The Pharmaceutical Industry 2008: Current and Future Trends and Strategic Issues Shaping Pharma

Table of Contents

• CHAPTER 1 EXECUTIVE SUMMARY
  • Scope of the report
  • Key findings
    • External factors driving change in the pharmaceutical industry
      • External factors affecting pricing in the pharmaceutical industry
      • External factors affecting proliferation in the pharmaceutical industry
      • External factors affecting product portfolios in the pharmaceutical industry
      • External factors affecting drug penetration in the pharmaceutical industry
      • External factors affecting costs in the pharmaceutical industry
• CHAPTER 2 EXTERNAL FACTORS IMPACTING THE PHARMACEUTICAL MARKET DURING 2007
  • Overview of external factors impacting the pharmaceutical market during 2007
  • Increased focus on safety is keeping drug approval rate low
    • The effects of longer clinical trials on Pharma' s ROI
      • Questions over safety and efficacy are the prime causes for delayed approval
    • Strategies implemented to improve drug safety
      • Drugs affected by the FDA' s increasing safety focus
  • Legislative events continue to significantly impact Pharma
    • The FDA Amendments Act (FDAAA) aims to overhaul the drug safety program but many uncertainties remain
      • PDUFA was reauthorized and user fees were raised but the DTC program was abandoned
      • Risk Evaluation and Mitigation Strategies (REMS) can restrict the market penetration of a drug
      • The FDA' s ability to require post-marketing studies has been expanded
      • The FDAAA gives the FDA the power to mandate labeling changes
      • FDA proposal for new labeling pre-emption rules is upsetting the lawmakers
      • Drug safety will be assessed by two separate bodies
      • Manufacturers not complying with the new safety requirements are subject to hefty civil penalties
      • Clinical trial registry and results database
      • Pediatric trial exclusivity term is kept at six months for all drugs despite opposition from the generic industry
      • Citizen Petitions may no longer delay the approval of generic drugs by the FDA
    • The FDAAA did not include generic user fees but they may be introduced in the near future
    • Changes in the US patent law may weaken the position of Pharma
  • The outcome of the US Presidential and Congress elections will impact the industry in the world' s largest market
    • Republican candidates are against a federal universal healthcare system
    • Both leading Democrat candidates are proposing universal healthcare coverage
  • Tightening of pricing and reimbursement across the global pharma market
    • Increasing healthcare costs driving cost cutting initiatives globally at the possible expenses of pharmaceutical innovation
    • US - healthcare costs escalate prompting cost-effective initiatives
      • Reasons behind escalating healthcare costs
      • Medicare unable to negotiate with Pharma on drug prices
    • Japan implements further price cuts but delays reforms to P&R system
    • EU - implementing price cuts and reference pricing are the main cost containment tools used in most EU countries
      • Uncertainty over EU P&R reform
      • Italy to pay increased attention to pharmaceutical innovation
      • France - reimbursement drug list reforms have been insufficient in cutting reimbursement costs due to lack of physician compliance
      • Germany - continues to implement and review cost-cutting policies
      • Spain - reference pricing has cuts cost but is also partly responsible for a drop in investor confidence in Spain as a R&D center
      • UK - further implementation of cost-cutting reforms seen in 2007
  • Generics overview in the seven major markets
    • The global generics market is growing
    • Several measures to increase generics use were introduced in 2007 and will drive growth in the immature markets
      • Generics to be listed twice a year in Japan
      • Mandatory generic substitution in Japan
      • Education is key to improving generics uptake in all immature markets
    • The more mature markets are the most competitive
      • Generics companies engaged in price-fixing scams
      • Medicaid reimbursement for generics drugs to be reduced
      • Wal-Mart likely to push generic drug prices down further in the US
  • Biosimilars - a growing threat to biologics
    • Europe continues to lead in biosimilars approvals
      • Five biosimilars of epoetin alfa were approved in 2007 in the EU
    • Substitution is an unresolved issue in many countries, but France and Spain have banned automatic substitution
    • Payers are yet to introduce incentives for the use of biosimilars
    • The US is making progress towards establishing a pathway for approval of biosimilars
    • Lifecycle management strategies will also have to be employed for biologics in the future
    • Regulatory focus on immunogenicity is impacting the approval of both new biologics and biosimilars
      • Generic Lovenox was rejected by the FDA
  • Patients as consumers now have the ability to influence and alter healthcare decisions
    • The evolving role of patients and caregivers
    • Patient advocacy groups now have the ability to influence and alter healthcare decisions
      • Lack of transparent information for patients is affecting public perception of the Pharma industry - increasing distrust
      • Direct to consumer advertising under regulatory scrutiny in the US
      • EU to allow companies to provide information to patients
      • Current communication practices implemented by pharma companies are not tailored to patient needs
      • The emergence of new prescribers and influencers
• CHAPTER 3 STRATEGIC RESPONSES TO CUT COSTS
  • Overview of strategic responses to cut costs
  • Outsourcing is increasingly used to cut costs
    • Manufacturing is mainly outsourced to India and China
      • GMP compliance and safety of products are critical for emerging market CMOs
    • More companies outsource clinical trials in order to speed up the trial process and cut costs
      • Emerging markets are presenting many cost- and time-saving opportunities for clinical trials
    • Many companies are moving some of their own operations to emerging markets
      • Generic drug-makers are also tapping into the cost-saving opportunities in India
  • Is Big Pharma facing an R&D efficiency crisis?
