Future Pharma Trends - Long-term opportunities tempered by short-term challenges

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Future Pharmaceutical
Industry Trends
Long-term opportunities tempered by short-term
challenges
In recent years, Pharma has begun to adapt its business model in response to growing
industry constraints and the decline of the primary-care focused blockbuster therapy. This
process of change has recently been disrupted by unprecedented challenges caused by the
global economic downturn, and by President Obama’s planned overhaul of the US healthcare
system.
To continue on its journey towards Pharma 2.0, Pharma needs to balance the more pressing
short-term issues against the longer-term trends shaping the industry.
Reference Code: DMHC2497
Publication Date: 03/2009

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Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based
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Future Pharmaceutical Industry Trends DMHC2497
© Datamonitor (03/2009) Page 2
This report is a licensed product and is not to be photocopied
ABOUT DATAMONITOR
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Nick Bennett, Director of Research and Analysis, +44 (0)20 7551 9200,
nbennett@datamonitor.com

About Datamonitor
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by
any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission
of the publisher, Datamonitor plc.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.
Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based
on information gathered in good faith from both primary and secondary sources, whose accuracy we are
not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions
taken based on any information that may subsequently prove to be incorrect.
TEAM INFORMATION AND CONTACT DETAILS
Datamonitor’s Strategic Analysis team led by Alistair Sinclair includes both analysts
and senior analysts. In addition to prior experience in bioinformatics, pharmaceutical
consulting and medical market research, the team’s educational backgrounds span a
variety of science and business based degrees (BSc, MSc and PhD) from universities
in the UK and abroad. The team focuses upon providing in-depth strategic insight
through syndicated reports in the following five key areas:
• Healthcare Systems and Markets – analysis of strategic issues ranging from
emerging markets to the changing pricing and reimbursement environments in
the major pharmaceutical markets and their impact on the industry as a whole;
• Research and Development (R&D) – coverage of topics including strategies
aimed at improving R&D productivity and the impact of emerging technologies;
• Corporate Strategy – providing understanding behind corporate development
strategies such as mergers and acquisitions and licensing/alliance networks,
plus major trends impacting business models;
• Sales and Marketing – examining issues affecting sales and marketing, from
strategies to improve sales force effectiveness to the impact of new media;
• Lifecycle Management – offering insight into the opportunities presented by
reformulations or OTC switching, in addition to providing up to date coverage
of the rapidly evolving generic and biosimilars markets.
For inquiries about the content of this report, please contact Alistair Sinclair
asinclair@datamonitor.com

Executive Summary
CHAPTER 1 EXECUTIVE SUMMARY
Scope of the report
Future Pharmaceutical Industry Trends – Long-term opportunities tempered by short-
term challenges provides an overview of key trends shaping the pharmaceutical
industry today and those that are set to play a central role in the future as companies
transition towards a new business model: Pharma 2.0.
The report has been structured into the following chapters:
• Chapter 1 presents an overview of the reports findings
• Chapter 2 provides key strategies and trends that will shape the future of the
pharmaceutical industry
• Chapter 3 examines the impact of President Obama’s administration on US
healthcare and its implications for Pharma
• Chapter 4 explores the evolving global generic and biosimilar landscape
• Chapter 5 assesses the impact of the current economic and financial
situation on healthcare
• Chapter 6 investigates key growth drivers and resistors set to shape the
industry’s future
• Chapter 7 lays out regulatory issues and their impact on the global
healthcare market
• Chapter 8 contains a comprehensive bibliography

Table of contents
TABLE OF CONTENTS
CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Key findings 5
CHAPTER 2 STRATEGIC & FUTURE TRENDS AFFECTING
PHARMA 24
Strategic and future trends in the branded pharmaceutical market 24
Corporate trends and strategies 25
Return of the mega-merger… but for how long? 25
Pharma set to capitalize on biotech funding crisis through M&A 25
Academic collaborations – a longer-term solution to R&D innovation 26
Biotech consolidation – an option for cash-strapped companies to remain
independent of Big Pharma 26
Contract research organization market evolution – M&A, consolidation and R&D
investment 27
Focus on cash and credit management to boost profit growth 27
Portfolio expansion or specialization – both strategies have their merit 28
Emerging markets set to play pivotal role in future Pharma success 29
Vaccines, over-the-counter products, and generics provide market access to
emerging markets 30
Pharma will continue to seek cost-efficiencies in emerging markets 30
Sales and marketing trends and strategies 31
New sales models will become tailored to product portfolio 31

