranteed."
Last year, the growth rate of the global market of medicines and medicines, according to IMS Health analysts, amounted to 7%. This is about one percent lower than in 2005. The volume of sales of medicines worldwide in 2006 amounted to 643 billion dollars. This year, the total sales volume is expected to reach 665-685 billion dollars.
Shifting the geographical balanceThe three main pharmaceutical regions of the planet are still the USA, Europe and Japan, they account for about 80% of the total market of medicines.
Meanwhile, the main geographical trend of the modern pharmaceutical market is the "drift" of its balance sheet from the United States to emerging economies where GDP per capita does not exceed 20 thousand dollars, such as China, India, Brazil and Turkey. They currently account for 17% of the global pharmaceutical market. The circle of the population covered by the local health care system is constantly expanding, thereby increasing the demand for medicines in general and for medicines intended for the treatment of chronic diseases traditionally associated with the Western lifestyle: cardiovascular, diabetes, oncological.
Locally produced reproduced medical products are dominant in local markets. The growth rate of the pharmaceutical market in these countries in 2006 amounted to 11.4%; sales volume – $ 83 billion, or 27% of the global value. This year, according to Diana Konmi, Corporate Director of IMS Health, their share in global sales will increase to 30%, and the growth rate will be in the range of 10-12%.
So, India today is one of the world's largest manufacturers of generic (generic) drugs, ranking 4th in the world in terms of output. Today, this country accounts for about 70% of the world's production of active pharmaceutical ingredients. Over the past 6 years, the share of Indian medicines approved for use in the United States has increased 9 times – from 5 to 45%. The two main directions in which the Indian pharmaceutical business is developing are the production of ready-made dosage forms and active expansion into emerging markets, primarily China and Russia.
China will soon become the absolute record holder, the growth rate of the pharmaceutical market in which this year may exceed 15%, and its size will reach $ 16 billion. The country is considered a kind of nursery of modern medical technologies and, first of all, biotechnologies. This area of scientific research enjoys the support of the Chinese government, which includes tax incentives and increased government funding. At the same time, biotechnological medicines produced in China, for the most part, are generics, for example, interferon, insulin, growth hormone.
Despite some shift in emphasis, the US pharmaceutical market remains the largest in the world, exceeding $274 billion in 2006. Its annual growth rate was 8.1%. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or, as it is also called, Medicare Part D, which came into force on January 1, 2006, had a positive effect on the dynamics of the market, thanks to which an additional 43 million people were able to partially compensate for their medical expenses. The share of this scheme in the overall structure of growth rates ranges from 1 to 2%. The US share in the global pharmaceutical market this year will be 36%, compared to 54% five years ago.
According to IMS Health experts, in 2007, the market growth rate in the United States will decrease to 4-5%. The most significant impact, in addition to the already mentioned Medicare Part D, will be the expiration of patents for several key medicines at once. It is expected that because of this, the American pharmaceutical industry will not receive about $ 10 billion this year (last year, similar losses amounted to $ 19 billion).
In Europe, although double–digit growth rates of the pharmaceutical market remain in general (due to the inclusion of Eastern European countries in it), in its five most mature markets (France, Germany, Great Britain - more than half of all sales, plus Italy and Spain), the slowdown continues. This year they will be 3-4% (in 2006 – 4-5%). This is due to artificial price restraint by governments, a balanced approach on the part of the population and wholesale buyers to the price/therapeutic effect ratio of the drug, as well as financial benefits from the use of generic drugs (globally, sales in this part of the pharmaceutical market in 2006 amounted to over $ 50 billion; growth rates reached 12%). Graham Levis, Vice president of Global Strategy at IMS, believes that the commercial success of pharmaceutical companies in the European market increasingly depends on how convincing the evidence of the effectiveness of the new drugs they supply is.
Another major global market, Japan, will grow by 5-6% this year, which is significantly higher than last year's growth rate of only 1-2%.
Medicines: fewer patents, more genericsThe average development time of a new drug, according to Pharmaceutical Research and Manufacturers of America (PhRMA), is 10-15 years.
And if 20 years ago this process cost a little more than $ 300 million, today the cost of developing a new drug has almost tripled. The development of biotechnological drugs is even more expensive and can reach $ 1 billion. At the same time, PhRMA experts note that only 3 out of 10 drugs that have entered the market bring a profit greater than or equal to the amount that was spent on their development. At the same time, every dollar spent in the United States over the past 20 years on healthcare has led to a reduction in the costs associated with the disability of the country's population due to diseases by almost $ 3.
In 2006, 29 new medicines entered the market. Approximately the same amount is expected this year. But their share in the total value of the global pharmaceutical market will be less than a few years ago. This is due to the fact that most of the new drugs are aimed at specialized market niches and highly specialized areas of treatment, where reaching the sales milestone of $ 1 billion (the result of the so-called blockbuster) takes much longer.
Moreover, a process that experts call generic erosion is gaining speed in the market. It implies the expiration of patents for a number of patented blockbuster drugs in 2006 and 2007 and their partial replacement with cheaper refurbished medicines. According to PhRMA estimates, the average validity period of patents in the United States is 11.5 years. If in the middle of 2005 the ratio of generic drugs to patented (by segment value) in the US market was 56/46, by the end of last year the gap had widened to 58/42.
