Snapshot of the Market
Sales IMS Health's annual forecast puts 2009 global sales at $820 billion, growing at the same 4.5 to 5.5 percent rate as this
year. Major markets are expected to be stagnant, with the US growing by 1 to 2 percent, to a little less than $300 billion.
"The correlation between economic factors and pharmaceutical growth is stronger in the current slowdown than in previous downturns,
given the continued shift of drug-related costs to patients," says IMS Health's Murray Aitken.
The European market is pegged to grow 4.5 to 5.5 percent to $162 to $172 billion, while Japan will hit $84 to $88 billion,
a 4 to 5 percent bump. For good news, look to what IMS calls the pharmerging markets—China, Brazil, India, South Korea, Mexico,
Turkey, and Russia—which should break the $100 billion barrier in combined sales, growing at a rate of 14 to 15 percent.
Dynamics The contraction of the primary-care market will accelerate, with growth dropping to 2 to 3 percent, according to IMS. Primary
care's piece of the drug-spending pie dropped below half for the first time in 2008, and it will fall to one-third in 2009.
With a fourfold higher growth rate, specialty drugs are where the action is.
Oncology will remain the number one growth area in 2009, with sales increasing 15 to 16 percent. Last month, the World Cancer
Report announced that cancer would outstrip heart disease as the leading cause of death worldwide by 2010; rates will double
by 2020, hitting hardest in top emerging markets Russia, China, and India. But though medical need is increasing in oncology,
profits may lag. With cancer compounds comprising almost half of the industry pipeline, Bain & Company predicts that competition
will trigger price declines of 35 percent or more starting in 2011.
The economic downturn, however, may hasten that moment. Struggling private payers will increasingly make like NICE and refuse
to cover $30,000 drugs that extend life for only a few months. "Couple that with all the front-page investigations we'll see
about people who lost their health insurance and then get presented with a huge bill for their cancer medication—these drugs
will become exhibit A in the case against high prices," says Arthur Daemmrich.
Generics The global generics market is expected to expand 5 to 7 percent to $68 million in 2009. That is consistent with 2008's 5
to 7 percent growth, but markedly lower than the double-digit rates of previous years. Generics will be OK'd for sale in Japan
for the first time next year, while Spain and Italy will also see first time rapid uptake. The copay gap will increase in
the US, with four-tier pricing and other payer-to-consumer cost shifts. This will help accelerate the so-called class effect,
says Albert Wertheimer, director of the Center for Pharmaceutical Health Services Research at Temple University's School of
Pharmacy. "A first generic entry will reduce branded sales faster than expected because it takes out the whole class," Wertheimer
says. "Ironically, many me-too drugs are very much at risk."
The industry will lose $24 billion in sales to patent expirations in 2009—not a spectacular amount by current standards. Big-ticket
drugs going over the cliff include Takeda's $3.5 billion-a-year proton pump inhibitor, Prevacid; Sanofi-Aventis' blood-thinning
behemoth, Lovenox ($3.1 billion); Johnson & Johnson's anti-epileptic, Topamax ($2.2 billion); GSK's genital herpes cream,
Valtrex ($1.6 billion); and Shire's ADHD drug, Adderall XR ($900 million).
Bain predicts a sustained generics jump through 2011, as pharma loses as much as $105 billion to the patent cliff. But once
the industry reaches the other side—that would make the cliff a canyon—the annual incursion of new copycats will sink by half.
"Generics will have the wind in their sails for the next few years," says Tim van Biesen. "But they will run out of new products
after that—and they have no clear path to new revenue." Competition in top therapy areas is already driving prices down, says
A surprise trend: Brands like Pfizer's Lipitor are outselling projections in certain foreign markets. "These consumers trust
pharma's strong brands more than generics," says PA Consulting Group's Gary Liberson. "As the global market unifies, I would
expect to see Big Pharma start branding their companies, like Johnson & Johnson does."