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E7: The Outlook for Pharmaceuticals to 2012The emerging E7 countries represent the best prospect for growth. The potential of these countries is huge: they have a combined population of over three billion people, and their economies are performing very well. One consequence of this increasing wealth is a growing financial capacity to treat previously unmet health needs. Another is increasing incidence of 'affluence' diseases such as diabetes, as people live longer and have more sedentary lifestyles.
Highlights from the reports...
The Brazilian pharmaceutical market is the third largest in the Americas region, behind the USA and Canada; it ranks first in the Latin American region. Pharmaceutical demand will continue, fuelled by increasing disposable income, therefore the market outlook is positive for the 2011-2016 period. Higher consumption of patented and bioequivalent medicines in Brazil will continue, replacing consumption of similar medicines. Generics sales in Brazil, which represented 17.2% of the pharmacy sector by value and 21.3% by volume in 2010, are expected to continue to grow at a higher rate than the overall pharmacy sector. Recent acquisitions of local generic companies by major foreign multinationals have changed the shape of the generic sector, with multinationals increasing their market share considerably. Pfizer, for instance, purchased 40.0% of Teuto in October 2010, whilst Valeant acquired two local producers in May and April 2010. Additionally, Sanofi acquired the leading local producer Medley in 2009.
The MoH has made lower drug prices a top priority for health authorities in 2011. The National Development and Reform Commission (NDRC) reduced the prices of 162 drugs, by an average of 21.0%, effective from 28th March 2011. The majority of these were antibiotics and cardiovascular drugs. In January 2011, the MoH announced that the Essential Drugs List would be further expanded to cover nearly all government-sponsored grass-roots health institutions. The MoH will also focus on streamlining the centralised procurement and distribution of essential drugs, to bring down drug prices at the supply end and thus lower drug prices for patients. In December 2010, NDRC deputy director Zhu Zhixin reported that preliminary statistics showed the prices of basic medicines had dropped by nearly a third, since the implementation of the Essential Drugs List in August 2009.
The Indian pharmaceutical market is highly competitive and remains dominated by low priced, domestically-produced generics. Despite having the second largest population in the world and a growing middle class with high healthcare expectations, India accounts for less than 2% of the world pharmaceutical market in value terms. In one of the world's better performing economies, spending on pharmaceuticals accounts for less than 1% of GDP and average per capita spending remains one of the lowest levels in the region. India’s biopharmaceutical sector is currently experiencing double digit growth and this is expected to continue, driven by the vaccines market. Growth drivers include education and increased awareness of disease prevention, increases in disposable income and government participation in immunisation programmes. Continued growth is also expected in the diagnostic and therapeutic segments, including cancer and diabetes.
Due to the sheer size of the population, Indonesia cannot simply be dismissed. The Indonesian pharmaceutical market is projected to grow at a low double-digit CAGR in US dollar terms during the forecast period, and it will be the sixth largest pharmaceutical market in the Asia Pacific region by 2016. There are around 240 domestic pharmaceutical manufacturers in Indonesia, with the vast majority located in Java. However, despite the country possessing huge manufacturing capabilities, the complete lack of R&D in domestic companies could affect the market, especially if IPR regulations were tightened. Although multinationals will be unhappy at the legislation requiring all drugs in the Indonesian market to have been manufactured in Indonesia, it could potentially reduce costs in the long term for both the manufacturer and the consumer.
The pharmaceutical market in Mexico remains the second most attractive in Latin America. The Economist Intelligence Unit (EIU) projects a weak exchange rate for the Mexican peso in the forecast period, which will affect the value of the Mexican pharmaceutical market in US dollar terms. The CAGR will be moderate between 2011 and 2016. Some of the factors that will contain the market include: tighter out-of-pocket pharmaceutical expenditure due to tough economic conditions; a number of key pharmaceutical and biologic drugs losing their patents in the next few years; intensifying competition from foreign (generic) producers which no longer need to manufacture locally; an infant bioequivalent generic sector which is expected to shoot up in the forecast period; and price negotiations in the increasingly large public sector.
Russia accounts for just under a third of the total Central & Eastern European pharmaceutical market, due to its population of 142 million; however, in per capita terms, Russia is also one of the smallest markets, compared to Romania. The Russian pharmaceutical market is projected to expand at a relatively high CAGR in US dollar terms over the next few years and will continue to be driven by import growth; a heavy reliance on imports has resulted from the lack of locally-manufactured innovative pharmaceuticals. Over the last few years, import growth has been boosted by the federal drug supply system (DLO). Around 80% of DLO funds are spent on imported pharmaceuticals. The government is currently implementing the Pharma 2020 Strategy, which aims to encourage growth in the local pharmaceutical industry for the period up to 2020.
Turkey accounts for around 42% the total Middle Eastern pharmaceutical market, due to its population and GDP. The Turkish pharmaceutical market is expected to grow by a moderate CAGR in US dollar terms between 2011 and 2016. While the overall pharmaceutical market size is amongst the top 30 largest in the world, per capita spending on pharmaceuticals in Turkey remains low, and given the possible accession to the EU, though this is still at least a few years away, the potential for growth is very promising, compared to more established and mature markets in Western Europe. There is a strong generics industry in Turkey; according to the Pharmaceutical Manufacturers Association of Turkey, generics account for over a third of the pharmacy sector in value terms and just over half in volume terms.