What to Watch for in the Global Pharmaceutical Industry in 2017

Feb 16, 2017

The global pharmaceutical industry is currently volatile, with many opportunities but also several potential setbacks. The market is expected to continue to grow in 2017, with new clinical advancements and a growing need for medicine as the middle class expands in developing countries and the global population ages. However, the high prices of many drugs remain a point of contention in the market, and generic products are a significant source of competition. Companies will have to keep these factors in mind over the coming years.

The growing healthcare industry

The pharmaceutical market is expected to be worth $810 billion in 2017 according to estimates by Euler Hermes, which will be an increase from $780 billion in 2016. Healthcare spending as a whole is currently rising, and will likely continue to do so over the next several years. Many countries are working to expand access to healthcare and provide universal coverage for their citizens. Also, the growing middle class in many emerging economies means that more people can afford medicine and related expenses, when before this would have been more of a luxury. While there are challenges to implementing public healthcare systems, progress is nevertheless being made in many areas.

Mergers and acquisitions (M&A) will continue to rise among pharmaceutical companies. As research and development (R&D) is expensive and requires specific expertise, many organizations are opting to acquire other companies to expand their reach. Aside from gaining knowledge and products in new areas, buying another company is also an easy way to enter a new market. M&A provide a faster, less resource-intensive, and less risky way of growing and meeting new demands. As competition increases, large companies will increasingly seek deals with smaller, more agile ones to keep up with the market.

High drug prices driving demand for generic options

There are a few threats and challenges to the market, however. There is growing concern over pharmaceutical prices, and many consumers see the cost of patented drugs to be far too high. Several governments are placing limits on the cost of drugs and of their health programs, and are attempting to make healthcare more accessible. In line with this, generic drugs constitute significant competition, as they are easier for public healthcare programs and for individuals to afford. As patents expire, sales of those branded drugs are likely to take a hit. Drug makers will need to keep an eye on these factors and look for ways to compensate for them.

What is a threat for some companies, of course, can be an opportunity for others. Patent expiry and the demand for cheaper drugs opens up space for other companies to enter the market and to grow. Innovation remains valuable, especially as larger companies choose to forgo it in favor of acquiring others. Also, developing new drugs will help offset the expiry of old patents, and advancements in the field of oncology should bring new products in the near future.

Despite challenges around prices and economic uncertainty, the global pharmaceutical market will continue to grow over the next year and into the future. M&A will be a prominent strategy, and demand will rise as healthcare programs develop around the world. Innovation and affordability are two strategies with strong potential, and drug makers will need to balance the two in order to succeed in the market.

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