    • Pharma enters the biomarker era
    • Restructuring the R&D model
      • Roche focuses on specialized R&D centers
      • Pfizer and Bayer-Schering - cutting costs and concentrating R&D focus
      • Indian companies spin-out R&D
      • Which R&D model is best?
    • Using contract research organizations to optimize R&D
  • Pharma' s evolving sales force effectiveness model through specialized reps and outsourcing
    • 2007 was a year of cost cutting for Pharma
    • Increased regulation of sales and marketing set to continue and intensify in 2008
    • Pharma continues to streamline and develop sales and marketing departments to meet current challenges
      • Trends in new media' s role in sales and marketing strategy
• CHAPTER 4 STRATEGIC RESPONSES TO INCREASE SALES
  • Overview of strategic responses to increase sales
  • Cost-saving drives continued M&A growth
    • Factors driving M&A
      • Driving expansion and diversity in therapeutic and geographic markets
      • Simplifying access to drug candidates
      • Increased market penetration through sales force acquisitions
      • Divesting non-core assets to focus on core business strategy and specialization
      • Investigating future core areas and focusing on specialization
  • Licensing is becoming an increasingly expensive and complex option for Pharma
    • Increased competition and cost drives licensing of early-stage candidates
      • Rising cost of licensing deals increases pressure on cost-conscious Pharma
    • The increasing complexity of licensing deals
      • Biotechs increasingly exercise their bargaining power during deal negotiations
      • Deals between Big Pharma set to rise
    • Oncology remains the number one therapy area, and will drive the growth of the biologics market
  • Changes in the drug supply chain will impact on both legitimate and illegitimate players
    • Changes to the UK drug supply chain
    • Distribution of power shifts from pharmacists to manufacturers under DTP
      • Pharmacies are paying more under Pfizer' s DTP model, for poorer service
      • Widespread changes in distribution will have a wide-ranging impact
      • The government' s response to DTP
      • Implications for parallel trade in the EU
    • Simplified supply chains are insufficient, alone, to combat counterfeits
  • Emerging markets continue to attract Big Pharma despite challenges
    • Large patient potential is the main attraction
    • Strong economic growth is fueling the demand for modern pharmaceuticals
    • IP environment - improving but still a way to go
      • Indian Patent Act of 2005 - failing to deliver?
      • Chinese IP environment still needs to improve despite signing up to TRIPS
      • Compulsory licenses were issued in several emerging market countries in 2007
    • Increased funding of public healthcare systems gives hope for wider reimbursement
    • Drug pricing is tightly regulated in some countries
  • Personalized medicines offer an alternative to the traditional blockbuster model
    • Theranostics - Pharma revolutionizing its approach to diagnosis and treatment
      • Theranostics set to improve P&R of niche drugs
      • Investor uncertainty remains the biggest hurdle to theranostics
  • Current and future lifecycle management trends
    • Pharma moves away from indication expansions to R&D strategies that offer a greater ROI
    • Rx-to-OTC - to switch or not to switch?
