Generics take the lead
For some time now big pharmaceutical companies have been losing patent protection and the generic market has boomed. In 2011, the global generics market was estimated to be worth approximately $225 billion. By 2016, it is expected that this will have risen to $358 billion, representing more than 18% of all pharmaceutical sales.
Nowhere is the generics market growing faster than in emerging economies, creating a two-fold challenge for many large pharmaceutical companies operating within the EMEA region.
If the cheaper, generic drug market is to be dominated by companies in emerging nations, the model of relying on one or two ‘blockbuster’ drugs is no longer viable and all organizations are challenged to find more diverse sources of revenue.
To do this, companies will need broader and more diverse strategies, as well as new skills to bring those strategies to fruition. Specifically, these skills will include:
- Technology skills to improve global collaboration and enhance data capture systems
- Big data analysis skills to lower risk and identify new opportunities
- Community engagement and management skills—communities want and expect a greater say in health outcomes and how government funds are spent.
On top of this, emerging markets more generally are driving growth in the industry.
IMS forecasts show that global spending on medicines will reach $1.1 trillion by 2015, but that revenue growth will slow (from approximately 6% between 2005 and 2010, to 3% between 2010 and 2015). And the combined US and European share of spending will shrink from 61% in 2005 to 44% by 2015 as emerging markets grow from 12% in 2005 to 28% by 2015.
The impact of $120bn of product revenues losing patent protection in major western markets from 2011–2015 will leave emerging market and generic growth as the main drivers of global pharmaceutical spending. In fact, aggregate emerging market revenues are forecast to grow at a compound 14% between 2010 and 2015. If the pressure on the US and EU markets lessens after the ‘patent expiration cliff’, and low levels of growth return (say 3%), global growth would then be around 4% between 2015 and 2020. Either way, the gap between the two markets is clear.
The simple message is that the pharmaceutical market globally is still growing, but that profit margins are declining and a larger share of investment and growth is to be found in emerging markets.
For life science companies, the challenge is to balance growth and investment across emerging and developed markets, and to ensure that their access to the right talent and research (as well as other key capabilities) matches the market opportunities. The key question companies need to ask themselves now is, ‘How well-positioned are we to capture growth in emerging markets and are we adapting our staffing strategies to match?’
For more on the issues shaping Life Sciences and the pharmaceutical industry, see the full report here: Making Life Sciences a Magnet for Talent