This paper provides a brief overview of the likely evolution of the pharmaceutical industry in coming decades. Pharmaceutical companies face many challenges, particularly in regards to the fact that so many lucrative drugs are losing their patents, enabling cheaper generics to replace them. Likely future sources of revenue are anti-obesity drugs and diabetes drugs.
Pharmacutical Industry
What do you think the pharmaceutical Industry will look like in 10 years? Why?
What do you think the pharmaceutical industry will look like in ten years? Why?
Despite the sharp upturn in profits over the past twenty years for the pharmaceutical industry, there is grave concern amongst industry insiders that this cannot continue indefinitely. "Increasing price and cost pressure, regulatory changes and expiring patents are leading to shrinking margins in the pharmaceutical industry. Almost three in four companies believe their industry is in a strategic crisis" (Berger 2013). This is despite the fact that "the top 10 pharmaceutical companies were able to increase sales by about 13% between 2009 and 2010" (Berger 2013). Concerns abound that the failure to create a new 'hot' drug will create substantial downward price pressure. "R&D costs have risen by more than 80% worldwide over the past 10 years. On the other hand, the number of new product launches has dropped by 43%. Therefore, almost half of the companies surveyed believe that the Return on Investment (ROI) in the area of R&D is more or less negative" (Berger 2013).
One potential area of growth is the developing world: emerging markets are expected to increase in size about 12%. By 2016, especially in China, Brazil, India and Russia, "emerging markets will account for nearly 40% of the global market for pharma solutions by 2016 (Berger 2013). However, this cannot abate concerns about the rash of drugs that are facing what is known as the 'patent cliff' -- "40 brand-name drugs -- valued at $35 billion in annual sales -- lost their patent protection, meaning that generic companies were permitted to make their own lower-priced versions of well-known drugs like Plavix, Lexapro and Seroquel -- and share in the profits that had exclusively belonged to the brands" (Thomas 2012). Not only are these drugs more attractive to consumers because of their low cost -- in many instances, insurance companies will not pay for non-generic drugs if the cheaper generic version is considered to be pharmaceutically equivalent to the non-generic. Pharmaceutical companies will suffer a profound financial blow if they cannot create new non-generic drugs that are equally demand as these former warhorses that drew in such revenue to their coffers.
However, there are some 'hopeful' signs, not necessarily hopeful in terms of what they suggest for human health, but hopeful in the sense that they are likely to be sources of profit for pharmaceutical companies within the next coming decades. The rise in obesity and chronic conditions associated with obesity such as type II diabetes is also expected to be a major growth area for 'big pharma.' Today, the worldwide estimate of persons with diabetes is 177 million, according to the World Health Organization, with an expected increase to 300 million by 2025 (Diabetes, 2013, WHO). "The oral diabetes market could be worth more than $18 billion by 2020" (Carroll 2013). There is particular interest in growing the market for diabetes drugs administered by mouth (versus injection such as insulin) and treatments for early stage or pre-diabetes (Carroll 2013).
In terms of the most lucrative products for diabetes: "insulin, test strips, glucose monitors and anti-diabetic drugs" lead the market, which is one reason pharmaceutical companies such as Novo Nordisk are placing such emphasis on oral medications in their R&D portfolios (Global diabetes drugs market and diabetes services market, 2013, PR Web). At present, the age demographic between 40-59 years has the highest rate of diabetes. "However, this age bracket is expected to shift to the age-group 60-79 years by 2030" (Global diabetes drugs market and diabetes services market, 2013, PR Web). The drug maker that can deliver the 'next new thing' in diabetes drug treatment is likely to profit greatly from this surge in diabetes, particularly if it can be tolerated by older patients.
Given that obesity is associated with increased risk of blood pressure, heart disease, and osteoarthritis, drugs which specifically treat all of these obesity-related conditions will grow more in demand. Finally, drugs which treat obesity itself are likely to become of greater interest. Drugs to treat obesity have been stubbornly difficult to develop, given the multifactorial nature of the condition in terms of its etiology and causation. Still, obese patients remain a coveted demographic. "Valued at more than $130 million in 2009, the U.S. obesity drugs market is expected to grow at a healthy compound annual rate of 4.0%, with sales reaching nearly $160 million in 2014" (U.S. market for obesity drugs, 2013, Life Science Intelligence.).
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