Industry Trends

According to Standard and Poor’s industry service, in the past few years, the pharmaceutical industry has been subjected to heightened competition from generic drugmakers, unprecedented pricing pressure from payers, and hard-to-control inflation in research and development budgets. Furthermore, the industry has been experiencing a decline in R&D productivity, with a lack of innovative new products being launched in recent years.

The industry has suffered due to these problems in 2010, however, improvements in early-stage product pipelines in certain fields, such as cancer and diabetes, show positive long-term potential. Major cost-cutting initiatives, including sales and marketing overhauls and the reorganization of R&D operations, have been introduced as a response to the industry's concerns. New products, as well as an aging population, also provide another indication that the industry has a promising future.

1. Emerging Markets Drive Growth

With markets in major developed nations being stagnant or only showing modest growth, pharmaceutical manufacturers are focusing on global emerging markets to provide momentum for industry growth over the coming years. Projections show that these markets will account for over two-fifths of global GDP, and 80% of the world's population by 2015. With respect to the pharmaceutical industry, observers have forecast that emerging markets will drive up to 90% of the sector's growth through 2020.

Based on IMS Health forecasts, sales in 17 developing nations that IMS refers to as “pharmerging” countries, including China, Brazil, India, and Russia (Tier II); and Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam (Tier III), are expected to grow collectively at a compound annual rate of 13% to 16% in the five years through