Pharmaceutical industry trends

The pharmaceutical industry is shaped by continuing and emerging trends in its markets and companies.  Some of the more recent pharmaceutical industry trends include:

• Global harmonization of regulations
• Burgeoning healthcare expenditures
• Cost containment
• Emerging technologies

Global harmonization of regulations

To date, there is no global single harmonized protocol for drug approval. There exist separate regulatory bodies and approval processes for each of the pharmaceutical major markets of the USA, Europe and Japan. A new drug will have to go through at least three separate approval processes if it is to be launched in the world's three largest markets, which is a costly and time, consuming affair. To adhere to the requirements of the different regulators, companies often have to undertake further clinical trials in order to meet the regulatory needs of the authorities in the different territories.

With the objective of bringing together the regulatory authorities of Europe, Japan and the United States of America, the International Conference for Harmonization, (ICH) has been set up. The purpose is to make recommendations on ways to achieve greater harmonization in the interpretation and application of technical guidelines and requirements for product registration in order to reduce or obviate the need to duplicate the testing carried out during the research and development of new medicines.

Burgeoning healthcare expenditures

Healthcare expenditure worldwide has now reached approximately US$4100 billion. During the last 40 years the growth in health care expenditure has surpassed that of gross domestic product in all developed countries.  The pattern of this growth in expenditure is shown in Figure 7.

The latest available pharmaceutical statistics show that the European countries spent on average 8.7 per cent of their gross domestic product on health care in 2002. The USA continues to top the OECD ranking for overall healthcare spending at US$5,267 per capita in 2002, more than twice the European average. Although more than half of this USA spending is financed through private spending, public spending per capita in the USA is quite high and amounts to levels equivalent to those of most European countries. In any industrialized country, the share of income spent on health care generally rises with income itself. The OECD Health Report 2004 indicates that the main drivers for growing expenditure are rapid advances in medical technologies, population ageing and higher public expectations.

Health expenditure in the USA grew 2.3 times faster than GDP, rising from 13 per cent in 1997 to 15 per cent in 2002. A key factor in the increasing costs are pharmaceuticals, where spending has risen 1.3 times faster per year than total health expenditure. The USA spends approximately US$1500 billion on healthcare. The private health insurance payments have increased from 21 per cent to 35 per cent while government spending has increased from 21 per cent to 44 per cent during the same period. The prescription drug expenditure in US is at US$160 billion during   2002. Nearly half of this expenditure is sponsored by private insurers.

Cost containment

Pressure for pharmaceutical companies to curtail their total costs come from two sources. First, companies are facing the lowering of selling prices in some regions due to increased regulations on prices by the respective governments, in order to curtail the their increasing governmental healthcare budgets. Secondly, there is also increasing pressures on the major pharmaceuticals to manage R&D and marketing productivity. This is due to rising costs of drug development and patent expirations of some of the key products.

Emerging technologies

Recently, there have been dramatic technological advances in drug discovery. First, the recent decoding of the human genome is a major milestone in the history of medical sciences. This knowledge is expected to help diagnose potential risks for certain diseases much earlier and to uncover new ways to prevent and treat them. Today’s available medicines interact with only about 400 drug targets. However, an estimated 3,000 to 10,000 genes are functionally involved in diseases. In other words, there are more new potential targets that could be explored for new drugs.

Secondly, Proteomics will help illuminate protein interaction at the molecular level and new screening technologies will ultimately lead to the design of novel substances for currently unmet medical needs in the world. At the same time as technology helps increase research productivity, demographical changes in developed countries will also lead to growing demand in healthcare markets, which are expected to continue growing at a faster pace than economies in general.

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