Pharm Exec's Pharma 50 2014 - Pharmaceutical Executive

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Pharm Exec's Pharma 50 2014


Pharmaceutical Executive


Pharma 50 Insight: The Accelerating Growth of Specialty Markets


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A highlight of the Pharma 50 ranking over the last few years is the steady upward trajectory of companies with a strong franchise in specialty medicines. Specialty markets are appealing to companies that have a strong research and development pipeline, are prioritizing serious unmet medical needs, and are taking a more personalized approach to the traditional relationship between physicians and patients. This is why we find it appropriate to examine in more detail the factors that drive success in the specialty drug market as well as likely key areas of growth in this segment over the next five years.




Overall, this market has experienced significant expansion since the turn of the decade, with steady gains experienced across all geographies. Specialty pharmaceuticals comprised 19% of total global sales in 2008; in 2013, it reached 24%. More important, growth in the segment outpaced overall sales. Whereas, global sales of all pharmaceutical products in absolute terms rose from around $700 billion in 2008 to $880 billion in 2013—a 25% increase, according to IMS Health's MIDAS database—the specialty drug portion expanded at double the rate, at about 50% in absolute terms.

The conventional wisdom is to define specialty as products that treat smaller patient populations with higher treatment costs. In order to provide a consistent classification, IMS Health defines specialty products as medicines that treat specific, complex diseases with five or more of the following attributes:

Use in treatment of chronic conditions.

Initiated by a specialist.

Requiring special handling and administration, including subcutaneous injection.

Subject to unique distribution arrangements.

High price points.




Extensive patient care service, monitoring, or education.




The trend in favor of specialty shows every sign of continuing. Specialty products now represent a larger portion of the biopharma R&D pipeline: we estimate that more than 50% of early- to late-stage pipeline compounds are specialty products. In addition, these products are selling outside the traditional geographic markets of the US, EU5, and Japan. There is an assumption that high prices limit the potential for these drugs in these non-traditional markets—in fact, sales are growing, though not always for the originators of the molecules.




As companies continue to invest in this space, a key area of interest is better understanding of the historical growth trends in specialty. Such context is critical to answering this question: which are the areas that Pharma 50 companies should concentrate their investments to expand and grow into the next decade?




Our analysis finds three answers to the question. First, building a truly global business requires developing assets in the specialty segment, if only because sales and volumes of these drugs are increasing in almost every geography. Market demand is turning more towards specialty products, and for the top integrated players represented in the Pharma 50, being able to meet this demand is an acute strategic imperative. Second, the market channel structure within the specialty field is changing, as more products are being sold in the retail sector rather than in hospital or specialty clinics. This opens significant new possibilities in terms of a broader audience reach, with a strong "willingness to pay" component. Finally, we are seeing therapeutic class concentration, with a potential impact on the future competition: the top seven therapeutic areas in specialty now seem to account for about 75% of all sales of specialty products.




An important caveat in interpreting all figures in this article is that IMS sales data is based on the ex-manufacturer invoice price, exclusive of rebates, discounts, and patient access schemes. In some geographies (e.g., oncology in Europe), this could mean that the entire increase in sales does not translate directly back to the manufacturer because discounts to the price may be in place. Nevertheless, we are confident that the trends identified are representative of what is actually occurring in the market.


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