The healthcare ecosystem is a complex network of multiple industries and organizations, all of which form an intertwined web of interdependencies.
The industry, in terms of worldwide prescription drug sales, is estimated to grow at ~6% CAGR and reach >$1 trillion in 2024. There are some key factors that are expected to have an impact on this. Certain trends are also expected to emerge in the process over the next few years.
Key market trends, 2017-2024: Drivers:
It is expected that the global pharma market will be driven by novel therapies in oncology, rare diseases, orphan drugs and also in the fields of biologics and gene therapy. Geographically, apart from USA, the Chinese market is also of significant importance.
Oncology will continue to be a major contributor to the global pharma market:
The top 5 drug segments in the pharma market are oncology, anti-diabetes, anti-rheumatics, anti-virals and vaccines.
The oncology segment was the highest contributor to worldwide prescription sales in 2017. It is expected to grow at a 12.2% CAGR from 2017 to 2024, making it a major contributor in 2024 as well. This growth can be credited to the success of established products like KeytrudaTM, TecentriqTM, IbranceTM, OpdivoTM. Products belonging to the PD1/PDL-1 inhibitors class have reported positive results across various tumours. Immunotherapies in this segment are also the changing treatment landscape and outcomes.
The oncology pipeline has increased by 45% over the past decade. In the coming years, this will help boost the oncology market.
On the other hand, increased treatment complexity, rising cost of treatment, lack of comprehensive reimbursement options are challenges that the market will have to overcome.
Increased focus on rare diseases will boost the Orphan drug market:
The orphan drug market is expected to almost double during 2018-2024. A strong pipeline with faster approval rates is the reason for increased focus on this niche segment. In USA, 75 orphan drugs were approved in 2017. Products in the pipeline are often based on novel technologies like gene therapy and gene editing.
Despite high prices for many rare disease drugs, the distribution of these drugs is highly globalized. For most countries, the cost of these drugs has yet to raise substantial budgetary concerns in comparison to the rising costs for drugs in other categories like oncology, autoimmune disease and diabetes.
Drug types such as biologics and gene therapy will be at the forefront of innovation:
Monoclonal antibodies (mAbs) are the largest segment of the biologics market, followed by therapeutic proteins and vaccines. The penetration of biologic products is set to increase between 2016 and 2022. The biologics pipeline is mainly focused on therapy areas like oncology, immunotherapies and infectious diseases which are also among the top 5 drug segments in terms of global sales. In 2022, biologics are expected to be major contributors to the overall market as the established chemical products face patent cliff and new break through biologics get approved.
According to a report from the Generics and Biosimilars Initiative, a biologic drug costs an average of $22/day compared to a small molecule drug that costs an average of $1/day. Growth in the biologics market will be driven by high levels of prices for new launches for chronic diseases.
Gene therapy drugs act by correcting the condition at a gene level, the root cause of the condition. This ensures that the condition itself is cured with very low chances of relapse. As these therapies are personalized and targeted, they are expected to re-shape the treatment landscape.
As of 2017, out of the 946 gene therapy clinical trials ongoing in the world, ~50% are focused on oncology. However, as of today, there are only 3 FDA approved gene therapies in the market: KymriahTM (Novartis) for treatment of acute lymphoblastic leukemia (ALL), YescartaTM (Gilead Sciences) for treatment of B-cell lymphoma and LuxturnaTM (Spark Therapeutics) for treatment of patients with confirm edbiallelic RPE65 mutation-associated retinal dystrophy. Other key players with pipeline products in this area are Epeius biotechnologies, Sanofi, Amgen, Uniqure, Abeona Therapeutics, Celgene, Adaptimmune and Advantagene.
The biggest challenge for all gene therapies, both marketed and in development, is the final cost of treatment once marketed. Companies will have to find ways to justify the high cost tagged with the treatment, considering the increased emphasis of cost-containment in recent times.
Key market trends, 2017-2024: Challenges
Increased emphasis on cost-containment and the upcoming biologic patent cliff are some aspects that are expected to slow the pharma market growth.
Cost containment in the pharma industry has become a global phenomenon
Cost control measures are increasing in severity worldwide as current rise in drug prices is making healthcare unaffordable even in high income countries. To contain this issue, countries are adopting various policies for price cuts and controls, reimbursement policies and promoting generic medicines. The challenge is how to strike a balance between rewarding investments in innovation, achieving reasonable drug pricing for governments and securing equitable access to medicines.
Reference pricing and value-based pricing are widely adopted measures to control drug prices. Norway follows reference pricing by reviewing pricing of 9 countries and takes the average price of the 3 lowest prices. In UK, NICE operates based on quality-adjusted life years (QALYs), in which it does not recommend medicines that cost more than $27,843 to $41,765 per QALY.
Following this trend, global R&D expenditure is estimated to decrease from 20.4% of worldwide prescription sales in 2016 to 17.1% in 2022.
Increased demand for biosimilars:
Biosimilars are expected to have a major impact on the industry. There has been an increase in demand for biosimilars due to their cost-effectiveness. Biologic patent expirations and loss of exclusivity would increase biosimilar competition even more. The top 20 biologics are already exposed to biosimilar competition. As on 2017, 7 of these have already lost exclusivity in Europe and 6 in USA. Till 2020, as many as 15 biologics in USA will have lost their patents and 14 in Europe.
However, USA biosimilar market still has some catching up to do with the European market in terms of biosimilar approvals. As of December 2017, the FDA has approved only 9 biosimilars compared to EMA’s 33 approvals.
There are several reasons for the slow uptake of biosimilars in USA such as the lack of significant price reductions by manufacturers to payers, difference between the efficacy of biosimilars and their reference biologics, physician reluctance towards the use of biosimilars and uncertainty as to which indications are appropriate for biosimilar use.
Similarly, there is a limited maturity of the biosimilar market in Japan due to reluctance from both prescribers and patients as well as no push from payers.
Emerging economies like China, Brazil and India are more lucrative markets for biosimilars. For example, in Brazil, limited patient access to affordable biologics and the openness of physicians to low-cost therapies offer potentially significant opportunities for biosimilars.
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