Macro Benchmarks: Recession Spins Record Low Sales Growth
No performance audit is complete without an overall picture of the macroeconomic environment that all pharma competitors must
confront. Medicines have been a key casualty of the worsening global economy, particularly as public budgets face the strain
of higher unemployment and the increasing costs of benefits in aging societies.
In contrast to previous downturns, the pharma industry has proved not to be a "safe haven" against recession. The IMS forecast
for 2009 indicates the global recession will push growth in pharmaceutical sales to less than 3 percent (topping $750 billion),
down from nearly 5 percent in 2008.
A significant pullback has been underway for several years in the US market, with sales growth for this year pegged at around
one percent, or approximately $300 billion, down from 3.8 percent. The steep shortfall in demand has been accompanied by stiffer
resistance to price increases among US payers, with prescription unit growth forecast to rise by only 0.9 percent over 2008.
Three key conclusions can be drawn from analysis of the macroeconomic environment. First, the industry is no longer immune
to broader structural pressures confronting the global economy and can be expected to be a target for cost-cutting as the
size of the health sector increases in proportion to the overall economy. Second, the US is no longer the growth driver for
the industry worldwide, a trend that could be accentuated if comprehensive health reform legislation is enacted later this
year. Third, the capacity of the industry to exert pricing power against a consolidating payer base is shrinking fast, suggesting
that future growth is going to depend on a much more robust value proposition for products competing in crowded therapeutic
With this as the essential context, let's review the details driving results for the 27 surveyed companies.
SALES & SALES GROWTH
Figure 1 ranks our "Heaven 27" from highest dollar sales to lowest dollar sales in 2008. The gap is significant, from Johnson
& Johnson, the poster child for decentralized diversification, at $63.8 billion; to Endo, a specialty drugmaker focused on
pain management, at $1.3 billion. This metric illustrates how the industry's current "Big Five" are in fact a statistical
anomaly, considering the more modest size of most of the companies in the audit. Of the "Stealth 10" now added to the survey,
only one—Teva, at $11.8 billion—has revenues of more than $10 billion.
FIGURES 1 & 2
Much more important than total sales is the capacity to grow revenues, particularly in the current ravaged economy, with its
fiscal deficits and steep budget cuts for reimbursed medicines. Figure 2 illustrates the maxim "grow or die." In a hostile
demand environment, achieving real growth based on customer acceptance of value is no easy feat. Mylan Labs, a leader in generic
and specialty drugs, snared the number one spot in revenue growth for 2008—and by a large margin, outpointing runner-up Celgene
nearly two to one.