Abstract
Overview
Introduction
Today, pharma companies face growing competition from generics and me-too
drugs, combined with increasingly tough P&R, a clamp down on healthcare
spending, and the need to treat patients for longer due to the aging
population. These factors threaten both current and future revenues prompting
Pharma to adopt a range of corporate strategies to respond to the changing
market dynamics.
Scope
- Review of key external factors impacting Pharma and shaping their
strategies
- Analysis of steps undertaken by pharma companies to achieve cost saving
and improve efficiency
- Assessment of corporate strategies employed by drug developers to generate
new revenue growth
Report Highlights
Fewer drugs are gaining FDA approval year-on-year, primarily due to increasing
pressure the pharmaceutical industry is facing over drug safety, fueled by
several recent high-profile drug withdrawals and black box warnings.
Compounded with the recent expansion of the FDA' s safety powers, this will
have a negative impact on Pharma' s profitability.
The pharmaceutical industry is facing increasingly cost-conscious times, with
a declining ROI and numerous blockbuster products facing imminent generic
competition. This is exacerbated by the increasing cost of licensing and M&A
deals, and a harshening P&R environment.
A key trend in 2007 has been the vast number of job cuts across Big Pharma in
an effort to cut costs, in response to disappointing financial results driven
by patent expiries of key products and resulting generic erosion. Price
pressure and low reimbursement rates, which are impacting company revenues,
are set to continue in 2008.
Reasons to Purchase
- Identify the key trends that are impacting the industry in 2007, going
forward in 2008 and beyond
- Understand what strategic steps pharma companies are making to maintain
their profitability by cutting costs
- Gain insight into how Pharma are capturing new opportunities to sustain
historic growth rates
Table of Contents
- CHAPTER 1 EXECUTIVE SUMMARY
- Scope of the report
- Key findings
- External factors driving change in the pharmaceutical industry
- External factors affecting pricing in the pharmaceutical industry
- External factors affecting proliferation in the pharmaceutical
industry
- External factors affecting product portfolios in the pharmaceutical
industry
- External factors affecting drug penetration in the pharmaceutical
industry
- External factors affecting costs in the pharmaceutical industry
- CHAPTER 2 EXTERNAL FACTORS IMPACTING THE PHARMACEUTICAL MARKET DURING 2007
- Overview of external factors impacting the pharmaceutical market during
2007
- Increased focus on safety is keeping drug approval rate low
- The effects of longer clinical trials on Pharma' s ROI
- Questions over safety and efficacy are the prime causes for delayed
approval
- Strategies implemented to improve drug safety
- Drugs affected by the FDA' s increasing safety focus
- Legislative events continue to significantly impact Pharma
- The FDA Amendments Act (FDAAA) aims to overhaul the drug safety
program but many uncertainties remain
- PDUFA was reauthorized and user fees were raised but the DTC program
was abandoned
- Risk Evaluation and Mitigation Strategies (REMS) can restrict the
market penetration of a drug
- The FDA' s ability to require post-marketing studies has been expanded
- The FDAAA gives the FDA the power to mandate labeling changes
- FDA proposal for new labeling pre-emption rules is upsetting the
lawmakers
- Drug safety will be assessed by two separate bodies
- Manufacturers not complying with the new safety requirements are
subject to hefty civil penalties
- Clinical trial registry and results database
- Pediatric trial exclusivity term is kept at six months for all drugs
despite opposition from the generic industry
- Citizen Petitions may no longer delay the approval of generic drugs
by the FDA
- The FDAAA did not include generic user fees but they may be introduced
in the near future
- Changes in the US patent law may weaken the position of Pharma
- The outcome of the US Presidential and Congress elections will impact
the industry in the world' s largest market
- Republican candidates are against a federal universal healthcare system
- Both leading Democrat candidates are proposing universal healthcare
coverage
- Tightening of pricing and reimbursement across the global pharma market
- Increasing healthcare costs driving cost cutting initiatives globally
at the possible expenses of pharmaceutical innovation
- US - healthcare costs escalate prompting cost-effective initiatives
- Reasons behind escalating healthcare costs
- Medicare unable to negotiate with Pharma on drug prices
- Japan implements further price cuts but delays reforms to P&R
system
- EU - implementing price cuts and reference pricing are the main cost
containment tools used in most EU countries
- Uncertainty over EU P&R reform
- Italy to pay increased attention to pharmaceutical innovation
- France - reimbursement drug list reforms have been insufficient in
cutting reimbursement costs due to lack of physician compliance
- Germany - continues to implement and review cost-cutting policies
- Spain - reference pricing has cuts cost but is also partly
responsible for a drop in investor confidence in Spain as a R&D
center
- UK - further implementation of cost-cutting reforms seen in 2007
- Generics overview in the seven major markets
- The global generics market is growing
- Several measures to increase generics use were introduced in 2007 and
will drive growth in the immature markets