      • Weighing up the success of Alli
      • The pitfalls of Rx-to-OTC switching
      • BTC adds another string to Pharma' s bow
• CHAPTER 5 BIBLIOGRAPHY
  • Publications and online articles
  • Conference literature
  • Datamonitor resources
  • Databases
  • Abbreviations
• APPENDIX
  • List of Tables
    • Table 1: Drug safety concerns and outcomes in the US, 2007
    • Table 2: Three bills were introduced in the legislative houses in the US in 2007
    • Table 3: Euro-Canada health consumer index, 2008
    • Table 4: Information needs of patients
    • Table 5: Several companies have announced reduction of in-house manufacturing capacities
    • Table 6: Several multinational pharmaceutical companies have established a R&D presence in China
    • Table 7: MNCs prefer to carry out R&D in India in collaboration with an Indian company
    • Table 8: Countries on the US Priority watch list presenting concerns over IP, 2007
    • Table 9: Pharma cost cutting strategies in 2007
    • Table 10: Summary of leading M&A deals by value in 2007
    • Table 11: Biologic products will experience a more than 10-fold growth rate compared to small molecules in 2007-08
    • Table 12: Rx-to-OTC FDA approvals and non-approvals
    • Table 13: Euro-Canada index weightings
  • List of Figures
    • Figure 1: External factors driving implementation of strategic responses in the pharmaceutical industry
    • Figure 2: External factors affecting pricing in the pharmaceutical industry
    • Figure 3: External factors affecting proliferation in the pharmaceutical industry
    • Figure 4: External factors affecting product portfolios in the pharmaceutical industry
    • Figure 5: External factors affecting drug penetration in the pharmaceutical industry
    • Figure 6: External factors affecting costs in the pharmaceutical industry
    • Figure 7: The impact of an increasingly safety conscious industry
    • Figure 8: Legislative events and policy changes impact pharmaceutical companies' profits in multiple ways
    • Figure 9: The FDAAA reauthorizes three acts and introduces several new provisions
    • Figure 10: FDAAA expanded the FDA' s authority to review TV DTC adverts but the user-fee program was abandoned
    • Figure 11: The FDA can require REMS both before and after approval
    • Figure 12: New US Patent and Trademark Office rules are unfavorable for pharma and biotech
    • Figure 13: The Patent Reform Act of 2007 proposes some fundamental changes to the US patent system
    • Figure 14: The frontrunners for the US Presidential election have a great deal of overlap in their healthcare reform plans
    • Figure 15: Potential impacts of the US Presidential elections on pharma industry
    • Figure 16: Factors driving tightening P&R
    • Figure 17: The impact of tightening P&R in the pharma industry
    • Figure 18: Pricing policies in the US, Japan and 5EU, 2007
    • Figure 19: Generics use will continue to threaten innovator profits
    • Figure 20: Key generic trends impacting the seven major markets
    • Figure 21: Biosimilars present a threat to the profits of companies with biologics
    • Figure 22: Events and trends increasing the threat of biosimilars
    • Figure 23: The Biologics Price Competition and Innovation Act passed the Senate but failed to clear Congress in 2007
    • Figure 24: Various lifecycle management strategies can be employed to maximize revenues derived from biologics
    • Figure 25: How patient empowerment affects Pharma' s profitability
    • Figure 26: Drivers of patient empowerment
    • Figure 27: Influence of patient advocacy groups
    • Figure 28: Decision-making processes for prescription drugs
    • Figure 29: Outsourcing can impact profitability of pharmaceutical companies in various ways
    • Figure 30: Advantages and disadvantages of conducting clinical trials in emerging market countries
    • Figure 31: Is Big Pharma facing an R&D crisis?
    • Figure 32: Recommendations to improve R&D efficiency in the pharma industry today
    • Figure 33: Novel technologies such as biomarkers improve R&D efficiency through a variety of means
    • Figure 34: Recent trends in the Pharma-CRO relationships
    • Figure 35: How CSOs can boost company profitability
    • Figure 36: $115 billion worth of branded drugs from the top 50 Pharma companies face patent expiry through 2012
    • Figure 37: Factors driving M&A and licensing in the pharma industry today
    • Figure 38: The line between licensing and M&A is becoming increasingly blurred
    • Figure 39: Drivers and resistors of co-promotion
    • Figure 40: Oncology remains the number one therapy area for licensing deals in 2007
    • Figure 41: The changing face of pharmaceutical supply
    • Figure 42: Impending changes to the drug supply chain
    • Figure 43: Emerging markets present an opportunity to grow revenues
    • Figure 44: Attractions and challenges facing global pharmaceutical companies operating or wishing to enter emerging market countries
    • Figure 45: Factors driving the growth of theranostics in the pharma industry
    • Figure 46: Drivers and resistors of theranostics and personalized medicines
    • Figure 47: Niche drugs experience a greater return of promotional spend compared to those for large patient populations
    • Figure 48: A wide range of brand defense strategies are available, however timing of implementation is key
    • Figure 49: Key factors driving implementation of LCM strategies in the pharma industry today
    • Figure 50: Risks associated with indication expansion launch timing
    • Figure 51: Indication expansion - multiple options for driving market share
    • Figure 52: Decline in US indication expansions approved since 2004
    • Figure 53: Rx-to-OTC switches in the US and UK, 2001-07
    • Figure 54: 2007 US revenues of GSK' s Alli and Roche' s Xenical