That’s a big number and it is also the total amount to be spent globally on medicines in 2014 as estimated by the Institute for Healthcare Informatics, a subsidiary of the for-profit pharmaceutical and health care information company, IMS Health. In its just-released report, “Global Use of Medicines: Outlook Through 2017” (IMS report), the Institute provided a readable summary of trends and drivers for those interested in global pharmaceutical business. Using the multiple data streams of the parent company, the authors forecasted a modest growth rate of about 3% with higher rates of growth outside the major market countries. In the mature market countries, defined as having have health care spending of more than $100 per capita, they gave growth forecasts of 0% (Spain) to 5% (South Korea), and in the “pharmerging” market countries (less than $100 per capita) rates of 5% (Turkey) to 15% (China). The report also noted the geographic distribution of spending between the major markets of the US/EU/Japan and the rest of the world (ROW) will be approaching 50/50 in 2014-17. The authors reported their forecasts are more uncertain than those of the past and prepared three alternative scenarios to attempt to bracket the uncertainty. Here is my abstract of their key observations:
- cost containment and slow economic recovery in Europe will limit spending on meds there;
- remodeling of the health care system in the US will affect spending but the direction and magnitude are uncertain in part due to the unpredictable political situation;
- in the major market countries, medicines for cancer, rare diseases, and diabetes will have an increase in their share of the spending;
- in the ROW countries, increases in government investment in health care and the number of out-of-pocket payers will drive the increase in spending with an emphasis on generic meds; and
- while new medicines in the pipeline will significantly improve treatment of a number of diseases that have the large impacts on health in both major market and ROW countries (heart disease, stroke, lower respiratory infections), the pipeline is lacking for meds for diseases like malaria, tuberculosis, neonatal sepsis, and diarrhea that have major impacts in the ROW (HIV treatment is an exception).
Not surprising is that I found the Institute’s big picture confirmed my bias that the future of the pharma industry depends on its ability to meet ROW needs. The report also provides an economic and social framework against which to evaluate the actions and plans of the major global health actors- governments, multi-lateral funding groups, unilateral funders, and companies (multinationals and regionals). As regular readers know, my themes are that to improve global health governments and funding groups should be building countries’ health care systems (including payers like insurance, regulatory and approval agencies, and delivery infrastructure; see my posts, “From Bad to Worse” and “Victory!”) and companies should be building their abilities to sell existing meds affordably and inventing new ones for unmet needs (e.g., my posts, “Playing the Long Game” and “Trickle Down”).
Speaking of ROW strategies for companies, in a recent interview, Andrew Witty, CEO of the big pharma, GlaxoSmithKline (GSK), spoke of GSK’s strategy for India, an important pharmerging market, and gave advice to the industry. As reported by the Economic Times of India (Economic Times article) and noted in FiercePharma (FiercePharma article), he said that he understands the need for the Indian government’s controls on drug prices and its attempt to increase competition by deceasing patent protection, but he also noted that the government should take a less adversarial position with big pharma companies. He was quoted as saying that “there are alternative ways to achieve” cost savings, “and having a good dialogue may create positive ways to do it.” To succeed in the ROW markets, he said that companies need operate in the “real world,” look at the long term, and come up with competitive and efficient business models. Along the lines of the last point, during the same visit to India, he announced GSK’s intent to add to its multi-million dollar investment in expanding manufacturing capability in India by building a $135 million facility, likely in Bangalore (FiercePharmaManufacturing article). In addition to having the capacity to produce upwards of nine billion doses of meds per year, the factory will utilize “continuous processing” technology to reduce waste and cost and will be the second of its kind for GSK, the first being a $50 million plant being built in Singapore. It is interesting that GSK chose southeast Asia for the new plants, not Europe or China, and that Witty stated in an earnings call earlier this year that its commitment to this technology will result in very significant improvement in efficiency and reduction in costs, both capital and operating (also a FiercePharmaManufacturing article). Close behind GSK is Novartis. Starting in 2007, Novartis has been the sponsor of a 10-year, $65 million collaborative program on continuous processing at MIT and last year demonstrated a process that integrated several new chemical processes and equipment and could make a higher-quality drug faster and with less waste (Technology Review article). Novartis’s CEO has said that the company will build a continuous processing facility by 2015 but not where.