Global Pharma Market will expand by 5% to 7% in 2016 (Part 1)

Why Big Pharma won't get its piece of the 
U$S 1.2 Trillion Global Drug Market
by Matthew Herper, Forbes Staff

The global market for prescription drugs will grow from $950 billion now to $1.2 trillion in 2016, according to a new report released today. But Big Pharma may sit out much of the growth as patents on big-selling drugs expire and people fast-growing markets such as China, Russia, and Brazil buy generic drugs from local manufacturers.

That’s the forecast from the IMS Institute for Healthcare Informatics, a unit of health information company IMS Health, which tracks prescription data and provides consulting services to drug makers and to Wall Street. All the charts are from this report, which serves as not only a forecast but as an annual opportunity to take the drug industry’s temperature.

First, as the overall market grows, the United States will command a smaller piece of the pie while still being the largest single drug market. It’s good that we’re controlling the cost of prescription drugs, but this does mean that the U.S., which a fifteen years ago seemed to be pulling European drug makers such as Novartis, Sanofi, GlaxoSmithKline, and Novo-Nordisk to amp up their presence here, will be less of a lure.

Here’s a country by country look at what’s really happening. The U.S. still spends more per capita on medicine than any other nation. But in the emerging markets, costs and volumes are going up. According to Michael Kleinrock, director, Research Development for the IMS Institute, the reason for this transformation is pretty simple. As per-capita income increases, say, from $500 to $5,000, a medicine’s cost as a percent of that income drops by an order of magnitude. Many of these countries are just reaching a point where people will be able to afford some medicines they need and want out of pocket.

For the record, when we talk about emerging markets in pharma, we’re talking about: Brazil, India, Russia, Argentina, Egypt, Indonesia, Mexico, Pakistan, Poland, Romania, South Africa, Thailand, Turkey, Ukraine, Venezuela, and Vietnam. In these markets, the products are not just generic companies, like Teva or Mylan, they’re often small and local, too. And that’s where much of the growth will be – although every big drug maker is fighting to get some of this growth.

In these markets, the reports says, 65% of about $360 million in sales will be from generics. In the developed world, only 18% of $675 million in sales will be from generics. That leaves branded drugs with just $680 million in sales, a bit more than half the market, with cheaper generics taking the rest.

In the U.S. and Europe, though, growth will be harder to come by, as these countries try to control cost. The drug industry will actually pull out of its research drought, IMS says, bringing 35 new medicines to market each year, on average – than it has in any of the previous five years. These might include medicines against’ Alzheimer’s being developed by Eli Lilly and Pfizer, and a likely new drug for multiple sclerosis from Biogen Idec.

But more than anything else, the drug business in Europe, the U.S., and Japan will be focused on cancer and diabetes. Want an explanation for why AstraZeneca and Bristol-Myers Squibb bid for Amylin Pharmaceuticals? Look no further.

That may not be enough to make up for the massive waves of patent expirations that are still going to be buffeting the drug business, though. Over this period, more than $127 billion in annual sales will be lost as drugs go generic. Here, to end, is a list of all the brands that will go off patent in big markets over the next five years. It is a list of many of the biggest products on the market today.