IMS Institute projects global pharma market of $1.17-1.20 trillion in 2017

November 19, 2013

Growth includes 1-4% CAGR in U.S., 0-3% in Europe and 14-17% in China. US specialties have a twist

The IMS Institute for Healthcare Informatics has released its annual Global Use of Medicines report, pinning down relative growth rates for the developed world and "pharmerging" countries—a group led by China and Russia, India and Brazil, and including 17 other countries with better-than average per capita incomes and populations. Overall, the trends the report highlights are a continuation of past recent years, but the effects of Obamacare in the U.S., the continuing economic weakness in Europe, and the heightened emphasis on public health in China are all course corrections that will play out over the next five years.

On the product-development and commercialization side, IMS Institute projects that there “will be an increasing split between spending in primary care (largely generic …) and specialist care (heavily focused on newer medicines, and a sharply rising share of the overall medicines bill).” “Specialist care” implies specialty medicines, which IMS Institute defines as mostly injectable, biologic, high cost and requiring cold chain distribution. Overall spending here will grow from $148 billion in 2012 to $193 billion in developed markets (30% growth over the span) and from $23 to $43 billion in the pharmerging markets-a 90% growth rate.

The current (2012) markets for pharmaceuticals are $965.4 billion for the world; $621.6 billion for “developed” (US, Japan, South Korea and Canada, and the EU5—Germany, France, UK, Italy and Spain), and $223.9 billion in pharmerging. China’s current market is worth $81.7 billion, projected to rise to $160-190 billion by 2017. The industry grew, globally, by 5.4% (compound annual growth rate—CAGR) in the 2008-2012 period, and is projected to grow at 3-6% CAGR in the current (2012-2017) period.

Specialties in the US

At Pharmaceutical Commerce’s request, Michael Kleinrock, director of research at IMS Institute, took a closer look at the specialty segment in the US. A preliminary estimate of 2013 sales is $81 billion, up only $1 billion from 2012; the five-year trend is for 5-6% annual growth, to $101 billion in 2017. This is in dramatic contrast to what has been reported by pharmacy benefit managers, who have publicly expressed concerns over “uncontrolled’ growth in specialty costs—rising at double-digit rates.

Why the dramatic differences in projections? The discrepancy, explains Kleinrock, arises from the retail-only environment of PBMs; generally speaking, they don’t manage drug costs at hospitals, or where the drug is covered as a medical benefit rather than a drug benefit. “To a certain extent, a specialty drug now being handled through a PBM is one that was handled previously at a hospital or clinic; the rise in retail sales of specialties is offset partly by the decline in expenditures in those settings,” he says. This has implications for many of the new specialty drugs coming to market; if PBMs seek to control specialty costs by higher copays for patients, or strict prior-authorization policies, they could wind up keeping specialties from broader market acceptance. But a new (and typically more expensive) specialty drug might be the best if not only way to keep sick patients out of hospital beds or becoming incapable of working—both of which have a cost to overall healthcare coverage.