Author: Jean-Claude Muller, 穆卓Executive Editor at BtoBioInnovation  jcm9144@gmail.com

SPECIAL REPORT #6

Prediction for the Global Pharmaceutical Market

A new report issued by IQVIA Institute‘s 2018 Global Use of Medicines : 10 Healthcare Predictions for 2019 showed that global spending on medicines reached $1.2 trillion in 2018, up from $1.1 trillion in 2017 and $1.0 trillion in 2016 and forecasts that the market will exceed $1.5 trillion by 2023- marking a 50% increase within seven years.

This report is summarizing IQVIA’s overview, enriched by some comments made by the btobioinnovation editor.

The global pharmaceutical market will exceed $1.5 trillion by 2023 growing at a 3-6% compound annual growth rate (CAGR) over the next years, a slowdown from the 6.3% seen over the past five years.  The market is expected to be just under $1.3 trillion in 2019. Global growth over the five coming years will primarily be driven by developed markets and a wave of newly launched products (see special report #1) and to lesser extend by emerging markets.  China is still expected to be the fastest growing market with yearly sales reaching $170 billion, the United States will stay the world biggest market with sales above $600 billion, Top 5 Europe countries sales could reach a $200 billion figure, Japan will stay at around $90 billion and Pharmerging countries (China excluded) close to $200 billion.

In 2018, China has been spending $137 billion on various medicines. By 2023 the China market will almost equal the five European market (Germany, France, UK, Italy and Spain) in reaching $170 billion.  Growth which was as high as 19% CAGR in 2008-2013 has slowed down to 8% CAGR in the 2013-2018 period and is expected to further decline to 3-6% through 2023. Much of the growth, in the past, came from government reforms initiated by former Health Minister Chen Zhu, between 2007 and 2013, to expand insurance access to a large untreated rural population and to modernize the hospital system. The Chinese programs to favor affordability of the more than a billion poorest population is focused on the use of Essential Drug List (EDL) and National Reimbursement Drug List (NRDL) which both require substantial discounts from manufacturers.  The NDRL has been updated in 2017 with the adoption of a series of new medicines from abroad as well as new Chinese drugs discovered in China (see special report #3). The Chinese Authorities have realigned the previous Food and Drug Administration (CFDA), replaced by the State Drug Administration (SDA) and the State Medical Insurance (SMIA) in order to drive consistency, speed and efficiency in the implementation of new policies.

The United Sates spending on medicines has reached $485 billion, in 2018, up 5.2% from the year 2017. By 2023, IQVIA forecasts a market of $625-655 billion, an increase between 4-7% CAGR. The US market has always to be analyzed in keeping in mind that it is driven by two positive factors: the contribution of new products and the price increase and one major pressuring factor, namely the very rapid introduction of generics once a product loses exclusivity in the country. Recent level of launches of breakthrough drugs such as immune checkpoint inhibitors or CAR-T cell therapies is not expected to be repeated as much as in the past five years. A series of very high-priced rare disease drugs have and will be launched but their impact on overall spending will remain low. “Drug pricing in the US is a complex interaction between the price set by manufacturers negotiation with payers, competition between branded and generic products and the design of public and private insurance programs that ultimately determine how much is paid by patients, payers and the government. These dynamics include both the price set at launch and price increases that occur yearly and the statutory and negotiated concessions manufacturers make afterwards. Price increase by manufacturers on established products have recently drawn attention, as some have been deemed excessive by the public, media, policy makers and politicians” writes IQVIA. In the past two years, some companies made commitments to reduce list price increases which were below 6% per year, but there are already signs indicating that this may not be true for 2019. Pressure on prices at launch will also increase due to independent review by bodies like the Institute for Clinical and Economic Review (ICER) or others with similar impact to the one of National Institute for Health and Care Excellence (NICE) in the UK.

The relatively slow adoption of biosimilar policies in the US, where only seven biosimilars were approved in 2018, has delayed savings from biologics launched more than ten years ago, such as Avastin, Herceptin, Rituxan, Neupogen, Neulasta or Remicade, which represent currently $11.3 billion in spending. Total US biologic spending has grown from $109 billion in 2014 to $182 in 2018 and is forecasted at $319 in 2023 with about $62 billion facing biosimilar competition. According to the IQVIA report, “there is still little prospect of harsh competition for the major blockbusters in the next five years”. 

