Q1: How has the market changed since the IMS forecast in October?
This adjustment to growth expectations is linked primarily to the lowered expectations for overall economic growth that are embedded in the Market Prognosis forecast models. Our econometric model considers GDP, employment, consumer expenditure, government expenditure and other macroeconomic factors. The estimates for these factors, which IMS sources from the Economist Intelligence Unit, have changed significantly since our earlier forecast.
For example, the October forecast assumed GDP would be growing in 2009 in each of the eight major developed markets — in aggregate by approximately 1.1%. Our latest forecast assumes each of these markets will contract this year; in aggregate by almost 2%. Similarly, the October forecast embedded GDP growth in 2009 among the seven high-growth emerging markets of 6.6%; that growth level has been revised down to 4%.
Our 5-year compound annual growth rate (CAGR) is for global pharma growth of 3–6% through 2013; that’s down from the 4–7% range we gave in October 2008.
To the now-familiar factors impeding growth, such as patent expirations, a slowdown in innovative product launches, and hurdles imposed by payers on market access and acceptance, we can now overlay the economic downturn. We should keep in mind, however, that while the pharmaceutical industry is not recession-proof, it will feel the impact of the overall economic climate to a lesser degree than many other industries, where spending is more discretionary.
In the US, the pharmaceutical market has been impacted for several years by the factors I mentioned earlier. Now, we’re also starting to see the impact of rising unemployment, loss of medical insurance, and reduced levels of consumer expenditure. As a result, we’re forecasting a contraction of the US market by 1 to 2% in 2009, an historic low. When we extend our forecast through 2013, we foresee variability in growth by year, but with essentially no net growth.
Mature markets as a whole will contribute lower growth. Among the developed markets of Japan, France, Germany, Italy, the UK, Spain and Canada, CAGR over the next 5 years will be 1 to 4%, down from 2 to 5% forecast last October.
Q2: Although there will be variations on a country-by-country basis, can you provide any additional information about how the European pharmaceutical market as a whole will fare in 2009?
Around the world — and based in part on the extent of the impact of the economic crisis on individual markets — we are seeing patients and payers respond in differing ways. In countries where patients directly pay a high portion of drug costs, such as China, Brazil and the US, we are beginning to see the impact of changing consumer spending behaviour. In the US specifically, we are tracking a slight reduction in office visits and declines in new therapy starts in certain chronic care areas, such as diabetes, hypertension, insomnia and depression.
In more publicly funded markets such as Japan, France and Turkey, we are seeing different policy actions — from stimulus programmes that can have an indirect positive impact on the pharmaceutical market, to the imposition of price cuts in response to budgetary constraints.
Across the board, we’re seeing a greater shift from branded products to generics and more pressure than ever to prove the value of medicines.
Q3: Are there any recommendations that will help companies to take advantage of when there is a rebound in market conditions?
In terms of pure financials, we’re forecasting a $70 billion reduction in the total dollar value of global pharmaceutical sales in 2009 compared to what we had forecast last October. Approximately $55 billion of this impact can be attributed to changes in foreign exchange rates, with the balance resulting from the lower growth rate measured in local currency. This adds urgency to the management agendas of pharmaceutical manufacturers, who already were operating in a tremendously challenging environment. We’re seeing companies take bolder strategic and tactical steps — acquiring research platforms and pipelines; redefining their commercial models and redeploying their commercial resources, including outsourcing more; establishing new organizations to help pursue profitable growth in the emerging markets; and capturing new information about the real world use and value of their medicines in order to support broader market access for their products among payers and patients alike.
Q4: What factors have led to the high growth forecast for the pharmerging markets?
The seven high growth emerging markets we highlight — Brazil, Russia, India, China, Turkey, Mexico and South Korea — are forecast to grow collectively at a 13 to 16% pace through 2013, contributing more than half of global market growth this year and 40 to 50% during the next 5 years. That’s up from 30% last year, and 10% back in 2003.
This high level of growth in the emerging markets, combined with the contraction of the US market and ongoing low single-digit growth in other developed markets, is driving the pharmaceutical market to a new world order. It will result, for example, in China moving from being the sixth largest market today to the third largest market by 2011.
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