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According to the recent
update to IMS HEALTH's Pharma
Prognosis International, 2000-2004 (PPI), further strong
growth is expected in the leading pharmaceutical markets
of the world in the period 2000-2004.
All the ten countries studied in PPI are forecast to post
positive market growth in 2000, led by the USA, and all
except Japan will continue this positive trend up to 2004.
Pharmaceutical sales for the ten countries combined are
expected to grow at a compound annual growth rate (CAGR)
of 7.4%, at actual prices.
This growth will be driven mainly by the largest and fastest-growing
market, the USA. Despite price pressures, the US market
will be buoyed by increased DTC advertising and wider access
to prescription drugs, which will stimulate volume.
A higher proportion of US pharmaceutical companies' promotional
expenditure is being allocated to DTC advertising, which
rose 38% in 1999 to account for 13% of the total $13.9 billion
industry promotional spend. The growing investment in DTC
advertising will drive an increase in volume in the USA,
which saw 9% more prescriptions dispensed in 1999.
The prospect of a Medicare prescription drug benefit, the
nature of which will be determined by the US Presidential
Election result, is also expected to boost volume. This
should outweigh the concomitant downward pressure on prices.
Source: IMS HEALTH Pharma Prognosis International,
2000-2004
In Japan, the lack of an annual price revision and improved
regulatory review times contributed to a 5.4% growth (in
yen terms) in pharmaceutical sales in 1999. However, the
Japanese market is expected to decline by 0.2% over the
period 2000-2004.
Japan's healthcare system is facing a funding crisis as
the growing elderly population increases the country's medical
costs by ¥1000 billion annually, a figure that cannot be
met by declining revenues from medical insurance premiums
and taxes. Medical expenses for the over-70s account for
over a third of Japan's medical expenditure.
However, the strong medical lobby in Japan presents an obstacle
to attempts to control demand and government pharmaceutical
cost-containment policies will continue to focus on changes
to the National Health Insurance (NHI) pricing system. Drug
costs are projected to account for 23% of total Japanese
healthcare expenditure in fiscal 2000.
As expected, the overhaul of the NHI pricing and reimbursement
system has been postponed and the resumption of discussions
on new proposals will aim to introduce reforms in April
2002. An option likely to re-emerge is the elimination of
the R zone (reasonable zone allowable discounts) - which
is already diminishing.
The NHI price review of April 2000 resulted in a reduction
in the R zone discounts to 2% for both new and older products,
bringing actual sales prices in line with reimbursement
prices. The tougher stance on discounts will further stimulate
the separation of prescribing and dispensing by removing
the profit incentive for doctors.
In Germany, the third largest market globally, pharmaceutical
sales grew by 5.4% in 1999. Germany also faces cost containment
pressures, however, which will slow growth over the prognosis
period. Of the major European countries, Germany is expected
to record the lowest growth in its pharmaceutical market
between 2000-2004.
The figure below indicates how the USA is expected to dominate
the global pharmaceutical market in 2004. The US market
will record the highest growth rates of the ten major markets,
and its share of the top ten markets will increase from
47.3% in 1999 to 55.9% in 2004. According to PPI, the US
market's total value will approach the $200 billion mark
in 2003, and break through it in 2004.
Source: IMS HEALTH Pharma Prognosis International,
2000-2004
Japan and the major European countries will remain important,
but Australia and Canada are forecast to record higher growth
rates. By the end of 2000, the UK is expected to have overtaken
Italy as the fifth largest pharmaceutical market, in US$
terms, after the USA, Japan, Germany and France.
UK market growth is being driven by higher National Health
Service (NHS) spending and a focus on health promotion by
the UK Government, which is driving demand for innovative
treatments. No limit has been set for the NHS pharmaceuticals
bill, which is expected to increase its share of total NHS
spending from the 13.7% registered in 1997-1998.
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