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

www.datamonitor.com Datamonitor America 245 Fifth Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 646 365 3362 e: [email protected]

Datamonitor Europe Charles House 108-110 Finchley Road London NW3 5JJ United Kingdom t: +44 20 7675 7000 f: +44 20 7675 7500 e: [email protected]

Datamonitor Asia Pacific Level 46 / 2 Park Street Sydney NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8705 6901 e: [email protected]

Datamonitor Japan Da Vinci Ginza East 7th Floor 5-14-5 Ginza Chuo-ku Tokyo 104-0061 Japan t: +81 3 5148 7670 f: +81 3 4496 4316 e: [email protected]

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

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.

Future Pharmaceutical Industry Trends DMHC2497

© Datamonitor (03/2009) Page 2 This report is a licensed product and is not to be photocopied

ABOUT DATAMONITOR

Datamonitor plc is a premium business information company specializing in industry analysis.

We help our clients, 5,000 of the world’s leading companies, to address complex strategic issues.

Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, Technology.

Datamonitor maintains its headquarters in London and has regional offices in New York, Frankfurt and Hong Kong.

ABOUT DATAMONITOR HEALTHCARE

Datamonitor Healthcare provides a total business solution to the pharmaceutical and healthcare industries. Its services reflect its expertise in therapeutic, strategic and eHealth market analysis and competitive intelligence.

Nick Bennett, Director of Research and Analysis, +44 (0)20 7551 9200, [email protected]

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 [email protected]

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

Documents

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