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Global Pharmaceuticals Market Forecast: Drivers, Value Chain Analysis & Trends

Global Pharmaceuticals Market Forecast: Drivers, Value Chain Analysis & Trends
Global pharmaceuticals market is expected to be worth USD 1.57 trillion by 2023 as per newly launched report "Global Pharmaceuticals Industry Analysis and Trends 2023" by NAVADHI Market Research
North America is expected to retain it’s leading position in the global pharmaceuticals market with market share of 45.33% in 2023 improving on it’s market share compared to 2017. Europe on the contrary is expected to see a decline in it’s market share compared to 2017 and be worth 20.24% of global pharma industry in 2023. Asia Pacific pharmaceuticals market is expected to retain it’s second position with a market share of 24.07% in 2023. Latin America and Middle East and Africa (MEA) are expected to retain 7.53% and 2.96% market share of global pharmaceuticals market in 2023.
Pharma Market Share of Key Geographies

Growth Drivers and Inhibitors of Global Pharmaceuticals Industry

This growth is fuelled by the growing and ageing population in key markets. As per World Population Prospects by United Nations, the worldwide population is likely to cross 9.3 billion by 2050 and around 21% of this population is expected to be aged 60 and above. Apart from ageing and rising population the improvements in purchasing power and access to quality healthcare and pharmaceuticals to poor and middle-class families worldwide also is driving the growth of global pharma industry. Another aspect which is leading this growth is rising focus of pharmaceuticals companies to tap the rare and speciality diseases market. Innovations in advanced biologics, nucleic acid therapeutics, cell therapies and bioelectronics & implantables has attracted investments in the industry by even non-pharma companies like Facebook, Qualcomm etc. which is also driving the global pharmaceuticals industry growth.

On the other hand, adoption of cost control policies along with tightening of rules by governments in key markets are expected to impact the growth prospect of the global pharmaceuticals industry. Pharmaceuticals companies are forced to reduce their research and development (R&D) spending due to slowdown of growth in last few years which is also expected to hamper growth of the global pharma market as new drugs revenue form large part of pharma firm’s revenue due to exclusivity of the drug. Apart from this generics pharma market is facing decreasing return on investment due to price erosion in key markets which is forcing many firms to look for other avenues and markets to sustain growth.

Pharmaceutical Growth Drivers and Inhibitors


Global Pharmaceuticals Industry Value Chain Analysis

Pharmaceuticals industry value chain can be broadly segregated in to 5 major steps. The initial stage of the value chain constitutes the research and development of a new medicinal molecule. The next phase involves getting patents for the new medicines and licenses in various countries where the new drug will be manufactured or sold.
The next stage involves procuring raw materials like active pharmaceutical ingredients (APIs), packaging materials etc. and sourcing them to manufacturing plant(s). In the next step new medicine is manufactured. This is done using either in-house manufacturing facilities or contract manufacturing methods. In the last stage the new medicine is sent to various pharmacies and hospitals using distribution channels (wholesalers, retailers etc).
Pharma Industry Value Chain

Global Pharmaceuticals Industry Research and Development (R&D) Phases

Research and development in pharmaceuticals industry is quite time consuming and hence costly affair. It normally takes anywhere between 12-15 years for a new drug to enter market after patent application. It takes around 4 years to complete pre-clinical process which includes checks for acute toxicity, pharmacology and chronic toxicity.
Once pre-clinical development is completed, clinical trials begin which are conducted in 3 phases and can take up to 5 years to finish. Then it takes 3-5 years to complete the registration, price formulation and reimbursements to launch the new drug to the market. Once launched pharmacovigilance process is initiated to track the long-term effects (sometimes also referred as adverse drug reactions (ADRs)) of the newly launched drug.
The initial patent expires in 20 years from the date of filing which gives exclusive manufacturing rights to the pharma company developing new drug which can be extended for another 5 years using supplementary protection certificate (SPC) mechanism.
Research and Development Phases for New Medicine

Industry Wise Research and Development (R&D) Investment

Pharmaceuticals industry is research and development (R&D) driven industry which is evident from the fact that they nearly spend around 15% of their revenue on R&D related activities compared to only 2.80% by Aerospace & Defense firms as per the 2016 EU Industrial R&D Investment Scoreboard, European Commission. Software & computer services are the only other industry to spend more than 10% of their revenue on R&D related activities.
Industry wise R&D Investment

Phase Wise Research and Development (R&D) Investment in Global Pharmaceuticals Industry

As per PhRMA Annual Membership Survey 2017, pharmaceutical firms spend nearly 48.50% of their R&D budget on 3 phase clinical trials. The second highest allocation of R&D budget is made for pre-human/pre-clinical trial phase by a pharma company. Pharmacovigilance accounts for 11.40% while Approvals cost 3.70% of the total R&D budget of a pharmaceuticals firm.

Global Pharmaceuticals Industry Trends

1. Increasing Severity of Drug Price Controls

The global pharmaceutical industry is facing government-initiated drug price controls since public health in most of the key market is governed by associated decisions and policies of local government. Drug price controls can broadly be categories in 3 major segments i.e. direct pricing controls and cuts, drug reimbursement related policies and policies to promote generic versions of medicines.

Even in the USA market which was free of direct drug price controls, president Donald Trump has proposed new drug price controls for Medicare. As per Department of Health and Human Services (HHS) report, Medicare is paying 80% more than other advanced industrialized nations for some of the most costly physician-administered medicines.

He is planning to lower drug prices by basing them on other countries’ (Austria, Belgium, Canada, the Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden and the United Kingdom) costs. It is estimates that implementation of the new pricing index would save Medicare USD 17.2 billion over a five-year period.

2. Greater Focus on Rare Diseases / Orphan Drugs

The 1983 Orphan Drug Act in the U.S. was designed to encourage drug manufacturers to develop new medicines for smaller, neglected diseases that didn't offer as much of a financial return.

This 1983 law offered pharma manufacturers not only tax credits, faster FDA review and waived fees, and exception from the ACA branded drug pharma fee for orphan-only drugs, but seven years of marketing exclusivity to those firms who secured approval of a rare disease.

According to the US Food & Drug Administration (FDA), 75 orphan drugs were approved in the United States in 2017, compared to a total of 27 in 2016 and 56 in 2015.

Even some of the generics manufactures who are facing price erosion in key markets like USA are looking at rare diseases / orphan drugs to sustain their growth. Because of low development costs but high market value, rare diseases/orphan drugs segment is expected to see substantial investments in the future.

3. Increasing Development of Nucleic Acids as Therapeutics

4. Increasing Focus on Cell Therapy

5. Implantables (Bioelectronics) and Electroceuticals are Expected to Become Mainstream

6. Use of 3D Printing to Reduce Cost and Improve Production Efficiency of Biologics

7. Increasing Use of Big Data and Artificial Intelligence (AI) in Drug Discovery


Global Pharmaceuticals Industry Analysis and Trends 2023

Global Pharmaceuticals Industry Analysis and Trends 2023: Report covers growth forecasts for 39 countries along with 5 major geographic regions


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