Europe's pharma industry and competition from emerging economies
The European pharmaceutical industry has played a key role in the recovery of the continent’s economy over recent years.
While many businesses were being forced to cut back and introduce austerity measures due to the recession, the pharma industry continued to develop innovative treatments.
Research from the European Federation of Pharmaceutical Industries and Associations (EFPIA) found that €30,000 million (£24 million) was invested into research and development (R&D) during 2012, highlighting the vigilant nature of the sector.
The industry employs 700,000 people and creates three to four times more indirect employment than directly, but it has faced significant challenges from other countries, including rapid growth in Brazil, China and India, where economic activities have gradually migrated over recent years.
During the course of 2012, the Brazilian and Chinese markets jumped by 16% and 21% respectively in comparison to the average market growth of -2% for the five key European sectors and -1 for the US. These figures are according to findings from the IMS Retail Drug Monitor.
Due to the fragmentation of the European Union’s pharmaceutical market, lucrative parallel trade options are available, but these mean the industry often does not have the extra resources required to fund R&D.
A closer look at the Brazilian market
The Brazilian pharma market has grown rapidly in recent years. In 2013, it grew into the sixth largest in the world, generating $26.3 million (£16.78 million) in revenue.
This is according to the Emerging Markets Information Service, which found that the country’s profits increased by 17% from the previous year. Brazil is also set to jump to fourth place in the company’s global rankings in 2016.
Medicine sales are expected to reach $39.4 billion by 2017, thanks to higher household incomes, a larger middle class and a bigger expansion of generic drugs - these hold almost 30 per cent of the market share today and could jump to 45 per cent in the next three years.
Brazil’s prescription drugs market represent around 52% of the overall pharma market in 2012, marking a 12% value increase from the previous year. On the other hand, over-the-counter (OTC) drugs grew 16% in value and 11% in volume, rising to a 26% market share.
These rising statistics illustrate the increasing importance of the Brazilian market, which is proving to be a valuable industry for pharma companies looking to introduce new groundbreaking medicines and technologies.
What makes the Brazilian market so appealing?
The Brazilian market has progressed significantly in recent years, taking advantage of the growth in care spending as household incomes rise substantially.
A paper from PricewaterhouseCoopers (PwC) has looked at the country’s market in more depth, using figures from the Scrip Insights to highlight growth in the nation.
It found that brand name medication led the prescription market with 40.8% of sales, but it had a smaller growth rate, rising only 7.6% in 2011 when compared to the previous year.
The Brazilian population has increased significantly creating great opportunities for local manufacturers in drug sales. Of all the medicines in the country, treatments to decrease cholesterol and control high blood pressure are the most popular. Drugs that do not need prescriptions, including Cialis and Viagra, are also popular.
However, while Brazil’s economy is in good health, the country’s population still suffers from illnesses recorded in underdeveloped nations, including dengue fever, yellow fever and Chagas disease.
Overall, the Brazilian market is an industry growing exponentially and there are the facilities available for innovative new treatments to emerge in the future.
Growth in the Indian market
Another emerging pharmaceutical market is India, where there has been significant growth in pharmaceuticals over recent years.
A recent study from CPhL and Global Business Reports has found that the country has seen significant changes in its domestic market due to changes in manufacturing, exporting, importing and regulations.
In the past, API manufacturing represented most of the country’s manufacturing business, but trends have caused the nation to increase its number of finished dosage drugs.
The study emphasised that API producers are now starting to move towards “high-value, low-volume work,” where there are complicated chemistry and IP difficulties.
The study also identified that many companies in the country are starting to invest in R&D work, including the delivery, biosimilars and generics involved in drugs.
However, some specialists believe more time and money needs to be invested in the technology.
Dr Prasad Panzade, Vice President and Head, corporate analytical services (R&D and quality), Aditya Birla Science and Technology, said: “[In India, companies] are more focused on generic drugs and waiting to get the patents expired … R&D means just modifying what is available in the market. The industry needs to put in bigger efforts towards research and development.”
By 2020, it is believed that biosimilars will represent 15% of India’s market, with many leading companies turning to the market to generate profit.
Statistics show that the US picks up 40% of its drugs from India, with a study showing India-based businesses will soon be the worldwide focal point of pharma manufacturing.
While India may not have the research and development expertise of the US, it is clear that the country is emerging as a force in the sector, much like the Brazilian industry.
India’s pharma government incentives
One of the main reasons why India’s pharma market has blossomed is the amount of support it has received from the government.
The country’s Pharma Vision 2020 initiative aims to make the nation a worldwide leader in drug manufacture, putting in place new mechanisms to address issues such as affordability and medicine availability.
As part of the project, the Andhra Pradesh government will supply necessary infrastructure, incentives and skill upgrade facilities for the pharma industry.
The government of India and the pharma industry will float a trust to advertise the brand image of the Indian pharmaceutical industry.
The country is also aiming to invest in a number of other countries, with Cipla Ltd planning to set up a manufacturing plant in Iran, while it has also entered a deal with Teva Pharmaceutical Industries for the South African market.
Paul Miller, Chief Executive of Cipla Medpro, said: “This collaboration is highly complementary and aligns strongly with our philosophy of providing South Africans with access to a broader range of affordable medicines.”
Lupin Ltd has also signed a strategic partnership with Merck Serono to help the company extend its generic drug portfolio in emerging markets by creating and providing a number of products.
Overall, it is apparent that the Indian market is receiving strong support from the government and is creating strong links with other nations. If this level of support continues, it is likely the sector will continue to grow and create more options for pharmaceutical specialists across the globe.
Can we expect more competition in the future?
It is clear that both the Brazilian and Indian pharma markets are growing significantly, posing a strong challenge to the European Union.
The future will depend largely on the state of the economy, which will dictate the success companies enjoy from the sector. However, signs are positive at the moment and, with a large portion of money set to be invested in both industries, it will be interesting to see what developments lie waiting in the pharma world and how many more lives can be saved through effective medicine.
Whether India or Brazil emerge into stronger pharmaceutical forces remains to be seen. The Indian market is clearly receiving a substantial amount of government support, while the Brazilian sector is buoyed by a strong economy. If growth continues, it is likely both countries will offer more competition for the US and Europe in the future.
[Summary: How is Europe’s pharma industry comparing with emerging economies?]