For decades the industry has relied on a steady sprouting of new products to provide growth while older brands nearing the end of their patent life, often described as the 'tail' of the portfolio, have been left to wither. But this approach is wrong-headed, says IMS, as it is the tail that will help companies answer the needs of healthcare systems in the 'pharmerging' markets. The global pharmaceutical industry is experiencing a downturn in growth to around 6 per cent a year, thanks to loss of marketing exclusivity by products in a number of major therapeutic categories, lower contributions from new products because of increased scrutiny of their value and slower take-up by doctors and healthcare systems. Against this trend the emerging markets such China, India, Brazil, Russia, Mexico, Turkey and South Korea , with growth rates in double digit percentages, are assuming much greater importance to multinational drugmakers. For example, back in 2001 the three top markets - the US, Europe and Japan - accounted for a hefty 74 per cent of the growth in the world market for drugs, according to IMS figures. By 2007 that had slipped back to 46 per cent, while the emerging markets advanced from 8 per cent to 25 per cent over the same period.
In 2011, the pharmaceutical landscape will be very different. While the US and Europe will still be the largest regions in dollar terms - at 38 per cent and 29 per cent of the world market respectively - the group of top emerging markets will have leapfrogged Japan into third place with 16 per cent. Japan will have around 10 per cent with the rest of the world accounting for the remaining 5 per cent. Annual pharmaceutical sales in emerging markets is expected to reach $400bn by 2020, equivalent to current sales in the US and the five top European markets combined. "The ability of healthcare systems in emerging markets to afford drugs is on the rise, but the majority are still seeking low-cost medicines," said Murray Aitken, senior vice president for IMS' Healthcare Insight group. "There are some signs of an increase in demand for drugs for 'western diseases', such as diabetes and hypertension, but these markets are still dominated by essential medicines," he added.
That means that some of the top areas of R&D for established drugmakers - metabolic and cardiovascular disease for example - are focused towards areas of the globe experiencing lower rates of sales growth. Lifeycle management The answer is to make more of those older drugs in the portfolio, according to IMS. The current situation with tail products is that they are left to their own devices, and as a result typically lose 17 to 18 per cent of sales year-on-year, he said. And sometimes this can be particularly dramatic, with the biggest declines typically seen in the year after patent expiry when the 180-day exclusivity period for the first-filed generic competitor comes to an end. For example, one of the biggest brands to come off-patent to date was Merck & Co's Zocor (simvastatin) in 2006. In 2005 the drug brought in $4bn for Merck, shrinking to $3bn in 2006 when it lost patent protection in the US and then just $200m in 2007.
But there have been examples where pharmaceutical companies have approached an off-patent brand with the strategies usually adopted by consumer packaged good firms. The result? In exceptional cases a complete reversal of the decline and 10 per cent sales growth, said Aitken. But for now, "all the major pharmaceutical companies are struggling to re-orient themselves away from the mature markets and towards emerging markets." Firms must be prepared to adapt their business models to reflect local and regional political issues and the economic environment in these countries, he added
Meanwhile, companies that have elected to incorporate a generic product portfolio in their strategy, such as Novartis with its Sandoz division, also stand to capitalise on the growth in emerging markets.