- Generics to be listed twice a year in Japan
- Mandatory generic substitution in Japan
- Education is key to improving generics uptake in all immature markets
- The more mature markets are the most competitive
- Generics companies engaged in price-fixing scams
- Medicaid reimbursement for generics drugs to be reduced
- Wal-Mart likely to push generic drug prices down further in the US
- Biosimilars - a growing threat to biologics
- Europe continues to lead in biosimilars approvals
- Five biosimilars of epoetin alfa were approved in 2007 in the EU
- Substitution is an unresolved issue in many countries, but France and
Spain have banned automatic substitution
- Payers are yet to introduce incentives for the use of biosimilars
- The US is making progress towards establishing a pathway for approval
of biosimilars
- Lifecycle management strategies will also have to be employed for
biologics in the future
- Regulatory focus on immunogenicity is impacting the approval of both
new biologics and biosimilars
- Generic Lovenox was rejected by the FDA
- Patients as consumers now have the ability to influence and alter
healthcare decisions
- The evolving role of patients and caregivers
- Patient advocacy groups now have the ability to influence and alter
healthcare decisions
- Lack of transparent information for patients is affecting public
perception of the Pharma industry - increasing distrust
- Direct to consumer advertising under regulatory scrutiny in the US
- EU to allow companies to provide information to patients
- Current communication practices implemented by pharma companies are
not tailored to patient needs
- The emergence of new prescribers and influencers
- CHAPTER 3 STRATEGIC RESPONSES TO CUT COSTS
- Overview of strategic responses to cut costs
- Outsourcing is increasingly used to cut costs
- Manufacturing is mainly outsourced to India and China
- GMP compliance and safety of products are critical for emerging
market CMOs
- More companies outsource clinical trials in order to speed up the
trial process and cut costs
- Emerging markets are presenting many cost- and time-saving
opportunities for clinical trials
- Many companies are moving some of their own operations to emerging
markets
- Generic drug-makers are also tapping into the cost-saving
opportunities in India
- Is Big Pharma facing an R&D efficiency crisis?
- Pharma enters the biomarker era
- Restructuring the R&D model
- Roche focuses on specialized R&D centers
- Pfizer and Bayer-Schering - cutting costs and concentrating R&D
focus
- Indian companies spin-out R&D
- Which R&D model is best?
- Using contract research organizations to optimize R&D
- Pharma' s evolving sales force effectiveness model through specialized
reps and outsourcing
- 2007 was a year of cost cutting for Pharma
- Increased regulation of sales and marketing set to continue and
intensify in 2008
- Pharma continues to streamline and develop sales and marketing
departments to meet current challenges
- Trends in new media' s role in sales and marketing strategy
- CHAPTER 4 STRATEGIC RESPONSES TO INCREASE SALES
- Overview of strategic responses to increase sales
- Cost-saving drives continued M&A growth
- Factors driving M&A
- Driving expansion and diversity in therapeutic and geographic markets
- Simplifying access to drug candidates
- Increased market penetration through sales force acquisitions
- Divesting non-core assets to focus on core business strategy and
specialization
- Investigating future core areas and focusing on specialization
- Licensing is becoming an increasingly expensive and complex option for
Pharma
- Increased competition and cost drives licensing of early-stage
candidates
- Rising cost of licensing deals increases pressure on cost-conscious
Pharma
- The increasing complexity of licensing deals
- Biotechs increasingly exercise their bargaining power during deal
negotiations
- Deals between Big Pharma set to rise
- Oncology remains the number one therapy area, and will drive the
growth of the biologics market
- Changes in the drug supply chain will impact on both legitimate and
illegitimate players
- Changes to the UK drug supply chain
- Distribution of power shifts from pharmacists to manufacturers under
DTP
- Pharmacies are paying more under Pfizer' s DTP model, for poorer
service
- Widespread changes in distribution will have a wide-ranging impact
- The government' s response to DTP
- Implications for parallel trade in the EU
- Simplified supply chains are insufficient, alone, to combat
counterfeits
- Emerging markets continue to attract Big Pharma despite challenges
- Large patient potential is the main attraction
- Strong economic growth is fueling the demand for modern pharmaceuticals
- IP environment - improving but still a way to go
- Indian Patent Act of 2005 - failing to deliver?
- Chinese IP environment still needs to improve despite signing up to
TRIPS
- Compulsory licenses were issued in several emerging market countries
in 2007
- Increased funding of public healthcare systems gives hope for wider
reimbursement
- Drug pricing is tightly regulated in some countries
- Personalized medicines offer an alternative to the traditional
blockbuster model
- Theranostics - Pharma revolutionizing its approach to diagnosis and
treatment
- Theranostics set to improve P&R of niche drugs
- Investor uncertainty remains the biggest hurdle to theranostics
- Current and future lifecycle management trends
- Pharma moves away from indication expansions to R&D strategies
that offer a greater ROI
- Rx-to-OTC - to switch or not to switch?