Table of contents
Marketing teams will become more involved clinical development decisions 31
Collaborative payer relationships are vital to secure optimal drug pricing... 32
…and improve healthcare strategy and patient compliance 32
The shift from drug promotion to information provision will continue 32
Pharma to enter into closer and earlier collaboration with regulators 32
Scenario-based pricing expected for US Pharma 33
R&D trends and strategies 34
Niche indications offer Pharma better opportunities for market access 34
Reformulations no longer an approval certainty – more creative lifecycle
management strategies needed 34
Widening the ‘R&D bottleneck’ will shorten R&D time and increase productivity 35
Biomarker analysis set to grow simultaneously with targeting of niche markets 35
Employment of proactive pharmacovigilance strategies could limit future costs 35
Big Pharma collaboration on R&D processes should enhance drug discovery 36
Reduction in Pharma’s reliance on traditional R&D strategies leads to further cost
savings 37
Pharma in-house R&D will evolve through satellite start-ups 38
Pharma’s use of contract research organizations set to grow 38
Pharma will increase focus on specialty markets 39
Personalized drugs to become an important part of future drug portfolios 40
Drug-diagnostic test combinations will become more common 40
External trends and resultant company strategies 41
President Obama’s overhaul of US healthcare will define Pharma strategies 41
Regulatory pressures become more restrictive, but solutions are available 42

Table of contents
Manufacturers will be more proactive in securing drug supply-chain 43
Pharma must adapt to divergent distribution channels in Europe 43
Closer co-operation with regulators on drug safety is anticipated 43
Strategic and future trends in the generic pharmaceutical market 45
Corporate trends and strategies 45
Consolidation in the generics sector to accelerate 45
Larger generics or branded pharma companies set to be biosimilars winners 46
Greater convergence between branded and generic companies expected 46
Acquisition of small biotech companies by innovators will increase 47
Increase in acquisitions and alliances between Big Pharma and Japanese generics
companies 47
R&D trends and strategies 47
Would-be biosimilar manufacturers should concentrate on more complex second-
generation products 47
Sales and marketing trends and strategies 48
Generics companies in the US must build ties with retailers 48
Patient information databases to become important tools for generics growth 48
Branded biologic companies must lower prices following biosimilar incursion 48
Biosimilars manufacturers will court physicians to drive near-term uptake 48
External trends and resultant company strategies 49
Reverse payments in decline in the US 49
Risk Evaluation Management Strategy will act to delay generic entry 49
Generics companies must fight to secure global trade routes 49
Companies operating in Germany must lower price and survive on lower margins 50

Table of contents
Germany set to become the biosimilar testing ground 50
CHAPTER 3 PRESIDENT OBAMA’S REFORMS 51
President Obama – time for change! 51
Current issues with US healthcare 52
The financial crisis has impacted private insurance coverage 53
Growing strain on public insurance schemes 54
Baby boomers hit 65 driving up Medicare healthcare costs 54
High drug, medical device and administrative costs stretch budgets 54
Increased prevalence of chronic diseases 54
President Obama sets out to provide quality, affordable and portable healthcare
insurance to all US citizens 55
Provision of healthcare for all uninsured US children 55
Coverage cannot be denied based on pre-existing conditions 56
Implement universal healthcare through establishing a national healthcare plan 56
Minimizing the ‘donut hole’ 57
Medicare reform 58
Establishment of a national health insurance exchange scheme 58
Pressure on large employers who choose not to contribute to their employees
healthcare insurance costs 59
Obama’s healthcare reform ambitions – how realistic are they? 59
Good news for Pharma 60
Patient power achieves greater choice for seniors 61
Continuing support for R&D tax credits 61

Table of contents
Stem cell research – a quick win for Obama 62
Obama’s support for disease prevention and personalized medicine is good news
for Pharma 62
Bad news for Pharma 63
Establishment of a comparative effectiveness board 64
Bad time for Pharma, but good times ahead for generic companies as a pro-
generic senator takes power 65
President Obama promises biosimilars pathway 66
The uncertain news for Pharma 67
Re-importation will not happen until FDA reforms are in place to ensure safety 67
Pharma must pre-empt direct pricing negotiations by going to the federal
government with a compromise 68
CHAPTER 4 GENERICS & BIOSIMILARS 69
The need for cost-containment will drive generic and biosimilar uptake 69
Generics growth begins to slow 70
Global march towards a commodity generics market gathers pace 70
High-volume, low-value market of US and UK beginning to contract 70
Retailers grow in power, forcing down margins 71
Germany on the road to a commodity generics market 72
Increasing scrutiny of innovator-generic company deals 73
Reverse payments in US remain a contentious issue 73
European Pharma sector enquiry uncovers generic delay tactics 75
Promotion of generics uptake gains momentum 76
Getting the basics right in less mature generics markets 77

Table of contents
Novel strategies to increase generic uptake in mature markets 78
Biosimilars uptake set to grow 80
First biosimilars in Europe have yet to make a splash 80
Pre-filled Omnitrope cartridges boost sales for Sandoz 80
Epoetin uptake picking up in Germany 81
Biosimilar filgrastim looks to be a crowded market 82
Lessons from the EU 83
The hospital retail divide will impact biosimilar uptake 83
Physicians pivotal to biosimilars uptake 84
Branded pharma taking the biosimilar leap 84
The US outlook 85
Interchangeability a distant but alluring prospect 86
Market exclusivity for branded and biosimilar drugs is a contentious issue 87
The US biosimilars pathway will be informed by lessons learned from Hatch-
Waxman 88
CHAPTER 5 FINANCE & THE ECONOMY 89
The global economic downturn is set to exacerbate Pharma’s problems 89
Greater focus on Pharma spending 90
The Biotech financing crisis – no sign improvement for Biotech 91
The number of biotechs struggling for cash continues to grow 91
Still no biotech IPOs 92
Investors demand their cash back 92
Slump in licensing deals but rise in M&A 93

