2010, Year of Collaboration
2009 was a ‘Year of Consolidation’ for the life
sciences industry. The economic downturn has altered the way of
conducting business. Increasing cost of conducting clinical trials,
drop in the bottomline, patent expiry of blockbuster drugs and fall in
the new product launches, will continue to haunt big pharmaceutical
companies—but the outlook looks up.
IMS Health observes that the value of the global pharmaceutical market
in 2010 is expected to see a flat growth of 4—6 percent on a
constant dollar basis, exceeding Rs.38.58 lakh crore ($825 billion),
driven by stronger near-term growth in the US market.
Commenting on the global pharma market, Murray Aitken, senior
vice-president, Healthcare Insight, IMS Health, says,
“Overall, market growth is expected to remain at historically
low levels, but stronger-than-expected demand in the US is lifting both
our short and longer-term forecasts. The economic climate will continue
to be a dampening influence in most mature markets, particularly in
countries with rising budget deficits and publicly-funded healthcare
systems. In the US, pricing flexibility and inventory management
actions are contributing to much higher growth than anticipated earlier
this year, and are the main reasons for the upward adjustment to our
The IMS Health noted that near-term growth prospects in the US have
strengthened in recent months, reflecting both sustained levels of
price increases and changing inventory stocking patterns. Pharmacy
chains are more tightly managing their inventory levels based on
expectations of patient demand, which has led to greater purchasing
volatility than in the previous years. This also has played a role in
unusually high sales growth in the first quarter of 2009, relative to
forecast expectations. The US market growth in 2009 is now expected to
be 4.5—5.5 percent, and 3—5 percent in 2010. While
payers seek to limit price increases and boost the use of lower-cost
generics, pharmaceutical manufacturers are expected to maintain their
pricing practices, competing on the basis of clinical evidence and
Growth has slowed in countries where there is high out-of-pocket
spending on pharmaceuticals and steep declines in macro-economic
activity, especially in Russia, Mexico and South Korea. At the same
time, growth has been less affected to date in countries where drugs
are largely funded publicly, such as in Germany, Japan and Spain.
However, new cost-containment measures expected to be introduced during
the forecast period likely will impact the pace of growth in these
markets. In the US, pharmaceutical manufacturers’ efforts to
expand access to and awareness of patient assistance programs, as well
as co-pay subsidies for patients in need, are limiting the impact of
the economic downturn to some extent.
Consistent with the trends of the past several years, the year is
expected to reflect a significant imbalance between new product
introductions and patent losses. This is the primary factor limiting
global pharmaceutical market growth to the mid-single digits. At the
same time, new products that will enable innovative approaches for
treating patients suffering from diseases such as osteoporosis,
respiratory ailments, thrombosis, multiple sclerosis and cancer are not
expected to generate the same magnitude of sales as products losing
Despite economic conditions significantly affecting some
markets—notably Russia, Turkey, South Korea and
Mexico—the seven pharmerging countries that include China and
India are expected in aggregate to grow by 12 -14 percent in 2010.
China’s pharmaceutical market is expected to continue to grow
over 20 percent annually. The economic climate has heightened
concerns by payers about healthcare funding, and intensified their
efforts to limit access to non-generic drugs. This has pushed the
countries having healthcare system in place to take necessary measures
such as encouraging generics players.
A number of events may occur in 2010 that also could have a long-term
effect on the pharmaceutical market. These include the potential for
passage of comprehensive healthcare reform in the US as well as
legislative or regulatory actions in other countries, the
magnitude of the H1N1 pandemic, and the timing and extent of the global
The fundamentals for biotechnology industry, such as the number of
products in clinical trials, new product approvals, profitable biotech
companies and industry mergers and acquisitions will continue to remain
favorable. The biotechnology industry like 2009 will continue to pass
through tough period from venture capitalists. There will be casualties
along the way among the undercapitalized and under-performing
The companies from the APAC region such as contract manufacturing
particularly in generics and active pharmaceutical ingredients,
contract research, clinical research continue to do better due to lower
costs of production in general as well as in improving ability of
international regulators expectations.
Aitken of IMS Health notes, “While our outlook for the global
market is more positive than earlier in the year, the fundamental
dynamics of the innovation cycle, funding pressures, and the broader
macroeconomic environment will result in mid-single-digit growth over
the next five years. Notwithstanding the improved prospects in the US
market, the drive by pharmaceutical manufacturers to adapt to the
longer-term marketplace trends and evolving patient needs will continue
“In future, pharmaceutical companies will not be able to
“profit alone”. They have to ‘profit
together’ by collaborating with a whole range of
organizations, from academic institutions, hospitals and technology
providers to companies offering compliance program, nutritional advice,
stress management, physiotherapy, exercise facilities, health screening
and other services,” observes Abhijit Ghosh, Pharmaceutical
& Life Sciences Leader, PricewaterhouseCoopers Services LLP
The life sciences companies have to look for collaboration,
consolidation and profit sharing to be successful in near future.
- Expect industry-wide, intense efforts to reduce healthcare
costs by hospitals, physicians, payers, employers and other providers.
- The US Congress passes healthcare reform legislation
– as it hopes to do – expect major adjustments that
would include insurance market and payment reforms, the addition of
dozens of new agencies and grant programs, reimbursement and pricing
pressures, increased oversight, tax changes and the overall
implications of increased coverage and consumer demand.
- Physicians and providers will be scrambling in 2010 to
adopt healthcare IT to reap bonuses in 2011 under the American Recovery
and Reinvestment Act.
- Expect greater emphasis on Medicare fraud and abuse
recovery. The Obama administration has boosted its fraud and abuse
budget for 2010 by 50 percent, and a significant portion is dedicated
to prosecution and enforcement. An increase in enforcement for Medicare
billing errors is also expected.
- The technology and telecommunications sectors will become
leading players in healthcare. With a huge boost from the 2009 stimulus
package for broadband funding and healthcare IT expansion, technology
and telecommunications companies are aggressively capturing a growing
share of the healthcare business.
- Big pharma’s role will grow. The role of
pharmaceutical and life sciences companies will evolve from
manufacturer and supplier to full partner on the healthcare delivery
team as its focus shifts from lab-based outcomes to promoting
prevention and patient outcomes.
- Physician groups will join health systems. The percent of
hospitals employing physicians has nearly doubled since 1994, and PwC
expects the trend will continue in 2010 as physicians seek greater
stability and electronic connectivity.
- Alternative care delivery models will emerge, as
traditional care delivery models will give way to alternative models of
care outside of physicians’ offices and hospitals. Expect to
see an increase in the number and scope of services offered by
work-site and retail health clinics and home health services as well as
other technology enabled delivery such as e-mail, telehealth and remote
- H1N1 will elevate emphasis on readiness for public health
outbreak. Another wave of H1N1 flu in 2010 will put pressure on
healthcare organizations, public health officials and employers to
re-evaluate readiness for a major public health outbreak.
- Community health will become a new social responsibility.
In 2010, a new social responsibility for community health will emerge
among employers, healthcare leaders and community leaders, with a major
boost in funding from the government.
PricewaterhouseCoopers’ Health Research Institute