- Weighing up the success of Alli
- The pitfalls of Rx-to-OTC switching
- BTC adds another string to Pharma' s bow
- CHAPTER 5 BIBLIOGRAPHY
- Publications and online articles
- Conference literature
- Datamonitor resources
- Databases
- Abbreviations
- APPENDIX
- List of Tables
- Table 1: Drug safety concerns and outcomes in the US, 2007
- Table 2: Three bills were introduced in the legislative houses in the
US in 2007
- Table 3: Euro-Canada health consumer index, 2008
- Table 4: Information needs of patients
- Table 5: Several companies have announced reduction of in-house
manufacturing capacities
- Table 6: Several multinational pharmaceutical companies have
established a R&D presence in China
- Table 7: MNCs prefer to carry out R&D in India in collaboration
with an Indian company
- Table 8: Countries on the US Priority watch list presenting concerns
over IP, 2007
- Table 9: Pharma cost cutting strategies in 2007
- Table 10: Summary of leading M&A deals by value in 2007
- Table 11: Biologic products will experience a more than 10-fold growth
rate compared to small molecules in 2007-08
- Table 12: Rx-to-OTC FDA approvals and non-approvals
- Table 13: Euro-Canada index weightings
- List of Figures
- Figure 1: External factors driving implementation of strategic
responses in the pharmaceutical industry
- Figure 2: External factors affecting pricing in the pharmaceutical
industry
- Figure 3: External factors affecting proliferation in the
pharmaceutical industry
- Figure 4: External factors affecting product portfolios in the
pharmaceutical industry
- Figure 5: External factors affecting drug penetration in the
pharmaceutical industry
- Figure 6: External factors affecting costs in the pharmaceutical
industry
- Figure 7: The impact of an increasingly safety conscious industry
- Figure 8: Legislative events and policy changes impact pharmaceutical
companies' profits in multiple ways
- Figure 9: The FDAAA reauthorizes three acts and introduces several new
provisions
- Figure 10: FDAAA expanded the FDA' s authority to review TV DTC adverts
but the user-fee program was abandoned
- Figure 11: The FDA can require REMS both before and after approval
- Figure 12: New US Patent and Trademark Office rules are unfavorable
for pharma and biotech
- Figure 13: The Patent Reform Act of 2007 proposes some fundamental
changes to the US patent system
- Figure 14: The frontrunners for the US Presidential election have a
great deal of overlap in their healthcare reform plans
- Figure 15: Potential impacts of the US Presidential elections on
pharma industry
- Figure 16: Factors driving tightening P&R
- Figure 17: The impact of tightening P&R in the pharma industry
- Figure 18: Pricing policies in the US, Japan and 5EU, 2007
- Figure 19: Generics use will continue to threaten innovator profits
- Figure 20: Key generic trends impacting the seven major markets
- Figure 21: Biosimilars present a threat to the profits of companies
with biologics
- Figure 22: Events and trends increasing the threat of biosimilars
- Figure 23: The Biologics Price Competition and Innovation Act passed
the Senate but failed to clear Congress in 2007
- Figure 24: Various lifecycle management strategies can be employed to
maximize revenues derived from biologics
- Figure 25: How patient empowerment affects Pharma' s profitability
- Figure 26: Drivers of patient empowerment
- Figure 27: Influence of patient advocacy groups
- Figure 28: Decision-making processes for prescription drugs
- Figure 29: Outsourcing can impact profitability of pharmaceutical
companies in various ways
- Figure 30: Advantages and disadvantages of conducting clinical trials
in emerging market countries
- Figure 31: Is Big Pharma facing an R&D crisis?
- Figure 32: Recommendations to improve R&D efficiency in the pharma
industry today
- Figure 33: Novel technologies such as biomarkers improve R&D
efficiency through a variety of means
- Figure 34: Recent trends in the Pharma-CRO relationships
- Figure 35: How CSOs can boost company profitability
- Figure 36: $115 billion worth of branded drugs from the top 50 Pharma
companies face patent expiry through 2012
- Figure 37: Factors driving M&A and licensing in the pharma
industry today
- Figure 38: The line between licensing and M&A is becoming
increasingly blurred
- Figure 39: Drivers and resistors of co-promotion
- Figure 40: Oncology remains the number one therapy area for licensing
deals in 2007
- Figure 41: The changing face of pharmaceutical supply
- Figure 42: Impending changes to the drug supply chain
- Figure 43: Emerging markets present an opportunity to grow revenues
- Figure 44: Attractions and challenges facing global pharmaceutical
companies operating or wishing to enter emerging market countries
- Figure 45: Factors driving the growth of theranostics in the pharma
industry
- Figure 46: Drivers and resistors of theranostics and personalized
medicines
- Figure 47: Niche drugs experience a greater return of promotional
spend compared to those for large patient populations
- Figure 48: A wide range of brand defense strategies are available,
however timing of implementation is key
- Figure 49: Key factors driving implementation of LCM strategies in the
pharma industry today
- Figure 50: Risks associated with indication expansion launch timing
- Figure 51: Indication expansion - multiple options for driving market
share
- Figure 52: Decline in US indication expansions approved since 2004
- Figure 53: Rx-to-OTC switches in the US and UK, 2001-07
- Figure 54: 2007 US revenues of GSK' s Alli and Roche' s Xenical
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