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All things Pharma

Changing market dynamics: what does the future hold for pharma?

The UK has recovered from market decline in 2005, but the focus on cutting healthcare costs means many therapies are under threat from cheaper generics. Pf examines UK and global market figures for 2006.

In 2006, the global pharmaceutical market grew 7% to $643 billion, audited sales figures have revealed. Both the UK and North American markets achieved improved growth compared to 2005 figures, although Europe as a whole experienced below average growth.

The annual figures from IMS HEALTH indicate changing dynamics within the market, as the focus shifts to specialist therapies and patients are beginning to have a more active role in their health. The market has also been affected by the increasing use of generics as healthcare systems try to reduce their expenditure, particularly in the UK where the NHS reported a deficit of £500 million last year. And as cost effectiveness becomes more of an issue, it will become increasingly important for pharma companies to demonstrate the value of their medications.

Around the world

The audited UK figures for 2006 showed a recovering market. Having experienced a decline of 2.2% in 2005, the UK expanded its market in 2006 by 4.1% to $21 billion. Taken as a whole, however, the five major European markets (France, Germany, Italy, Spain and the UK) experienced slowing growth for the third year running, just 4.4%, down from 4.8% in 2005.

North America also strengthened its pharmaceutical market in comparison to last year, when growth was just 5.4%. The impact of the first year of the Medicare Part D benefit and the resulting increase in prescribing volume led to a market increase of 8.3% in 2006. China experienced impressive growth of 12.4%, although this had slowed from 20.5% in 2005, due to the government’s introduction of a campaign to limit physician promotion of pharmaceuticals.

In contrast, India was one of the fastest growing markets in 2006, with pharmaceutical sales increasing 17.5% to $7.3 billion. Indeed, overall, 27% of total market growth is now coming from countries with a per-capita Gross National Income of less than $20,000.

‘Genericisation’ of primary care

While the primary care market in the UK rose 3.2% to $15.7 billion, secondary care grew by 7.3%, to $4.9 billion. Factors such as Pharmaceutical Price Regulation scheme measures failing to spark a recovery in ethical prescribing and PCTs actively encouraging the use of generics, led to a 12.5% increase in generics and the declining value of the primary care sector. Nowhere was this decline more pronounced than in Scotland, where a 4.3% drop was due, in large part, to new guidelines favouring generic prescribing.

Among therapy classes, respiratory agents, antidiabetics and non-narcotic analgesics drove key growth in primary care, while antineoplastics, autoimmune agents and HIV antivirals drove growth in hospitals.

Globally, it was oncologics that experienced particularly strong growth in 2006, mainly due to innovative therapies that are reshaping the approach to cancer treatment. Specialist-driven products contributed 62% of the market’s total growth and half of the oncology products in late-stage development were targeted therapies – treatments directed at specific molecules involved with carcinogenesis and tumour growth. There was also high growth in lipid regulators, driven by products such as Crestor® and Vytorin®, respiratory agents and autoimmune agents, due to increased use of Humira® and Remicade®.

Murray Aitken, IMS Senior Vice President, Corporate Strategy, commented: “We continue top see a shift in growth in the marketplace away from mature markets to emerging ones, and from primary care classes to biotech and specialist driven therapies. Oncology and autoimmune products increasingly are demonstrating their value in answering unmet patient needs – offering significant opportunities for growth.”

A number of primary care classes experienced slowing growth due to lower-cost generics and switches to over-the-counter products, such as proton pump inhibitors (PPIs), antihistamines, platelet aggregation inhibitors and antidepressants. Indeed, generics represented more than half of the volume of pharmaceutical products sold in the seven key world markets (US, Canada, France, Germany, Italy, Spain and the UK).

Positive outlook for future market

Innovative new products were a key driver in the growth of the global pharmaceutical market in 2006, with 31 new molecular entities launched in key markets. The most significant of these were cervical cancer vaccine, Gardasil®, Januvia® for type 2 diabetes and Sutent® for renal cancer. There were also a high number of products in clinical development. At the end of 2006, 2,075 molecules were in Phase I or II development, with many more in Phase III or pre-approval stages, including 95 oncology products, 40 for viral infections and HIV and 27 for arthritis/pain.

Meanwhile, the number of new product launches in the UK continued to fall. With the country showing the slowest uptake of new chemical entities in Europe, there has been some concern about its continued role as a major force in innovative research and development (R&D). However, surveys by the Office of National Statistics show that total R&D expenditure by the industry in the UK has risen from £475 million in 1984 to £3,308 million in 2005, so investment in UK R&D is not slowing down.

Recent research by the Association of the British Pharmaceutical Industry (ABPI) has also indicated a positive outlook for the future UK market. The ABPI figures show there were over 950 compounds in pre-registration clinical development in 2006, with the largest number being developed for cancer (170), cardiovascular diseases (109), mental disorders (62) diseases of the endocrine system (59), respiratory diseases (53) and dementia (20).

Richard Barker, Director General of the ABPI, said, “This report shows the medicines pipeline is stronger than ever before, and that there are many exciting prospects in a wide variety of therapeutic areas, including some of humanity’s toughest disease challenges. If we relied solely on breakthroughs, our overall achievements would be less – each of those 950 compounds in development has the potential to lead to a small but significant improvement to the treatment of a disease.”

Power to the people

The loss of patent protection in products across seven key markets in 2006 will continue to affect the industry throughout 2007 and beyond. With lower-cost drugs replacing branded ones, generics will assume a more central role.

Another key influence is the growing power of patients, as they take an increasingly active role in their own care. This a particularly strong influence in the UK, where it has long been argued that the key to the long-term sustainability of a system is that it can offer both free care at point of delivery and improved health outcomes for all. The pharmaceutical industry has little to fear from these reforms, since it already welcomes patient involvement, especially in the assessment of health outcomes, as well as practice-based commissioning. 

“Because patients are both consumers and ultimate payers,” observed Murray Aitken, “they are gaining the power to compel regulatory approvals, influence market access decisions, and sway prescribing behaviours.”

Ultimately, it will be those companies that focus on payers and patients that will thrive in the future market environment. While a relatively small proportion of the NHS budget, pharmaceuticals remain an attractive cost reduction target. Industry engagement and support of PCTs, as they grapple with organisational issues and new quality outcome targets, will be fundamental to demonstrating the overall value of medicines.

This article is based on IMS HEALTH’s global pharmaceutical market report .


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