The resurgence of the US pharmaceutical market is the key story in the global pharmaceutical market as the fortunes of emerging markets slow.

The rise of the US; the decline of emerging markets

So what is the key story in the outlook for the global pharmaceutical industry? “The resurgence of the US is the most significant event of this decade,” said Graham Lewis, vice president, global pharma strategy, IMS Health. Lewis provided an overview of the global pharmaceutical market and the key trends impacting the market in the education program, Pharmaceutical Industry Outlook: Market Overview, Macro Trends, and the Supply Lines, which was held March 14, 2016 in New York during DCAT Week ’16, the flagship event of the Drug, Chemical & Associated Technologies Association (DCAT).

Graham Lewis Vice President, Global Pharma Strategy IMS Health

Led by the US, the global pharmaceutical market is expected to increase at a compound annual growth rate (CAGR) of 4-7% through 2019, when the global pharmaceutical market is projected to reach $1.3 trillion, explained Lewis. (Note: IMS Health planned to issue an updated forecast through 2020 at the end of April 2016). The continued resurgence of the US pharmaceutical market with projected CAGR of 6-9% from 2015 to 2019 will lead CAGR in developed markets, which is projected at 4-7% CAGR to 2019 (see Table I), only slightly below the CAGR of 5-8% for pharmerging markets, defined by IMS as the most promising emerging markets, in the forecast period of 2015 to 2019 (see Table II). A slowing of growth in pharmerging markets and the rise of the US pharmaceutical market will lead the US to account for 45% of global pharmaceutical growth from 2016 to 2020 and for the US to retain its number one global position with a 41% market share of the global pharmaceutical market by 2020, according to IMS.

 Growth in the five major markets of the European Union (EU)(France, Germany, Italy, Spain, and the United Kingdom) is mixed. The UK is expected to have the strongest growth with a projected CAGR through 2019 of 4% to 7% although clawback will significantly reduce the actual growth. Italy follows with a projected CAGR of 2% to 5% through 2019, and the pharmaceutical markets in Germany and Spain are each expected in increase at a CAGR of 2% to 5% through 2019. The weakest performance is projected for the French pharmaceutical market, which is projected to see a decline of 2% to only 1% CAGR through 2019 (see Table I).

A slowdown in pharmerging markets is the other key story for the global pharmaceutical market as growth in these markets is projected to reach near parity with developed markets following a period of exponential growth. Overall CAGR for pharmerging markets will be 5% to 8% through 2019, projects IMS, only one percentage point better than the overall growth of 4% to 7% in developed markets (see Table II). India will outperform all pharmerging markets with a CAGR of 11% to 14% through 2019, far surpassing the second best projected performer, China, with a projected CAGR of 6-9% through 2019, whose growth is on par with overall growth in pharmerging markets. Brazil (CAGR of 1% to 4%) and Russia (CAGR of [-3]% to 0%) will trail overall growth in the pharmerging markets.  

China’s slowdown in growth is significant. In the previous five-year period of 2010-2014, China’s pharmaceutical market increased at a CAGR of 16.8%, but is projected to increase only at a CAGR of 6.9% in the forecast period of 2015-2019. Lewis pointed to several factors that are leading to the lower forecast: the spread of reimbursement controls that are slowing volume growth; increased pricing pressure in 2015 from the tender system and hospital reform; and lower volume and value growth in the first half of 2015. He pointed to two key risks to be aware of in consideration of future growth prospects: (1) increasing pricing pressure in the tender system and new provincial tender initiatives; and (2) more conservative prescribing attitudes. Some positive factors for pharmaceutical growth in China include infrastructural development to be promoted in the 2015-2020 five-year plan; an expansion of existing basic medical schemes to cover treatment of critical illnesses; and (3) an update of the National Reimbursed Drug List in 2016.