Table of contents
Growing uninsured population – patients even less able to cover the costs of
healthcare including pharmaceuticals 94
Pharma may struggle to justify the costs of expensive prescription drugs 96
CHAPTER 6 STRATEGIC GROWTH DRIVERS &
RESISTORS 98
Unprecedented industry pressures will affect future growth potential 98
Key drivers 101
Emerging markets set to drive future growth for Pharma 101
Global pharmaceutical market growth will be driven by emerging market sales 102
Big Pharma embraces the emerging markets 103
Vaccines drive emerging market growth 105
Off-shoring to emerging markets begins to take hold 106
From blockbusters to personalized medicine 108
Key drivers and resistors to personalized medicine 108
Personalized medicines are a growing industry 110
State, industry and academia collaborations drive personalized medicines 112
Diagnostics take center stage as personalized medicines become a reality 112
Niche markets offer growth potential for Pharma 113
Key advantages of targeting secondary care, niche markets 114
Hospital branded pharmaceutical sales outgrow the retail branded pharmaceutical
market 115
Key drivers of the secondary care, niche markets 117
Key resistors 118
Growing regulatory pressures are set to restrict Pharma 118

Table of contents
Regulatory pressures affecting Pharma 119
Pharma’s responses to growing regulatory pressure 121
Pharma needs to reassess its R&D strategies 122
Factors impacting Pharma’s innovation and R&D process 124
The Biotech financing crisis provides Pharma an opportunity to access innovative
research through M&A 126
Regulatory pricing pressures and limited payer healthcare spend impact Pharma
sales 128
CHAPTER 7 REGULATORY PRESSURES & CHANGES 129
Heightening regulatory pressure restricts Pharma’s options 129
Drug safety regulations set to intensify 130
Drug safety takes center stage 130
Digoxin, Chantix and heparin drive up adverse events reports 131
FDA looks to introduce toll-free number to report adverse events 132
Manufacturers in breach of Good Manufacturing Practice 133
FDA’s failing oversight 134
EU-US collaboration for foreign facility inspections 135
Use of certified independent third parties to assess compliance 135
Establishment of foreign outposts 135
Pilot program to secure foreign imports 136
FDA – expansion will be a challenge without industry funding 137
Funding the FDA’s expansion is vital to the implementation of President Obama’s
reforms 138
Tighter regulations for Pharma marketers in 2009 138

Table of contents
Until a new FDA commissioner is appointed reforms will stall 139
FDAAA is up and running forcing Pharma to adjust its internal processes to comply 140
Developing a REMS adds between 3 and 9 months to the FDA approval process 141
REMS slow down generic approvals 142
Companies to submit all bioequivalence studies in ANDA applications 142
EU approvals to become faster and more tailored to specialty products 143
US direct to consumer advertising is waning as EU relaxes rules 143
FDA’s direct to consumer oversight is lacking 144
Drug advertisements falling foul of the FDA 144
Vytorin advertising campaign run despite poor study outcome 145
Failure to disclose payment to ‘celebrity’ posing as doctor in Lipitor ads 145
Bayer to launch a corrective ad campaign for Yaz 145
Pharma moving away from direct-to-consumer advertising 146
A shift in balance between promotion and patient education 148
Industry looking to pre-empt direct to consumer regulatory changes 149
EU direct to consumer communication guidelines partially relaxed 150
Security and supply dominate drug distribution 151
Contrasting distribution trends in Germany and the UK 152
UK drug distribution system in flux 152
Competition in Germany’s drug distribution sector set to grow 153
Securing the drug supply chain 154
Goods in transit subject to seizure in EU 154
Track and trace could get federal in the US 156

Table of contents
Drug tracking gains traction in the EU 157
Pound’s depreciation turns UK into parallel exporter 158
Evolving pricing and reimbursement set to restrict pharma further 159
US – President Obama’s cost-cutting strategies will drive down drug prices 159
Japans NHI drug pricing system reforms will balance innovation with cost-
containment 160
Germanys healthcare reforms will create difficult market conditions for branded
Pharma 162
Germany’s planned implementation of IQWiG reforms will increase scrutiny on
branded drugs 162
German statutory healthcare funds are gaining considerable negotiating power and
autonomy 162
UK – introduction of the PPRS is not all bad news for Pharma 163
Flexible pricing agreements introduced to reward innovation 164
NICE – patient access schemes and the government’s action plan set to boost
access to new drugs 164
France, Italy and Spain – continue to implement cost cutting strategies through
greater generic use 166
Evolution of a payer centric sales and marketing model 167
Sales force cuts will intensify in 2009 167
Pharma discloses physician fees to enhance public perception 169
Internet-based approaches in reaching key stakeholders will intensify 170
CHAPTER 8 BIBLIOGRAPHY 171
Publications and online articles 171
Datamonitor resources 194

Table of contents
Conference Literature 195
APPENDIX 196

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