IMS Institute for Healthcare Information has projected that global spending on medicines is likely to touch US$ 1.3 trillion by 2018 with a growth of 30 per cent over the 2013 level due to introduction of new specialty medicines and increased accessibility for patients coincides with lower impacts from patent expiries in developed markets. The growth will driven by rising population, an aging population, and improved access in pharmerging markets.

This level of growth—a compound annual growth rate of 4-7 per cent on a constant currency basis—will be slightly higher than the 5.2 per cent recorded over the past five years.

Among the major markets, the United States remains the largest, representing over one third of the global total, and is expected to grow at a compound annual growth rate of 5-8 per cent through 2018. This is significantly higher than the 3.6 per cent growth over the past five years, and is particularly dramatic in 2014 when market growth is expected to reach 11.7 per cent.
 
Annual spending growth will spike in 2014 when absolute growth will be about $70 billion, up from $40 billion growth in 2013. Thereafter, growth will moderate though remain at higher levels than seen in the past five years. The developed markets—led by the United States, the major five European markets and Japan—are the primary drivers of this increased growth, while the 21 pharmerging countries will increase their contribution to growth over the next five years and account for nearly 50% of absolute growth in 2018.

The pharmerging markets will expand at a compound annual growth rate of 8-11% through 2018, a slower pace than over the past five years, which averaged 13.6% growth. China, already the world’s second largest pharmaceutical market, will reach spending levels of $155-185 billion in 2018. Implementation of health reforms are increasing demand for medicines, while pricing regulations are being used more frequently to manage overall growth levels. Over 80% of growth in pharmerging markets will be attributed to non-branded medicines.

While the level of global spending is based on best available pricing information and measured at the ex-manufacturer level, it does not factor in a range of rebates, discounts, taxes and other adjustments that affect the net amount received by manufacturers. These result from regulations as well as competitive negotiations between suppliers and purchasers. These are expected to increase in aggregate over time and therefore reduce the level of growth incorporated in this forecast. This impact is estimated to be approximately 25% of the total growth over the next five years, and suggests the net price growth rate will be about one-half percentage point lower than reflected in this report.
 
While growth will moderate from that level in 2015 and be in the 5% range thereafter, this is a reflection of a shift in the balance of the “innovation cycle”—the amount of new medicines being launched and utilized compared to the value of branded medicines that are facing new generic competition. In 2014 for example, an unusually high level of spending on new products is coinciding with an unusually low reduction in the use of brands associated with new generic entrants. Price increases also contribute to US market growth, unlike other countries, though much of these increases are not realized by manufacturers due to rebates and discounts.

Implementation of the Affordable Care Act and the resulting expansion of access will result in slightly higher levels of growth, though the impact of other structural changes of healthcare payment and delivery will be more significant.

Higher spending can be expected on specialty medicines over the next five years, particularly in developed markets. About 40% of total global growth will come from these medicines, primarily in the oncology, autoimmune, respiratory, anti-virals and immunosuppressants therapy areas.

Much of this growth is from medicines bringing new treatment options for patients, including breakthrough therapies or even cures, and often reduced complications or hospitalizations.

A growing number of these drugs are also available in oral form, which reduces the costs associated with delivering the drug to patients. The pipeline of innovative specialty drugs is also robust, especially in the area of oncology, and the number of new molecular entities that will be launched is expected to remain at levels higher than in the past decade, aided by an increasing number of applications subject to accelerated regulatory review.