The IMS Institute for Healthcare Informatics predicts that annual global spending on medicines will reach nearly $1.2 trillion by 2016, as the impact of emerging markets, generic drugs and biologics begins to be felt.
In developed markets (i.e. the United States, Western Europe and Japan) spending will drop to 57% of the global total, due to the lingering effects of the global economic downturn and expiring patents for a number of brand-name medicines. Spending in the United States will recover, but will stay at a historic low. The impact of health insurance reform will positively impact growth in 2014, and the majority of that impact will be in the retail and primary care sectors.
European growth is expected to be in the -1% to 2% range through 2016 (compared to 3.8% for 2007-2011) as austerity programs and healthcare cost containment efforts take a heavy toll. Low savings from patent expiries in are forcing governments to institute policy shifts that encourage greater use of generics and lower reimbursement.
The Japanese market for pharmaceuticals will increase slightly, with growth forecast at between 1 and 4%. A set of reforms implemented in 2010 will encourage the use of new medicines and increase reliance on generics. Japan’s overall population will shrink, but a rapidly aging remaining population is expected to keep demand for medicines strong. The number of innovative new drugs and therapies will increase due to the reforms, reflecting commitments made by manufacturers in return for access to premium pricing for new drug development.
The IMS Institute report * notes that emerging markets will keep on growing to reach 30% of global spending by 2016, as population booms and economic growth contribute to a more widespread use of medicines in these markets. Volume growth in emerging markets will be largely responsible for an increase in annual global spending, from $30bn in 2012 to $70bn in 2016.
Emerging markets will in fact double their spending on pharmaceuticals over the next five years (annual growth is predicted to increase from $24bn in 2012 to around $45bn in 2016), driven by rising incomes, economic growth and better access to medicines through a range of government programs. Generic and other products will account for around 83% of the increase, since consumers still face large out-of-pocket expenses in these markets, limiting the use of name brands and expensive newer medicines accordingly.
New medicines are typically not available uniformly to all patients in all markets, and the wait in some countries to gain access to these medicines can be long. In 2004, the World Health Organization reported that significant gaps existed in the treatment of priority diseases, and issued a call to action to address them.
Traditionally, new products and therapies are launched first in the most commercially attractive markets and only later in emerging markets, though some effort is being made to rectify this. For example, of the 22 new cancer therapies available, two-thirds are available in developed markets compared to fewer than half in emerging markets. Efforts have been made to address these availability gaps, and medicines that were previously only available in a few countries will reach huge new markets over the next five years, bringing life-saving advances in care for diabetes, cancer and autoimmune diseases to millions of new customers around the globe.
According to the IMS report, global launches for New Molecular Entities (NME) will increase, as up to 37 innovative products are expected to be launched per year over the next five years. These developments will include new therapies for Alzheimer’s, autoimmune diseases and various forms of cancer, which have massive potential to transform disease treatment (though it’s important to remember that not every therapy will become available or achieve its clinical aims. There are also further developments in previously launched therapies for hepatitis C, multiple sclerosis and prostate cancer.
The top 20 therapy areas are expected to account for 42% of global spending, led by the fields of cancer, diabetes and asthma/COPD. Seven of the top 20 areas are specialty medicines, usually with new mechanisms and improved efficacy, and they represent many of the most important innovations global medicine has to offer. These medicines include new breakthroughs for melanoma, prostate cancer, autoimmune diseases, lupus, multiple sclerosis and hepatitis C.
As mentioned previously, generic medicines will rapidly grow in popularity, because of patent expiration in developed markets and volume-driven growth in emerging markets. At the same time, cheaper versions of previously expensive biologic medicines (known as biosimilars) will find their way to the market but have a slight initial impact, accounting for only 2% of spending on biologics by 2016, due to the fact that biologic medicines will stay protected by patents or enjoy near-monopolies on distribution in many countries.
In conclusion, all measurable signs predict that global spending on medicines should increase reliably in the near future, and the most important conclusion to be drawn is that the future clearly belongs to those innovators who can solve the related challenges of access and affordability.
* The Global Use of Medicines: Outlook Through 2016 Report by the IMS Institute for Healthcare Informatics