As sales practice shows, the first generic drug that penetrates into the market niche of a patented product after the expiration of the patent of the latter is on average 20-30% cheaper. As other generic drugs fill the niche, the price drops even lower. Treatment, during which the doctor prescribes only patent medicines, costs the patient three times more expensive than a similar course, but made up of generic drugs.
Despite the "leaching of patents", ISM Health experts note that the total number of blockbuster drugs on the world market is growing. As expected, this year their number will reach 112 items, which is 18 more than two years ago. At the same time, the growth of the share of "niche" blockbusters (aimed at the treatment of specific diseases) in the total number of commercially successful drugs is particularly noted: if at the beginning of the millennium it was about 5%, then last year niche drugs were already almost 20%. Potential sales record holders in 2007 may be Paliperidone (which is used to treat schizophrenia), Desvenlafaxine (depression) and Vildagliptin (diabetes).
Particularly high growth rates are observed in the sub-market of oncological drugs. Last year, it amounted to 20% with sales of $ 35 billion, or 5.7% of all medicines sold globally. Over 70% of all cancer drugs are sold in the USA (45%) and five leading European countries (26%). This year, according to ISM Health forecasts, the volume of sales of cancer drugs may amount to 40-45 billion dollars with an increase in the share of global sales to 20%. Experts attribute this increase to an increase in the proportion of elderly people in developed countries, as well as an improvement in the diagnosis of cancer. Among other therapeutic areas, the production of lipid-lowering drugs also stands out, whose growth last year was 7.5% (the most successful drugs in this group were Zetia and Vytorin).
Bio means aliveThe trend that will have the greatest impact on the development of the pharmaceutical industry in the medium term is the expansion of the use of biotechnological developments in the creation of new medicines.
There is a rapid growth in the number of biotech companies in the world whose research focus lies entirely in the field of pharmacology. Pharmaceutical giants either create appropriate divisions in their structures, or use an outsourcing scheme, transferring highly specialized research to subcontractors.
At the junction of traditional pharmacology and biotechnology, a new branch is emerging – pharmacogenomics, its goal is to create personalized medicines – "the most effective medicine for a given patient at a given time." The personalization of medicine based on the latest biotechnological developments and, together with it, the production of medicines also means a departure from the blockbuster business model, which until recently was universal for large pharmaceutical companies. As part of this strategy, the main profit comes from the sale of one or more popular and well-proven medicines.
The sub-market for the production of biotechnological medicines has been steadily growing for several years; last year its growth rate was almost 18%, and total sales reached $ 65 billion. Among its main characteristics is the increasing involvement of emerging market countries (especially China and India), as well as the blurring of boundaries between biotech and traditionally pharmaceutical companies. This is especially noticeable in large companies that dominate this segment of the pharmaceutical market.
Although the main developments are being carried out in the most significant therapeutic areas (oncology, diabetes, etc.), biopharmacological companies are gradually beginning to displace traditional manufacturers from such niches as the fight against overweight, asthma and allergies, cardiovascular diseases and atherosclerosis, relief of sudden and chronic pain. Experts note that competing medicines with biologics for certain diseases have begun to appear on the market, for example, for the treatment of anemia, sclerosis, rheumatoid arthritis. This should eventually reduce the cost of biotech products. Today it is a very concentrated market, where the 10 best-selling biomedicaments bring in over 50% of all revenues.
Experts predict a bright future for medical biotechnology, despite the growing cost of research and the tightening of legislation regulating this area of activity. Although growth is expected to decline to 13-14% this year, total sales are likely to exceed $70 billion. In 2006, 10 new drugs were introduced to the market, and 8 more are expected this year.
The market of veterinary medicines is also interesting from the point of view of potential growth. Major manufacturers such as Pfizer, Abbott Laboratories and Novartis AG are increasingly entering it. Sales growth of drugs for the treatment of animals last year amounted to 5%. There are about 66 million dogs and 78 million cats in the USA alone. In addition, the number of pet owners who are willing to spend hundreds or even thousands of dollars on their pets is growing. So, last year they spent almost $40 billion on them, half of them on veterinary care and over–the-counter medicines. According to George Fennell, vice president of Pfizer's veterinary drugs division: "Investing in pet care products is a good business." 600 Pfizer specialists spend about $300 million annually on research in this area.
The company recently introduced two new drugs: Slentrol, which is designed to treat overweight dogs (and there are about 17 million of them in the United States) and Cerenia, which should help dogs suffering from seasickness. As Professor Bonnie Beaver, President of the American Veterinary Medical Association, notes: "We are seeing a new approach from pharmaceutical companies. And much of what we see in veterinary medicine has parallels in "human" medicine, for example, obesity and diabetes."
Murray Aitken, IMS Vice President for Corporate Strategy, described the current state of the pharmaceutical market and the trends that will dominate it during 2007: "In 2007, the market will continue to absorb changes that lead to the formation of a new economic reality in this sector of the world economy. Among the changes are the shift of economic growth from countries with mature markets to countries with emerging economies; the growing gap between the emergence of new medicines and the expiration of patents for existing original drugs; the expansion of the sector of medical products of special demand and products narrowly focused on certain consumer niches."
Viktor Glumskov, Expert Kazakhstan No. 20-2007
Portal "Eternal youth" www.vechnayamolodost.ru
02.06.2007