While the US will still be the dominant pharmaceutical market in 2020, accounting for 41% of the global market, second place is contested with the EU5 and China each projected to hold a 12% share, according to IMS. Brazil, Russia, and India will collectively hold 7%, other pharmerging markets (Tier 3 and Tier 4 markets) 8%, Japan 6%, Canada 2%, and the rest of world 13%. Table III outlines the global rankings of the top pharmaceutical markets in 2014 and projected for 2019. The US, China, Japan, and Germany keep their top positions in 2014 and 2019 although Brazil overtakes France for the number five spot. Spain is projected as the only EU5 country to fall out of the top 10, declining from nine in 2014 to a projected spot of eleven in 2019. Among the BRIC countries, China, Brazil, and India are projected to be in the top 10 in 2019, with only Russia left out of the top 10, which falls from number eleven in 2014 to a projected twelfth in 2019. Saudi Arabia also becomes the only Middle Eastern country to move into the global top 20 and is projected to take the number nineteen spot by 2019, supplanting Belgium, which is projected to fall out of the top 20.

The rise of specialty medicines and biologics
Specialty medicines are a strong source of growth for the global pharmaceutical market, particularly in the US. More than 50% of specialty medicines’ growth is in small molecules, according to IMS. IMS defines “specialty products” as medicines that treat specific, complex chronic diseases with four or more of the following attributes: (1) initiated only by a specialist; (2) requires special handling and administration; (3) unique distribution; (4) high cost; (5) warrants intensive patient care; and (6) might require reimbursement assistance.

In looking at the mix between traditional and specialty medicines over the past five years, traditional medicines still account for more than a majority of the pharmaceutical market in developed markets (US, EU5, Canada, and Japan), where they accounted for 66% of the market compared to specialty medicines at 34% in 2015. The share of specialty markets from these countries, however, has risen significantly over the past 10 years when specialty medicines accounted for only 18% of sales in 2005 and 24% in 2010. Penetration of specialty medicines in pharmerging markets trails significantly.The specialty share of the total market has remained constant at 12% since 2010. 

Growth in biologics is helping to drive growth in specialty medicines and overall pharmaceutical industry growth. In 2015, biologics accounted for 24% of global pharmaceutical sales and for six of the top 10 selling products, according to IMS. In 2010, small molecules accounted for 80% of the global pharmaceutical market and biologics 20%. By 2015, biologics had increased their share by four percentage points to 24%. In looking at the industry’s pipeline, biologics are almost at parity with small molecules in preclinical development, but small molecules continue to dominate in later-stage development (Phase II to registration) (see Table IV ).

The importance of specialty medicines to overall pharmaceutical industry growth is underscored by the higher sales return comparative to traditional medicines. More than half of specialty new molecular entities (NMEs) reached sales of more than $150 million in two years, which is more than two times higher than traditional products, based on NME launches between 2006 and 2013, according to IMS. Overall, the US leads with NME launches among all countries with 121 launched between 2010 and 2014, far outpacing the second-placed Germany, which had 92 during this period, followed by the UK at 83 NME launches. The other top countries among NME launches between 2010 and 2014 were Japan (67 NMEs), Italy (62 NMEs), Canada (60 NMEs), Spain (59 NMEs), and France (58 NMEs). One of the key developments in the global pharmaceutical market is the return of the blockbuster, explained Lewis.In the period 2005-2009, only two blockbusters were launched; in the next five years (2010-2015), this rose to eight. 

Leading therapeutic growth sectors  
In examining other global pharmaceutical growth patterns, another key trend is that five therapeutic areas accounted for 75% of the global growth, with the majority of that growth coming from the US and the EU5, explained Lewis. Hepatitis C was the dominant area of growth, accounting for 28% of global pharmaceutical growth from 2013–2015, according to IMS, with the US accounting for 61% of that growth and the EU5 23%. Oncology was the second strongest growth segment, accounting for 19% of global pharmaceutical growth between 2013 and 2015, with the US accounting for 54% of that growth and the EU5 23% of the growth. Anti-diabetes drugs (9% overall growth), anticoagulants (9% overall growth), and auto-immune drugs (7% overall growth) round out the leading therapeutic areas for pharmaceutical growth during the period of 2013-2015.

On a therapeutic sector basis, specialty medicines will continue to be of greatest significance to developed markets. Oncology is expected to remain the largest area of spend in developed markets and is of rising importance in pharmerging markets, moving to the number four therapy area (see Tables V and VI) although traditional medicines will continue to dominate growth in pharmerging markets. 

Thank you to our 2016 Pharma Industry Outlook program sponsors:
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