Healthy Skepticism Library item: 10441

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Publication type: media release

Global Pharma Market Predicted to More Than Double In Value to $1.3 Trillion by 2020: Industry Must Transform to Capitalise On Opportunities
PricewaterhouseCoopers 2007 Jun 13
http://www.pwc.com/extweb/pwcpublications.nsf/docid/91BF330647FFA402852572F2005ECC22

Full text:

London, 13 June 2007 – The global pharmaceutical market will more than double in value to $1.3 trillion by 2020, according to a new report on the future of the pharmaceutical industry released today by PricewaterhouseCoopers. The increase is driven by soaring worldwide demand for medicines and preventative treatments as the population grows, ages, becomes more obese and more prosperous.

By 2020 the E7 countries – Brazil, China, India, Indonesia, Mexico, Russia and Turkey – could account for as much as one fifth of global pharmaceutical sales. Further, the chronic conditions in the developing world will increasingly resemble those of the developed world. But PricewaterhouseCoopers report indicates that the current pharmaceutical industry business model is both economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets. In order to make the most of these future growth opportunities, the industry must fundamentally change the way it operates.

PricewaterhouseCoopers report, entitled Pharma 2020: The Vision – Which Path Will You Take?, contends that despite unprecedented global demand for its product, the pharmaceutical industry is at a pivotal point in harnessing its ability to capitalise on these opportunities. Pharmaceutical companies are facing a dearth of new compounds in the pipeline, poor financial performance¹, rising sales and marketing expenditures, increased legal and regulatory constraints and challenges, and tarnished reputations. At the same time health care payers and providers everywhere have recognised that current health care expenditure levels are also unsustainable unless they deliver more demonstrable care and cost benefit over the long term.

Dr. Steve Arlington, global pharmaceutical research and development advisory leader, PricewaterhouseCoopers, and principal author of the report, commented:

“The pharma industry will not be in a strong position to capitalise on opportunities unless R&D productivity improves. The core challenge for the industry is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced. It is simply an unsustainable business model.

“Over the next decade, the industry must shift its investment focus more toward research and less on sales and marketing. Pharma’s traditional strategy of placing big bets on a few small molecules, marketing them heavily into primary care with the aspiration of achieving blockbuster sales, will no longer suffice. It must focus on the development of medicines that prevent, treat or cure. These must demonstrate tangible benefits and tackle unmet medical needs. Governments and payers must play their part and ensure the industry is rewarded for these efforts.”

Some of the major changes which PricewaterhouseCoopers forecasts for the industry are:

*Emphasis on outcomes to increase.
The focus on outcomes and measurement of outcomes data will drive product development, pricing and reimbursement decisions and risk-sharing agreements between industry, health care payers and providers and regulators. Successful companies will prove that their products really work and add value. Companies will also be rewarded with a fair price for new therapies according to the level of improvement over existing medicines. Risk-sharing agreements will become more mainstream with drug manufacturers adjusting prices according to the results of outcomes analysis data that demonstrates drug efficacy.

*Compliance monitoring becomes win-win for patients, payers and providers.
Solutions to monitor and ensure that patients are fully compliant with their medications could generate more than $30 billion of revenue a year in new sales, and would improve outcome and patient safety. One U.S. study found that 20 per cent of Americans never fill their original prescriptions, or use other people’s medicines, and 60 per cent of patients cannot identify the drugs they are taking. This not only affects safety and outcomes, it creates risk and revenue loss for pharmaceutical companies. Pharmaceutical companies will revise their proposition, employ new technologies and develop personalised compliance monitoring techniques as a value-added service to patients, payers and providers. Improved patient compliance would also help clinical studies and outcomes.

