IMS predicts $1T global drug market by 2017

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Michael Kleinrock, Director of Research at the IMS Institute for Healthcare Informatics
Michael Kleinrock, Director of Research at the IMS Institute for Healthcare Informatics

“Rumors of the demise of the industry are overblown,” Director of Research Develoment at IMS Institute for Healthcare Informatics Michael Kleinrock says when summing up the firm's forecast for the pharmaceutical industry's next five years, bringing the global spend to almost $1.2 trillion. This translates into an increase of between $205 billion and $235 billion. Kleinrock's take was part of a conference call when he ran through trends the industry can anticipate in the near future.

The catch, however, is that "spend" is not the same as sales or revenue. Japan, for example, is looking to rev up its generics use so that unbranded drugs account for 60% of prescriptions in what has long been a prime market for branded drugs. Kleinrock said this market has had a historically low generic use, but the small youthful population cannot support the country's growing geriatric population, making it difficult to sustain a branded drug marketplace.

Similarly, IMS said that while China is poised to overtake Japan in terms of pharmaceutical demand, the country will also lean heavily on generics. IMS predicted that generics will account for 64% of drugs in pharmamerging markets by 2017.

Standbys like the US and Europe will continue to be important to the industry, but financial pressures and patent losses are changing what the branded pharmaceutical marketplace looks like in these geographies.

IMS said that the future will be in small-market, specialty drugs. This is not a surprise for industry watchers who have seen rare disease become a more regular part of the industry's research portfolio, particularly as high-volume conditions, like diabetes, appear to be running up against developments that benefit patients, but not to the extent that they upend care.

Merck's EVP Adam Schechter hit on this point during his company's third-quarter rundown, when talking about the need to fight for share in the DPP-4 diabetes drug market, where its Januvia pill dominates, because the branded space is just not growing. IMS attributes such a stalemate to satisfaction with current medications, a situation which leaves “little or no room for expensive new medicines with only minor incremental benefits.”

Specialty medications are expected to jump by around 30% by 2017. While IMS noted that their high prices may trigger payer ire, the pipeline is somewhat insulated, because these new, small-audience medications will have little competition from biosimilars.

While expanded healthcare coverage could be expected to be a financial boon for the industry, IMS said domestic and global efforts need to be embraced with caution. Part of it is the built-in payer preference for lower-cost generics, but IMS also noted that how universal coverage plays out has yet to be determined. In the US, for example, we still need to find out how many will actually enroll, and then there's the need to understand their health needs. At the same time, the US is still recovering from from the 2007 recession.

IMS said it expects developed market spending to rebound from the $3 billion that bled out of the system during the recession, but that recovery includes math like the following: an expected $113-billion windfall of savings due to lapsing patents, somewhat balanced out by $40 billion in spending on the generics.

The projected US generics scenario is that 34% of the 2012 brand spend will move to generics by 2017, compared to Canada where it will be around 30%, and other developed markets where it will average 22%.

IMS also noted that developed and emerging markets will be focusing on different disease areas. The top classes in developed markets by 2017 for developed countries, for example, will be oncology, diabetes, anti-TNFs and pain, whereas developed markets will focus on pain, CNS drugs and antibiotics. In terms of specialty vs. traditional types of medications, the developed markets' priorities lean more heavily toward specialty medications compared to developing ones which focus on traditional therapies.

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