However, so far it has almost only hit the generic small molecule OSD products, whereas biotech and injectables are only starting to be affected by biosimilars. However, the net effect is that OSD will remain the largest pharmaceutical product type in volume, whereas the strongest growth in value is in large molecule injectable products.
In short, we may be facing a “new normal” situation in the pharmaceutical industry of the future. Many business partner companies and suppliers have not yet understood what this will mean, but we will take a look at some of the implications in the following sections.
Some companies have diversifying their business for many years. Thanks to the diversification investment strategy and a strong R&D portfolio, they have been well prepared for the effects of the patent cliff. Later, most of the big pharmaceutical companies have turned towards diversified businesses models with coverage in several areas and with several technology approaches.
As a supplier and partner to the pharmaceutical industry, it is important to follow on to this new strategy and offer a range of services that enables pharmaceutical companies to select few and broad partners that understand the broad challenges of their business. The traditional model of suppliers and partners with limited competences within e.g. biotech, chemistry, utilities or maintenance may become outdated soon, because many pharmaceutical companies will prefer broad and competent partners across their broad business rather than narrow and deeply specialized.
This may be even more obvious with some of the most innovative pharmaceutical companies that combine their capabilities within drugs with other competences such as diagnostics, drug delivery systems etc.
One example is a multinational company which was the first to sell insulin as part of a drug delivery system — an injection pen. This made self-medication easy for diabetes patients and others and has been a significant differentiator for several years.
Another example is a company that has been combining drugs with diagnostics for many years and now has a leading position in combining drugs and diagnostics towards a future vision of “personalized healthcare”. They are also combining their drugs with drug delivery devices that enable self-medication.
Both companies combine medicines with medtech (devices, diagnostics, drug delivery etc.) and more and more companies are going this way. Actually the medtech industry is growing faster than the pharmaceutical industry and again pharmaceutical companies with this new, broad focus should seek business partners with a broad understanding of not only biotech or chemistry, but also final dosage forms of a variety of pharmaceutical products as well as drug delivery systems and diagnostics devices.
Growth in Emerging Markets
IMS Health is the leading provider of statistics in the global pharmaceutical industry and they estimate that the strongest growth in the pharmaceutical industry is no longer in the Western world, but in Emerging Markets and especially in China. From 2011 until 2016 the emerging markets are expected to grow with 494 million people and their drug spending with $ 150–165 billion.
In fact, USA will remain the largest market with almost three times the size of China, but Brazil, India and Russia will grow ahead of many of the traditional pharmaceutical markets towards 2016. However, the markets of Western and Emerging economies are very different. The Western drug prices are much higher and the volumes are much larger in Emerging markets. Besides, the new products are launched in the developed countries first, whereas most of the products in emerging markets are traditional.
However, with patents expiring on biotech drugs, generic products (called “biosimilars”) will take over and some local follow-on companies in China and India are focusing on developing biosimilars only for emerging markets, thus keeping the cost of product development and manufacturing lower than 1:10 of what biosimilars for the Western world would cost.
Pharmaceutical companies that consider the business expansion opportunities in emerging markets should seek business partners that have a strong local presence in these countries. Not many of the international professional service providers in the pharmaceutical manufacturing area have a strong presence in emerging markets such as China, India, Brazil etc. yet, but for the local success and investment risks, this should be a high priority selection criteria.
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