So first, the good news: pharma raked in sales of just under $1.1 trillion last year. According to a recent PricewaterhouseCoopers report, that amounts to a 7.8% increase over 2010. Assuming that all continues to go well, PwC estimated that medicine sales could continue to climb, hitting the $1.6 trillion mark in eight years.
Among the factors thar are in pharma’s favor: older people (who need more meds), population growth and health trends. PwC researchers also noted that, if current trends continue, about 20% of the world’s population will be overweight or obese in eight years. On the micro level, this scenario could play out in the following way:A patient with diabetes, for example, is at risk for a cascade of co-morbid conditions, and those conditions all come with potential drug treatments. So, along with the insulin and/or other therapies (as well as diagnostic devices) that would be needed to deal with the patient’s diabetes, there would also likely be a need for weight-loss drugs (perpetual prescriptions), weight-loss surgeries, hypertension (drugs), heart disease (drugs) and cancer treatments.
Additionally, researchers noted that were the trend toward increased healthcare access to continue through programs such as Mexico’s, (which now provides universal coverage) and a US-supported push to increase China’s health insurance to cover 90% of that country’s population by the end of this year, healthcare could go from being an additional benefit to “being regarded everywhere as a basic human right.” That would mean more drugs prescribed.
PwC noted the potential of biologics to fatten sales numbers, since they are harder to replicate than traditional medications. Researchers said this uniqueness has put the average price of a biologic at $14,750 per patient in the UK, where price controls are much stronger than in the US, compared to $700 for a conventional medication. Bernstein analyst Tim Anderson noted in an October report that biologics also have better pipeline odds, the only exception being that 85% of small molecules make it to the registration phase, compared to 79% of biologics.
In addition to biologics, the authors of the report noted that there is still life in the traditional small molecule market, although they said that the industry has to change how it thinks about development and its hierarchical structures. They also said that the industry needs to think of customers in a more holistic manner, because regulators, healthcare systems, physicians and patients are no longer discrete groups with distinct marketing needs. Instead, they all demand the same thing: value.
The not-bad-but-note-of-caution news: The authors point out that even though new markets offer both the opportunity to move huge quantities of medicine and the opportunity to introduce a plethora of treatments to new patient groups, they are not fresh starts. Many of these markets have been building in tough regulatory requirements as mature markets strengthen the ones they already have. Recent examples cited by PwC include: Russia’s 2010 mark-up limits on imported medicines; the UK’s value-pricing rules that will affect all new drugs from 2014 onwards; and the possibility that Japan could expand its cost-control program, which re-prices medications if their sales surpass expected targets. Then there’s the one-year honeymoon period for new drugs that Germany put in place two years ago. There, new medications must be tested head-to-head with a peer and then “priced in line with the improvement they offer.”
The pushback on this front cannot be underestimated. In addition to governmental requirements like those in Germany, Memorial Sloan-Kettering’s oncologists picked a fight with Sanofi by declaring they would not use Sanofi’s colorectal cancer medication Zaltrap because it was too expensive and wasn’t better than cheaper offerings. Sanofi caved after a month and is offering a discount.
PwC said neutralizing these arguments requires providing proof that treatments save money up front or down the line, presenting real-world outcomes data and developing patient-level relationships with healthcare organizations that put pressure on drug performance as opposed to being purely transactional.
In addition, said PwC, “pharma’s output has flatlined for the past decade. Yet the processes it uses to discover and develop new products remain much the same.” Researchers noted that the lack of new approaches is a failure in terms of innovation and keeping pace with a marketplace that demands hard proof that a new therapy is more valuable, as opposed to being a slightly better version of what’s on hand. The authors wrote that pharma cannot wait this out, because the patent cliff means consumers need only to wait for newer and better drugs to pass from patent-protected status into genericdom.