US pharmaceutical market faces a new environment - Dynamic development

Changed environment
The last several years have been turbulent for the US pharmaceutical market. After several years of robust growth, sales growth in both dollar and volume terms slowed dramatically in 2008, due largely to the recession that began in 2007.

The market enjoyed a strong recovery in 2009, with sales in dollar terms growing by 5.1 % and prescription volume up by 2.1 %. But in 2010 sales grew by only 1.9 % and volume fell for many major branded drugs that had gone off patent.
Over the next year, the pharmaceutical market is expected to grow in the range of 3-4 %. Generic drugs continued to gain industry share in 2010, accounting for 77 % of all retail prescriptions. This shift toward generics is being propelled by the recent or imminent patent expiries of several major drugs. Between 2011-2014, drugs representing sales of 95 billion USD will go off patent.

The US prescription pharmaceutical sales were valued at 279 billion USD in 2009, with an annual growth rate of 5.5 % between 2008 and 2009, having grown at a compound annual growth rate (CAGR) of 5.0 % between 2005 and 2009.
In volume terms, the market grew by 7.2 % between 2008 and 2009, with a CAGR of 3.8 % between 2005 and 2009.

The retail sector held the largest market share by value at 72.9 % in 2009, compared to the hospital sector with 27.1 %.

The retail sector grew approximately twice as fast as the hospital sector; retail sales grew by 6.4 % (2008–09) and 5.0 % CAGR (2005–09), while the hospital sector grew at 3.3 % (2008–09) and 4.9 % (CAGR, 2005–09).

The metabolic therapeutic area was the fastest-growing in terms of sales, growing by 16.2 % between 2008 and 2009 and 13.6 % (CAGR; 2005–09). CNS drugs led in terms of sales, with a 23.1 % market share in 2009, followed by cardiovascular drugs with 12.9 %, but both therapeutic areas saw declining sales due to increasing generic incursion.

Per capital expenditure on healthcare in the USA in 2007 was 7,290 USD, compared to the OECD average of 3,083 USD, suggesting that the country’s healthcare outcomes are not proportional to the investment.

The high healthcare spend can be attributed to a range of issues, notably a heavy presence of for-profit organisations in healthcare, widespread use of medical services and treatments by individuals with extensive health insurance coverage, as well as substantial administrative costs and fragmentation of the system.

The costs and benefits of US healthcare reform
The recent healthcare reform debate in the USA was broadly centered on three core issues: access (providing insurance to the currently uninsured), affordability (lowering the cost of existing activities and finding new sources of funding), and quality (improving the quality of care that is delivered). The Patient Protection and Affordable Care Act, signed into law in March 2010, attempts to address these issues by reforming healthcare nsurance laws and coverage. The law is designed to expand healthcare coverage, giving more patients better access to medicines. In the short term, this means additional costs to the pharmaceutical industry, as the law requires the industry to provide incremental rebates and discounts.

However, over the longer term, the law provides for an incremental expansion of coverage that should result in increased revenues for pharmaceutical companies. While new patients will be covered under the new law, the increased revenue associated with this expansion has not been quantified. The bulk of new patients is expected to come in 2016 through the Medicaid channel, a government health insurance programme for people on low incomes.

Most of the provisions of the Affordable Care Act have not yet been implemented, and the law faces challenges from the courts and the newly Republican-controlled House of Representatives. Nonetheless, states are moving forward in establishing competitive exchanges for insurance plans as the law requires.