It’s been said that a rising tide lifts all boats. But considering the state of pharmaceutical manufacturing in 2014, some boats are being lifted higher than others. Although the state of the pharmaceutical manufacturing union is strong, the continuing growth in the global demand for affordable prescription and over-the-counter drugs is challenging the industry in new ways to be able to manufacture enough safe, high quality drugs cost effectively and efficiently to meet demand. Similarly, the prominent western economic powers, traditionally North America and Europe, are imposing quality standards on companies selling pharma products in their countries. Both China and India are playing their own major role in contributing to worldwide global drug production capacity in the face of a globalizing industry and demand for drugs, but are facing increased pressure to assure they are making therapies, APIs and excipients to global standards of quality.
DEMAND ON THE RISE
According to the IMS report “The Global Use of Medicines: Outlook through 2016,” until recently the industry experienced several years of slowing growth, but certainly not any net decline. For example, the global market for medicines was expected, and reached a low point of 3-4 percent growth in 2012. However, IMS analysts forecast it to jump to a 5-7 percent growth rate by 2016. Total spending on medicines globally is projected to rise to $1 trillion in 2013 and to $1.2 trillion by 2016, says IMS Institute for Healthcare Informatics. In the report “Generic Drugs: World Market 2013-2023,” pharma industry analyst firm Visiongain predicts markets for generic drugs will reach $156.9 billion by 2016, reflecting a compound annual growth rate of 5.5%. Visiongain set the U.S. market at $43.1 billion for generics in 2011, making it the world’s largest national market for generics, followed by Germany, a distant second, at $8.6 billion. Visiongain says “the generics market is expected to achieve significant revenue growth over the forecast period owing primarily to the greater demand for cost-effective generic medicines.”
It’s by now well known that patent expiries peaked in 2012. According to IMS, the industry experienced its lowest annual growth during that
period. Murray Aitken, executive director, IMS Institute for Healthcare Informatics noted that, “The trillion-dollar spending on medicines we forecast for 2016 represents a rebound in growth that will accentuate the challenges of access and affordability facing those who consume and pay for healthcare around the world.”
IMS Institute identified a number of dynamics that are indeed playing themselves out as their analysts revealed in 2012, including the slowing of spending by developed economies. In 2014 the global pharmaceutical market continues to experience the impact of patent expiration. Global pharmaceutical manufacturing production is shifting from branded to generic as blockbuster drugs lose patent protection. Generic drugs now account for more than 70% of all prescriptions issued in the United States. Like branded pharma, these manufacturers are also facing challenges from increased government price controls in many parts of the world. Also affecting global production capacity is the rise of contract manufacturing organizations’ (CMOs) prominence in the global drug manufacturing universe.
Patheon, now currently operating as DPx after merging with DSM, is a case study of how market forces are affecting CMOs and the biologic portion of the industry. Harry Gill, senior vice president, quality and continuous improvement, for (then) Patheon, notes: “We are observing a shrinking fixed asset base among large Pharma, as there has been 4% compound annual growth rate (CAGR) decline since 2007.”
In 2012, says a recent 2013 Frost & Sullivan report “Global Pharmaceutical Contract Manufacturing Market,” the global pharmaceutical contract manufacturing market generated $13.43 billion in revenue and a CAGR of 6.6% through 2017. Solid dose formulations comprise the largest segment, says Frost, constituting 49.8% of the total CMO market. However, injectable dose formulations are identified as a primary outsourcing growth driver through the forecasted period with a strong 13% CAGR.
Ajinomoto Althea, a specialist in cGMP-compliant manufacturing and aseptic filling of sterile injectable therapies, is also producing protein delivery technologies for recombinant protein and parenteral products. According to Ajinomoto Althea’s Jack Wright, vice president sales and marketing, “One of the biggest market trends that will impact …our business specifically in the years to come, is the increase in outsourcing by Pharma and Biotech companies. The improvements in the CMO market environment stem primarily from new drug approvals, greater funding of biotechnology companies and demand for new services.”
Despite the highest number of patent expiries in history (some 40 in 2012), spending in the U.S. will grow by $35-45 billion over the next five years, representing an average annual growth rate of 1-4%, as newer medicines that address unmet needs are introduced and patient access expands in 2014 due to implementation of the Affordable Care Act, explains IMS. In Europe, growth will be in the -1 to 2 percent range due to significant austerity programs and healthcare cost- containment initiatives.
Health systems in pharmerging markets are also increasing spending on drugs, driven by rising incomes, better access to cost-controlled drugs and the effectiveness of government-sponsored programs aiming to increase treatment access — by limiting patients’ exposure to costs and encouraging greater use of medicines. Most analysts agree Pharma manufacturers will see flat growth in branded products through 2016. However, as noted, small molecule generics manufacturers are experiencing accelerating growth. Treatments for global priority diseases, such as malaria, tuberculosis and neglected diseases are also expected to improve and drive global pharmaceutical capacity expansion.