At btobioinnovation we believe this impact could be larger and come faster. Some private payers are already taking action to shift patients to biosimilars. In addition, there is increasing pressure on government policy and from payers to accelerate the change. In November 2018, the US FDA approved the first Rituxan biosimilar, Truxima from Celltrion and Teva. When asked, during the fourth-quarter conference call on 31 January 2019, to predict the level of US sales erosion Roche expects from its three cancer blockbusters this year from biosimilars, Roche Pharmaceuticals CEO Bill Anderson, who previously mentioned a “worst case scenario” said there were too many variables, including ongoing patent litigations. “Nobody knows exactly what’s going to happen and how it’s going to play out. So, I think there is that level of uncertainty, and then the other level of uncertainty is what will the uptake be when they arrive”. If adoption goes as fast as in Europe, the drop in sales could be close to 25% in the first year.

For quite some years, Japan is no longer the second biggest branded pharmaceutical market and medicine spending in 2018 totaled $86 billion and is expected to decline by -3% to 0% through 2023 on a constant dollar basis. The IQVIA report forecasts an overall figure of $80 billion for 2023, driven by a positive shift to specialty drugs, including oncology medicines, as well as aging population and a negative shift due to a declining population in Japan. The policy around biennial price cuts from the Ministry of Health, Labor and Welfare (MHLW), which have largely contributed to controlling growth in the past, are being refined and include reforms to achieve a price maintenance premium (PMP) for innovative products as well as annual price cuts for certain medicines exceeding ministry targets.

Surprisingly the IQVIA report does not dedicate a specific chapter to the TOP 5 Europe countries and none to the Pharmerging countries. It just mentions the TOP 5 Europe 2018 $178 billion sales and the 2023 forecasts of $195-225 billion with a 1-4% low CAGR. The report does not tackle the biosimilar impact in Europe, and we would like to describe what we could see in the fourth quarter of 2018 with a few examples. In sharp contrast to the US, European authorities have started approving biosimilars more than 10 years ago. Biosimilar versions of Remicade and Enbrel have already captured a 60% and 40% of European market share, respectively. Herceptin biosimilars from Celltrion, Samsung Bioepis and Amgen have captured 14% of the overall European market in just seven months and have a faster adoption than Rituxan biosimilar versions. Prices have dropped 70% of the Remicade market in less than three years and they have dropped 46% in the Enbrel market in the two years since its biosimilars were launched. “We do see some fighting back of the originator, and that generally is in the form of prices. So that gives some variability,” Richard Francis, CEO of Sandoz said recently. These rapid uptakes of biosimilars offer a good preview of what Abbvie’s Humira biosimilar adoption could receive when early figures will become available at the end of the first quarter of 2019.

Medicine spending growth in the Pharmerging countries (China excluded) has been slowing down over the last five years and is projected to be at 5-8% through 2023. Brazil and India have the largest spending with Egypt, Turkey, Vietnam and Pakistan having growths far above 10%. This market growth continues to derive primarily from increasing per capita use as well as to an increasing adoption and uptake of newer medicines.

In addition to overall and specific market forecasts, the IQVIA report also focusses on areas to watch with impact on growth.

New products. In developed markets the number of New Active Substances (NAS) has significantly increased with spending of $43.4 billion between 2014 and 2018. New products launching between 2019 and 2023 are expected to be higher and are forecasted to reach $45.8 billion but intriguingly will only represent 6.1% of brand spending down from 10.5% in 2016. The most interesting part of this chapter is the analysis of the type of products which are going to reach the market by 2023. The strong shift to specialty, orphan, biologic and oncology products is increasing substantially and is expected to represent 65% of newly launched medicines in 2023. Oncology products are constantly progressing from 17% in the 2004-2008 period to 30% of all new product launches in the 2019-2023 period. According to the report forecast, as many as 70-90 new oncology launches are expected in the next five years, a number up from the 57 launches over the past five years. Other notable first-time treatment such as non-alcoholic steatohepatitis (NASH) and novel approaches to migraines, neuromuscular diseases, attention deficits and development disorders are already emerging. This is far less true for treatments of neurodegenerative diseases were the portfolio of late stage products is very thin.

