IMS Health got all Cassandra-like last week, releasing its annual drug-industry forecast and flagging three pharma firsts—all of them ominous. For the first time, the growth of the global market is expected to bottom out at 5 to 6 percent—a new low—and the top-seven markets will, also for the first time, make up less than half of that growth. Meanwhile, companies will record falling sales of their primary care blockbusters, as one cash cow after another gets slaughtered by new generics.
Even for industry insiders used to watching profit lines go south, the IMS prophecy is likely to prove sobering. Yet the new data also feature nuances that moderate—or at least clarify—the negatives for pharma at a time of steep challenges on every front. "The two top trends," said Diana Conmy, IMS's corporate director for market insights, "are the world-market divergence and the growth of the specialty market."
Doom-and-gloom headlines notwithstanding, global drug sales will climb to $745 billion, keeping the pharmaceutical industry among the leading performers. Growth in the three biggest markets, however, is grinding to a near halt, with Japan at 1 to 2 percent, and the United States neck and neck with Europe at 4 to 5 percent. The jump in prescriptions triggered by Medicare Part D in 2006 has played itself out. "With no more big impact from D," Conmy said, "we're left with the underlying dynamics of these mature markets: high levels of generic drugs and continued cost constraints."
If the top-seven markets in the developed world are disappointing, the top seven on other side of the tracks are seeing double-digit growth. IMS even coined a new term—"pharmerging"—to describe this group previously known as BRIC (Brazil, Russia, India, China) and that now includes Turkey, Mexico, and South Korea. With their economies—and access to healthcare—expanding at record rates, their pharma-market dynamics are due to diverge even more sharply from those in the developed world. That will present drug companies with a host of hurdles, Conmy said, starting with high-stakes struggles over patent laws.
As sales of primary care drugs begin what looks to be an ongoing drop, specialty products for serious unmet medical needs are on the rise. This biologics-heavy segment will grow 14 to 15 percent, hitting $295 to $305 billion. "Oncology will remain the leader in both growth and size over the next few years," Conmy said, "but will moderate slightly as payers struggle with how to address the high prices of innovative therapies." She also fingered new classes in Alzheimer's, diabetes, and hypertension as other up-and-comers.
Reading the omens, Conmy offered this take-home: "Growth is no longer coming from the traditional sources, so in order to take advantage of new opportunities, companies must reevaluate the traditional principles behind their operating models."