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Global pharmaceutical sales are expected to grow about 3% annually from $955 billion in 2011 to nearly $1.2 trillion in 2016, with 17 “pharmerging” countries—led by China, Brazil, Russia, and India—accounting for more than two-thirds of the increase, or about $151 billion. These countries will also represent 30% of the total sales  in 2016, up from 20% of the total in 2011.

By contrast, pharma sales in the U.S. will grow by little more than 1% annually during the same period, from $322 billion to $350 billion, accounting for 30% of the total in 2016—roughly the same as the pharmerging countries—compared to 34% of the total in 2011. Meanwhile, pharma sales in Europe are expected to drop by about 1% annually from $159 billion to $135 billion, reducing the European contribution from about 17% of the total in 2011 to about 12% in 2016.

Overall, developed markets will account for 57% of total pharmaceutical sales in 2016, a steep decline from 73% in 2006.

These projections, released by the IMS Institute for Healthcare Informatics in July, paint a picture that is both sobering and hopeful for Big Pharma. While emerging countries represent fertile sales growth opportunities, making inroads there can be challenging at best. This is especially true since nearly two-thirds (65%) of the expected sales in pharmerging countries are likely to come from generics, with a preference for those produced by local companies. This is in contrast to the 18% market share for generics in the developed world.

In developed markets, “similar policies to control costs are already being implemented to rein in spending on expensive therapies, increase the use of generics, address pricing directly through price cuts or indirectly via discounts or rebates, and develop a market for biosimilars as a lower-cost alternative to original biologics,” said Michael Kleinrock, IMS’s director of research development. “Alternatively, the fast-growing pharmerging markets will be driven predominantly by economic gains and rising incomes.”

Growing markets
IMS defines pharmerging countries as those having more than $1 billion in spending growth from 2012 to 2016 and a per capita gross domestic product of less than $25,000. The 17 pharmerging countries are China, Brazil, Russia, India, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam.

Pharmaceutical sales in these markets will grow by at least 12% annually, increasing by more than $150 billion to $345 billion in 2016 from $194 billion in 2011 as millions more people gain access to basic medicines. Not unexpectedly, China will lead the pack with a 15% growth rate and sales jumping to $155 billion in 2016 from only $67 billion in 2011, IMS predicts.

For several years, Big Pharma has been maneuvering to take advantage of China’s burgeoning growth by heavily investing in facilities for R&D, in manufacturing, and in sales, sometimes alone but often in partnership with domestic firms. But as China’s population ages and demand for Western medicines increases, the government is taking steps to increase availability, but constrain costs. One method occasionally used during negotiations is to require branded manufacturers to license their products to generic competitors, even while patents are current.

Eli Lilly & Co. and Pfizer Inc. have both downgraded their sales projections in emerging markets this year from earlier estimates. Lilly blamed slower growth in China and pricing pressures in other countries for a 4% decline to $612 million in emerging–market revenue during the second quarter, according to the Wall Street Journal. Pfizer’s second quarter revenue in emerging markets rose 8% to $2.6 billion, but the company scaled back its overall growth projections in these markets by several percentage points from last year. Ernst & Young estimates there will be a $47 billion gap between expected and actual sales by leading drug manufacturers in emerging markets over the next four years.

Shrinking markets
Sales growth in developed regions, led by the United States and Europe, is expected to slow due to patent expirations, prevalence of lower-cost generics, and the sustained impact of the global economic slowdown that began in 2008. The projected 1% annual sales growth in the United States  from 2012 to 2016 is a significant reduction from the 3.4% growth seen during 2007 to 2011. In Europe, sales growth is expected to be in the -1% to 2% range through 2016, compared to 3.8% for 2007 to 2011 as austerity programs and healthcare cost containment measures continue, IMS said.

According to IMS, the Japanese market for pharmaceuticals will increase slightly over the next five years by 1% to 4%. “Reforms, implemented in 2010, will continue to encourage greater adoption of new medicines and also shift usage from off-patent brands to generics. While Japan’s population as a whole will decline, an aging population is expected to drive up demand for medicines,” the report said.

While growth in the developed markets will be harder to come by, the branded drug industry will be making the best of it, expecting to bring an average of 35 new molecular entities to market annually. Among these will be new drugs for Alzheimer’s, autoimmune disorders, diabetes, cancer, infectious diseases, cardiovascular and respiratory conditions, as well as orphan diseases, IMS predicts. Among these, oncology drugs will dominate, with at least $83 billion in sales expected in 2016. Diabetes drugs come next, with at least $48 billion expected, followed by asthma and COPD at $44 billion.

Of the nearly $1.2 trillion in global spending in 2016, $615 billion is expected to come from sales of branded drugs, a slight increase from $596 billion in 2011. Most of these sales will come in developed countries. By contrast, sales of generics will hit $400 billion in 2016, up from $242 billion in 2011. More than half of those sales, $224 billion, will be in emerging markets, IMS predicts. The balance will come from sales of other products, including over-the-counter, diagnostics, and non-therapeutics.

About the author
Contributing editor Ted Agres, MBA, is a veteran science writer in Washington, D.C. He writes frequently about the policy, politics, and business aspects of life sciences.