Drugs market set to boom but pharma companies need change of strategy

The global pharmaceutical market will more than double in value to $1.3 trillion by 2020, according to the latest industry report 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.

The report, called 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 performance, rising sales and marketing expenditures, increased legal and regulatory constraints and challenges, and tarnished reputations. At the same time health care payers and providers have recognised that current health care expenditure levels are also unsustainable unless they deliver more demonstrable cost benefit over the long-term.

Dr Steve Arlington, global pharmaceutical r&d advisory leader, PricewaterhouseCoopers, and principal author of the report, said: "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."

The report predicts that risk-sharing agreements will become more mainstream, with drug manufacturers adjusting prices according to the results of outcomes analysis data that demonstrates drug efficacy.

Solutions to monitor and ensure that patients are fully compliant with their medications could generate more than $30 bn of revenue a year in new sales, and would improve outcome and patient safety.

Focus will also shift from treatment to prevention. Preventative health care represents a huge opportunity for both health care providers and the pharma industry. Currently only 3% of health care spending on OECD countries is used for prevention, yet the WHO says up to 80% of heart disease, stroke and diabetes and 40% 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 bin by 2015.

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.

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.

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 as the OTC self-medication sector grows and new technologies enable automated dispensing of medicines direct to consumers.