The loss of exclusivity and the competition from generics is still far bigger for small molecules $13.3 billion versus biologics $3.1 billion in 2018. In 2019 the forecasts are $26.1 billion versus $5.2 billion and a surprising lower figure of $19.6 billion versus $1.9 billion in 2023. The largest individual loss of exclusivity will be affecting adalimumab (Humira), with current annual sales of $20.7 billion, where estimated biosimilar European entries are happening in 2019 and  US entries are expected in late 2023, with a notable impact in 2024 and beyond. The bulk of the biosimilar impact has been and will still be mainly outside of the US until 2024 (see above). The challenge for entering the biosimilar market is directly linked to policies encouraging providers and patients to use biosimilars while maintaining safety. 

Specialty medicines spending will reach $475-505 billion up from $336 billion in 2018 and will approach 50% of the total medicine costs in developed markets which represent 66% of global spending. The growth will be very disproportional with oncology representing 29% of spending in 2023 ahead of autoimmune medicines spending at 17% and immunology diseases at 10%.

In special report #2 we have already hinted at the emergence of cell and gene replacement therapies as the next wave of innovation. These next-generation biotherapeutics are currently being evaluated across several therapy areas such as ophthalmology and cancer diseases. The IQVIA forecast only considers five to eight new such approvals over the next five years, a far lower rate than previously predicted. As already mentioned in our own report, issues of manufacturing, supply chain and high costs are posing challenges which require adjustments from traditional manufacturing and payment models and will thus clearly limit the number of players on the pitch.

Digital Therapeutics (DTx) with clinical evidence are gaining momentum. In November 2018, the US FDA has approved reSET as the first DTx for the treatment of substance use disorder. Several such novel apps are seeking for approval at the US FDA through the De Novo pathway. Freespira for the treatment of panic attack and AKL-T01 for the treatment of Attention Deficit Hyperactivity Disorder (ADHD) are the most advanced projects and could both be approved in 2019. These DTx constitute a new emerging treatment modality with indications and disease-specific treatment effectiveness claims, obtained from well-controlled clinical trials similar to the ones for drugs, in their prescription labels. DTx will be prescribed by physicians and reimbursed by insurers, but it remains unclear how these apps are going to be adopted by patients, how they will be priced and ultimately how profitable this business model will become.

Innovation. Over the past decade the New Active Substances (NAS) approved, emerging from non-Big Pharma, has increased from 60% in 2009 to 72% in 2018. Over the next five years this trend will continue, with the forecasts that almost one third of the NAS will be brought to market by the inventive companies themselves which are deemed to become more commercially competitive in some therapy areas.

The report also wonders if the past philanthropic organisations, which made considerable progress and contributions, will continue to deliver new drugs for neglected diseases affecting more than a billion people in the world.

Life Sciences companies will continue to develop and invest in Artificial Intelligence (we prefer the Augmented Intelligence naming) and machine and deep learning programs to better exploit their massive data sets and based on more and more real-world evidence drive efficiencies in early discovery, in drug as well as DTx development and predict overall preclinical and clinical outcomes.

The growing volume of real-world evidence is building a stronger evidence-base for decisions by regulators across the world. Such data can elucidate both positive and negative outcomes related to clinical outcomes and need to be carefully assessed.  Approval based on real-world evidence can increase confidence in the result, however if the data contradict prior randomized controlled clinical trials the product may not be accepted and instead trigger further studies.

To conclude, the report also mentions the expanded business “beyond the pill” in order to build a stronger value for payers and patients. Over the last years one could notice how the Biopharmaceutical companies have started hiring specialists in patient affairs and patient advocacy while expanding their business into “therapeutic solutions” (see special report #5). Over the coming years these changes should lead to a stronger involvement of the patient voice within and outside the companies and revise some of the current Biopharmaceutical business models.

The full report is available free of charge at:

https://www.iqvia.com/institute/reports/the-global-use-of-medicine-in-2019-and-outlook-to-2023

or upon request at jcm9144@gmail.com

This document has been prepared by btobioinnovation and is provided to you for information purposes only.  The information contained in this document has been obtained from sources that btobioinnovation believes are reliable but btobioinnovation does not warrant that it is accurate or complete. The views presented in this document are those of btobioinnovation’s editor at the time of writing and are subject to change.  btobioinnovation has no obligation to update