The global pharmaceutical market will more than double in value to $1.3 trillion by 2020, according to a new PricewaterhouseCoopers report. Russia is among the countries where consumption of medicines is expected to grow dramatically. The experts suggested that the industry must transform in order to capitalize on the opportunities.
"The Russian pharmaceutical market looks quite promising at the present time, even despite certain difficulties. The sector is developing rapidly on account of general economic growth and increased standards of living among the population," said Alina Lavrentiyeva, Director of PricewaterhouseCoopers Russia's Pharmaceutical Industry group.
By 2020, Brazil, China, India, Indonesia, Mexico, Russia and Turkey could account for one fifth of global pharmaceutical sales, PwC reports.
Growth of the markets in those countries is driven by soaring demand for medicines and preventative treatments as the population grows, ages and becomes more prosperous. GDP in those seven countries is expected to triple during the next 13 years - from $5.1 trillion in 2004 to $15.7 trillion in 2020.
Despite being a big player on the global pharmaceutical market, Russia should improve its system of health care and medicines distribution in the next few years to meet the new realities, the experts indicated.
The problem is set to grow as the population ages. According to demographic forecasts, by 2020, 15.2 percent of Russians will be 65 or older, compared with just seven percent of those living in India. Russia will become more like a developed country in terms of an increasing demand for medical services and effective medicines.
"The potential capacity of the market and the opportunities for growth it presents is giving rise to great interest on the part of investors. Moreover, there is a foundation in place for research and development of medicines in Russia. All of these factors allow us to positively assess the prospects for future growth in the Russian pharma sector," Lavrentiyeva said.
However, the PwC report indicates that the current pharmaceutical industry business model is economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets.
Pharmaceutical companies suffer from poor financial performance, growing sales and marketing costs and increased legal and regulatory constraints.
"The pharma industry will not be in a strong position to capitalise on opportunities unless R&D productivity improves. The core challenge for the industry is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced. It is simply an unsustainable business model," said Steve Arlington, global pharmaceutical research and development advisory leader at PwC.
The report suggests focusing investment more on research and less on sales and marketing and more on prevention instead of treatment. It will lead to the wider use of health management, wellness programs, monitoring, vaccinations and other value-added services.
Solutions to monitor and ensure that patients are fully compliant with their medications could generate more than $30 billion of revenue a year in new sales, the report said.
The industry will have to reduce its sales force and, probably, introduce "just-in-time" manufacturing and delivery techniques.
Earlier this year German pharmaceuticals giant Bayer Schering Pharma announced a strategy of focusing on innovative and specialized high value-added medications.
"Our strategic goal is to increase the share of innovative medications for specialized therapy up to 70 percent of total sales," Manfred Paul, head of Bayer Schering Pharma in Russia, said in April at a news conference in St. Petersburg.
The company spends 15 percent to 17 percent of its revenue on R&D. Last year global sales exceeded 10 billion euros ($13.5 million). In Russia, Bayer Schering Pharma sales accounted for 150 million euros last year. This year the company expects sales amounting to 185 million euros.
The focus on outcomes and measurement of outcomes data will drive product development, pricing and reimbursement decisions and risk-sharing agreements between industry, health care payers and providers and regulators. Successful companies will prove that their products really work and add value. Companies will also be rewarded with a fair price for new therapies according to the level of improvement over existing medicines. Risk-sharing agreements will become more mainstream with drug manufacturers adjusting prices according to the results of outcomes analysis data that demonstrates drug efficacy.
Compliance monitoring becomes win-win for patients, payers and providers. Solutions to monitor and ensure that patients are fully compliant with their medications could generate more than $30 billion of revenue a year in new sales, and would improve outcome and patient safety. One U.S. study found that 20 per cent of Americans never fill their original prescriptions, or use other people's medicines, and 60 per cent of patients cannot identify the drugs they are taking. This not only affects safety and outcomes, it creates risk and revenue loss for pharmaceutical companies. Pharmaceutical companies will revise their proposition, employ new technologies and develop personalised compliance monitoring techniques as a value-added service to patients, payers and providers. Improved patient compliance would also help clinical studies and outcomes.