*Focus will shift from treatment to prevention.
Preventative health care represents a huge opportunity for both health care providers and the pharma industry. Currently only three per cent of health care spending on OECD countries is used for prevention, yet the WHO says up to 80 per cent of heart disease, stroke and diabetes and 40 per cent of cancer could be prevented. Recognising the cost effectiveness of preventing diseases among healthy populations rather than treating sick populations, pharma will enter the realm of health management, with wellness programmes, compliance monitoring, vaccinations and other value-added services. There are currently 245 pure vaccines and 11 combination vaccines in clinical development, and the market is estimated to be worth as much as $42 billion by 2015.

*New technologies will drive R&D.
Transformational technological changes in the pharmaceutical industry will reshape the business strategies of pharmaceutical companies. The role of genetic-based diagnostics in the development of personalised medicines has already shortened the R&D cycle for those products. Further research into the human genome will open up a new world of opportunities in molecular science and new ways of looking at targets. These new technologies will be used to improve understanding of diseases and link genomic and clinical data. The development of molecular delivery platforms could speed the development of new products that leverage existing/approved platforms. The convergence of therapeutics and medical devices, which started in earnest with the drug releasing stent, will continue and they will become increasingly sophisticated, improving efficacy and reducing the risk profile of many existing therapeutic agents.

*The current linear phase R&D process will give way to in-life testing and live licensing.
The current R&D model, involving phase I, II III and IV clinical trials that typically end in submission for a drug licence and market approval, will be replaced by collaborative in-life testing and ‘live licences’ being issued contingent on the performance of the drug over its lifecycle. The industry will conduct smaller, more focused clinical trials, continuously sharing results with regulators. If testing confirms that a medicine is safe and effective, a live licence will be issued permitting the company to market the drug on a restricted basis. Further in-life testing will extend the licence to cover a larger number of patients or a different patient population.

*Greater international regulatory cooperation.
Already, several national and regional regulators have begun to collaborate by sharing safety and efficacy data. There may well be one global regulatory system by 2020, administered by national or federal agencies responsible for ensuring that new treatments meet the needs of the patient populations within their respective domains. Such a system would help to reduce the spiralling costs of regulatory compliance and reduce time to market.

*The blockbuster sales model will disappear.
It will be replaced by a smaller, smarter and more effective sales force, led by key account managers who will negotiate tender based contracts on therapeutic benefit and outcomes. The imperative will be who can add the most value, not who can sell the most pills. Under this model, most pharmaceutical companies will sell integrated packages of medicines and services, and some services, such as patient monitoring and disease management, may be more valuable than the medicines themselves.

*The supply chain functions will become revenue generating.
The future supply chain will be responsible not only for distribution of all products and services, it will also create new channels through which to market products, so becoming revenue generating rather than a cost centre. Furthermore, 2020 will likely give rise to ‘made to order’ therapies rather than ‘made to forecast’ using just-in-time manufacturing and delivery techniques learned from other industries such as the automotive sector.

*More sophisticated direct-to-consumer distribution channels will diminish the role of wholesalers. The industry’s heavy reliance on wholesalers for distribution will be supplanted as the over-the-counter (OTC) self-medication sector grows and new technologies enable automated dispensing of medicines direct to consumers. Fulfilment of prescriptions for most primary-care medications will be fully automated, whereby doctors will write prescriptions, check reimbursement criteria, and download the script to the patients’ smart health card or email account. Patients will be able to forward the script to an online pharmacy, which checks their identity using a web-based biometric device and mails the medication to their specified address.

Simon Friend, global pharmaceutical leader, PricewaterhouseCoopers, concluded:

“Increasingly pharmaceutical companies are no longer shaping their own destiny. The future will require the industry to take note of growing health care market dynamics involving the demands of payers, patients, physicians, regulators and politicians. For the industry to rise to these global challenges, the current business model needs to adapt, but cannot do so alone. It requires collaboration between all groups driving the delivery of future health care.”

Notes to Editor:

In the six years to March 30, 2007, the FTSE Global Pharmaceuticals Index rose 1.3% while the Dow Jones World Index rose by 34.9%.

To download a copy of Pharma 2020: The Vision – Which Path Will You Take? and a related podcast please visit www.pwc.com/pharma.

PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.