IMS Projects Moderate Growth for Global Pharmaceutical Industry

By Patricia Van Arnum - DCAT Editorial Director

December 9, 2015

The IMS Institute for Healthcare Informatics projects that total spending on medicines will reach $1.4 trillion by 2020 due to greater patient access to chronic disease treatments and breakthrough innovations in drug therapies. Global spending is forecast to grow at a 4-7% compound annual rate over the next five years.

The IMS report found that total global spend for pharmaceuticals will increase by $349 billion on a constant-dollar basis, compared with $182 billion during the past five years. On a volume basis, most of the global increase in use of medicines over the next five years will take place in emerging markets, with India, China, Brazil and Indonesia representing nearly half of that growth.

Crunching the numbers
The IMS Report, Global Medicines in 2020: Outlook and Implications, projects that total spending on medicines will reach $1.4 trillion by 2020 due to greater patient access to chronic disease treatments and breakthrough innovations in drug therapies. Global spending is forecast to grow at a 4-7% compound annual growth rate (CAGR) over the next five years. Total global spend for pharmaceuticals will increase by $349 billion in the forecast period of 2016-2020 on a constant-dollar basis, compared with $182 billion during the past five years (2010-2015). Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes, and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $90 billion, or approximately 25% of the growth forecast through 2020.

"During the next five years, we expect to see a surge of innovative medicines emerging from R&D pipelines, as well as technology-enabled advances that will deliver measurable improvements to health outcomes," said Murray Aitken, IMS Health senior vice president and executive director of the IMS Institute for Healthcare Informatics, in commenting on the report. "With unprecedented treatment options, greater availability of low-cost drugs and better use of evidence to inform decision making, stakeholders around the world can expect to get more ‘bang for their medicine buck' in 2020 than ever before."

Some key findings from the report show that global medicine use in 2020 will reach 4.5 trillion doses, up 24% from 2015. Most of the global increase in use of medicines over the next five years will take place in what IMS terms "pharmerging" markets to denote pharmaceutical growth in emerging markets, with India, China, Brazil and Indonesia representing nearly half of that growth. Volumes in developed markets will remain relatively stable and trend toward original branded products as use of specialty medicines becomes more widespread. Generics, non-original branded and over the counter (OTC) products will account for 88% of total medicine use in pharmerging markets by 2020, and provide the greatest contribution to increased access to medicines in those countries. Newer specialty medicines, which typically have low adoption rates in pharmerging countries lacking the necessary healthcare infrastructure, will represent less than 1% of the total volume in those markets. Overall, the use of new medicines, defined as those medicines first available in the prior 10 years, will represent 0.1% of volumes in pharmerging markets compared to 2-3% in developed markets.

Global spending will grow by 29-32% through 2020, compared with an increase of 35% in the prior five years, according to the IMS report. Spending levels will be driven by branded drugs primarily in developed markets, along with the greater use of generics in pharmerging markets—offset by the impact of patent expiries. Brand spending in developed markets will rise by $298 billion as new products are launched and as price increases are applied in the US, most of which will be offset by off-invoice discounts and rebates. Patent expiries are expected to result in $178 billion in reduced spending on branded products, including $41 billion in savings on biologics as biosimilars become more widely adopted, according to the IMS report. Small-molecule patent expiries are expected to have a larger impact in the 2016-2020 period than in the prior five years. Many of the newest treatments are specialty medicines used to address chronic, rare or genetic diseases. By 2020, global spending on specialty medicines is expected to reach 28% of the total global spending on medicines, accounting for 36% of spend in developed markets and 12% in pharmerging markets. Oncology will be the largest therapeutic area for specialty medicines, with projected sales of $100 billion to $120 billion in 2020 and CAGR of 9-12% between 2016-2020.

Generics on the rise; US pharmaceutical growth
The IMS report points out that more than 90% of US medicines will be dispensed as generics by 2020. Generic medicines will continue to provide the vast majority of the prescription drug usage in US, rising from 88% to 91-92% of all prescriptions dispensed by 2020. Overall, spending on medicines in the US will reach $560-590 billion by 2020, a 34% increase in spending over 2015 on an invoice price basis. While invoice price growth, which does not reflect discounts and rebates received by payers, is expected to continue at historic levels during the next five years, net price trends for protected brands will remain constrained by payers and competition, resulting in 5-7% annual price increases. The impact of the Affordable Care Act (ACA) will continue to have an effect on medicine spending during the next five years largely due to expanded insurance coverage. By 2020, there will be broad adoption of ACA provisions that encourage greater care coordination and movement of at least one-third of spending to an outcomes or performance basis.

Innovation
The IMS report projects that more than 225 medicines will be introduced by 2020, with one-third focused on treating cancer. Disease treatments in 2020 will be transformed by the increased number and quality of new drugs in clusters of innovation around cancer, hepatitis C, autoimmune disorders, heart disease, and various rare diseases. During the next five years, an additional 75 new orphan drugs are expected to be available for various therapeutic areas that currently have limited or no treatment options.

By 2020, technology will be enabling more rapid changes to treatment protocols, increasing patient engagement and accountability, shifting patient-provider interaction, and accelerating the adoption of behavior changes that will improve patient adherence to treatments. Every patient with multiple chronic conditions will have the potential to use wearables, mobile apps, and other technologies to manage their health, interact with providers, fellow patients and family members. The use of smartphones, tablets, apps and related wearable devices as well as electronic medical records and increasing real-world data volumes, will open new avenues to connect healthcare while offering providers and payers new mechanisms to control costs.