Preventative health care represents a huge opportunity for both health care providers and the pharma industry. Currently only three per cent of health care spending on OECD countries is used for prevention, yet the WHO says up to 80 per cent of heart disease, stroke and diabetes and 40 per cent of cancer could be prevented. Recognising the cost effectiveness of preventing diseases among healthy populations rather than treating sick populations, pharma will enter the realm of health management, with wellness programmes, compliance monitoring, vaccinations and other value-added services. There are currently 245 pure vaccines and 11 combination vaccines in clinical development, and the market is estimated to be worth as much as $42 billion by 2015.
Transformational technological changes in the pharmaceutical industry will reshape the business strategies of pharmaceutical companies. The role of genetic-based diagnostics in the development of personalised medicines has already shortened the R&D cycle for those products. Further research into the human genome will open up a new world of opportunities in molecular science and new ways of looking at targets. These new technologies will be used to improve understanding of diseases and link genomic and clinical data. The development of molecular delivery platforms could speed the development of new products that leverage existing/approved platforms. The convergence of therapeutics and medical devices, which started in earnest with the drug releasing stent, will continue and they will become increasingly sophisticated, improving efficacy and reducing the risk profile of many existing therapeutic agents.
The current linear phase R&D process will give way to in-life testing and live licensing. The current R&D model, involving phase I, II III and IV clinical trials that typically end in submission for a drug licence and market approval, will be replaced by collaborative in-life testing and 'live licences' being issued contingent on the performance of the drug over its lifecycle. The industry will conduct smaller, more focused clinical trials, continuously sharing results with regulators. If testing confirms that a medicine is safe and effective, a live licence will be issued permitting the company to market the drug on a restricted basis. Further in-life testing will extend the licence to cover a larger number of patients or a different patient population.
Already, several national and regional regulators have begun to collaborate by sharing safety and efficacy data. There may well be one global regulatory system by 2020, administered by national or federal agencies responsible for ensuring that new treatments meet the needs of the patient populations within their respective domains. Such a system would help to reduce the spiralling costs of regulatory compliance and reduce time to market.
The blockbuster sales model will be replaced by a smaller, smarter and more effective sales force, led by key account managers who will negotiate tender based contracts on therapeutic benefit and outcomes. The imperative will be who can add the most value, not who can sell the most pills. Under this model, most pharmaceutical companies will sell integrated packages of medicines and services, and some services, such as patient monitoring and disease management, may be more valuable than the medicines themselves.
The supply chain functions will become revenue generating. The future supply chain will be responsible not only for distribution of all products and services, it will also create new channels through which to market products, so becoming revenue generating rather than a cost centre. Furthermore, 2020 will likely give rise to 'made to order' therapies rather than 'made to forecast' using just-in-time manufacturing and delivery techniques learned from other industries such as the automotive sector.
More sophisticated direct-to-consumer distribution channels will diminish the role of wholesalers. The industry's heavy reliance on wholesalers for distribution will be supplanted as the over-the-counter (OTC) self-medication sector grows and new technologies enable automated dispensing of medicines direct to consumers. Fulfilment of prescriptions for most primary-care medications will be fully automated, whereby doctors will write prescriptions, check reimbursement criteria, and download the script to the patients' smart health card or email account. Patients will be able to forward the script to an online pharmacy, which checks their identity using a web-based biometric device and mails the medication to their specified address.
The company spends 15 percent to 17 percent of its revenue on R&D. Last year global sales exceeded 10 billion euros ($13.5 million). In Russia, Bayer Schering Pharma sales accounted for 150 million euros last year. This year the company expects sales amounting to 185 million euros.
The focus on outcomes and measurement of outcomes data will drive product development, pricing and reimbursement decisions and risk-sharing agreements between industry, health care payers and providers and regulators. Successful companies will prove that their products really work and add value. Companies will also be rewarded with a fair price for new therapies according to the level of improvement over existing medicines. Risk-sharing agreements will become more mainstream with drug manufacturers adjusting prices according to the results of outcomes analysis data that demonstrates drug efficacy.
