Pharm Exec's Pharma 50 2014 - Pharmaceutical Executive


Pharm Exec's Pharma 50 2014

Pharmaceutical Executive

Geographic growth

As companies expand outside the mature US, EU5, and Japan triad, they have adapted their traditional commercial models to the customized needs of alternate geographies. For specialty products, this has posed a difficult challenge as treatments may require complex handling or levels of patient care that are hard to secure in areas with poor infrastructure and sporadic practice patterns. In addition, in countries where individual patients bear a significant portion of the out-of-pocket costs of treatment, companies must deploy and fund novel approaches to increase disease awareness and identify patients at risk. It is a necessary pre-condition to gain patient acceptance and position the local market for sales of higher priced therapies. It suggests higher fixed costs to developing the business there.

Figure 1: Specialty market percent of total sales by geography (Data: IMS)
Despite these challenges, the past few years have seen a significant increase in specialty sales and volumes across all geographies (see Figure 1). Using our proprietary information, we find that even with absolute growth in all the markets, the proportion of the specialty segment still increased. The increase was most prominent in the US, EU5, and Japan, with the proportion rising by at least five percentage points in each region. For example in the US, 27.5% of sales were in specialty products in 2013 while the remaining 72.5% were primary care, OTC, and all other prescription products. This proportion increased from 21.5% in 2008, and was driven by new launches and broader adoption of existing treatments.

The geographies on the X-axis represent the market tiering approach employed by IMS Health. For example, what we call the "Pharmerging" markets are split into three tiers. Tier 1 is China, Tier 2 is India, Russia, and Brazil, and Tier 3 includes the remaining 17 Pharmerging countries that have greater than $25,000 per capita income, expressed on a purchase price parity basis, and have five-year pharmaceutical market aggregate growth of greater than $1 billion. Tier 3 countries include Algeria, Argentina, Colombia, Egypt, Indonesia, Mexico, Nigeria, Pakistan, Poland, Romania, Russian Federation, Saudi Arabia, South Africa, Thailand, Turkey, Venezuela, and Vietnam.

For this article, we diverged from the tier model and put Mexico and Turkey with the remaining BRIC countries to reflect the priorities of most pharmaceutical companies, and because these countries are more advanced in their adoption of specialty medicines. In addition, we have included non-retail sales for Brazil and Mexico. All other remaining countries outside the BRIC and the other 17 Pharmerging countries are grouped together as ROW. This group includes the smaller European countries as well as Canada and Australia.

Figure 2: Specialty market percent of total sales by geography and by Pharma 50 (Data: IMS)
If we look specifically at the companies in the Pharma 50 list, we see that the increase in specialty pharmaceutical sales for US, EU5, and Japan is primarily driven by these top companies in global sales of Rx products (see Figure 2). In these markets, there is already a high level of specialty products usage, aided by a well-established infrastructure of specialist facilities and physicians to treat and prescribe these medicines.

There is also a strong increase in their usage likely due to the large investments companies have placed in securing access for specialty medicines in these markets, an increased aging population in these countries, and societal willingness and ability to pay for treatments for complex—often rare— diseases.

The increasing spend on specialty drugs for the Pharmerging markets, including BRICMT and Tier 3, is relatively smaller than the other markets, likely reflecting a higher cost of therapy relative to income, higher levels of cost borne directly by patients, and a relatively younger patient population that carries a greater need for products focused on primary care.

Although companies have been placing significant emphasis on expanding their specialty franchise into these areas, they still face challenges around drug awareness, availability, and affordability. This has slowed the transition to specialty and led to smaller changes in the product mix than in the US, EU5, and Japan. The significant increase in specialty products within ROW also reflects the investments being made by Pharma 50 companies in smaller markets outside of the G7 that have established infrastructure for these types of products (e.g., in Scandinavia, East Europe, Australia, and Canada).


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