Compliance monitoring becomes win-win for patients, payers and providers. Solutions to monitor and ensure that patients are fully compliant with their medications could generate more than $30 billion of revenue a year in new sales, and would improve outcome and patient safety. One U.S. study found that 20 per cent of Americans never fill their original prescriptions, or use other people's medicines, and 60 per cent of patients cannot identify the drugs they are taking. This not only affects safety and outcomes, it creates risk and revenue loss for pharmaceutical companies. Pharmaceutical companies will revise their proposition, employ new technologies and develop personalised compliance monitoring techniques as a value-added service to patients, payers and providers. Improved patient compliance would also help clinical studies and outcomes.
Preventative health care represents a huge opportunity for both health care providers and the pharma industry. Currently only three per cent of health care spending on OECD countries is used for prevention, yet the WHO says up to 80 per cent of heart disease, stroke and diabetes and 40 per cent of cancer could be prevented. Recognising the cost effectiveness of preventing diseases among healthy populations rather than treating sick populations, pharma will enter the realm of health management, with wellness programmes, compliance monitoring, vaccinations and other value-added services. There are currently 245 pure vaccines and 11 combination vaccines in clinical development, and the market is estimated to be worth as much as $42 billion by 2015.
Transformational technological changes in the pharmaceutical industry will reshape the business strategies of pharmaceutical companies. The role of genetic-based diagnostics in the development of personalised medicines has already shortened the R&D cycle for those products. Further research into the human genome will open up a new world of opportunities in molecular science and new ways of looking at targets. These new technologies will be used to improve understanding of diseases and link genomic and clinical data. The development of molecular delivery platforms could speed the development of new products that leverage existing/approved platforms. The convergence of therapeutics and medical devices, which started in earnest with the drug releasing stent, will continue and they will become increasingly sophisticated, improving efficacy and reducing the risk profile of many existing therapeutic agents.
The current linear phase R&D process will give way to in-life testing and live licensing. The current R&D model, involving phase I, II III and IV clinical trials that typically end in submission for a drug licence and market approval, will be replaced by collaborative in-life testing and 'live licences' being issued contingent on the performance of the drug over its lifecycle. The industry will conduct smaller, more focused clinical trials, continuously sharing results with regulators. If testing confirms that a medicine is safe and effective, a live licence will be issued permitting the company to market the drug on a restricted basis. Further in-life testing will extend the licence to cover a larger number of patients or a different patient population.
Already, several national and regional regulators have begun to collaborate by sharing safety and efficacy data. There may well be one global regulatory system by 2020, administered by national or federal agencies responsible for ensuring that new treatments meet the needs of the patient populations within their respective domains. Such a system would help to reduce the spiralling costs of regulatory compliance and reduce time to market.
The blockbuster sales model will be replaced by a smaller, smarter and more effective sales force, led by key account managers who will negotiate tender based contracts on therapeutic benefit and outcomes. The imperative will be who can add the most value, not who can sell the most pills. Under this model, most pharmaceutical companies will sell integrated packages of medicines and services, and some services, such as patient monitoring and disease management, may be more valuable than the medicines themselves.
The supply chain functions will become revenue generating. The future supply chain will be responsible not only for distribution of all products and services, it will also create new channels through which to market products, so becoming revenue generating rather than a cost centre. Furthermore, 2020 will likely give rise to 'made to order' therapies rather than 'made to forecast' using just-in-time manufacturing and delivery techniques learned from other industries such as the automotive sector.
More sophisticated direct-to-consumer distribution channels will diminish the role of wholesalers. The industry's heavy reliance on wholesalers for distribution will be supplanted as the over-the-counter (OTC) self-medication sector grows and new technologies enable automated dispensing of medicines direct to consumers. Fulfilment of prescriptions for most primary-care medications will be fully automated, whereby doctors will write prescriptions, check reimbursement criteria, and download the script to the patients' smart health card or email account. Patients will be able to forward the script to an online pharmacy, which checks their identity using a web-based biometric device and mails the medication to their specified address.