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Abstract
The performance of Big Pharma or the Top 10 pharmaceutical companies in the world
emerging key growth drivers and resistors of Big Pharma performance are: Drug
Today, the drug discovery process takes longer than ever, costs more than ever, but
delivers less than ever. Drug safety concerns are at their peak. With Big Pharma
accounting for a substantial chunk of the R&D spend and new drug launches, drug
novel drug delivery systems threaten to revolutionise the industry, if viable and safe.
Regulatory issues like patent expiries, pricing pressures and the generic onslaught are
severely testing Big Pharma margins and market shares. Tectonic demographic shifts,
stress-filled but sedentary lifestyles, and unmet clinical needs are driving the demand
Big Pharma
The concept of Big Pharma assumes significance due to their growing domination of the
global pharmaceutical market. Big Pharma in 2004 is equally divided between five
Traditionally, major US based Big Pharma like Merck, Pfizer, Johnson & Johnson,
EliLilly and Wyeth have been healthcare focused, while the European Big Pharma with
the exception of Glaxo, have been part of larger chemical, food or consumer
Big Pharma’s focus on pharmaceuticals has increased from an average of 49% in 1983
to 64% in 1998 to 81% in 2004, an ominous sign for the smaller players. An increased
focus and a flurry of mergers and acquisitions have doubled Big Pharma’s share of the
world pharmaceutical market to almost fifty per cent, over the past ten years. This
consolidation clearly outlines the growing importance and domination of Big Pharma.
Growth Drivers and Resistors of Big Pharma Performance 3
Big Pharma has also consistently outgrown the world pharmaceutical market with a
double digit growth rate. In 2004, Big Pharma grew at more than double the industry
growth, and if their almost 50% world market share is also considered, it clearly implies
that the entire world pharmaceutical market growth, is driven by Big Pharma.
Growth drivers and resistors are key factors that stimulate growth and change, and
The R&D process entails million of dollars in R&D spend, through a long and
healthy volunteers and patients. Out of 5000 molecules on which R&D is initiated, only 1
molecule is actually launched in the market, with the others being weeded out during
The World pharmaceutical R&D spend has trebled over the past 10 years, while new-
drug discovery costs have doubled during the same period. With an increase in the new
drug discovery period to almost 15 years2, the harvest period or the period during which
the drug is marketed has reduced to only 8 to 10 years, assuming a patent period of 20
years. This reduced harvest period can severely hamper margins on successful drugs.
Big Pharma markets 75 per cent of all new drugs approved and accounts for 66 per
cent of the total R&D spend. But, the last couple of years has seen fewer new
molecules being approved by the USFDA. Entirely new class of molecules or significant
advances are not forthcoming except for a few, in the last decade. Moreover, post
launch only 30 % drugs recover costs3. Considering the above factors, R&D productivity
Despite the stringent drug discovery and approval process, there has been a glaring
increase in the number of drugs banned, withdrawn or recalled in the past few years.
Even drugs for innocuous indications like common cold have been banned as they have
been found to lead to haemorrhagic stroke. The impact of such recalls on Big Pharma is
tremendous in terms of profits, revenue loss, opportunity loss and patient litigation
costs. However the breach of trust felt by patients and physicians who have consumed
or prescribed such drugs in good faith for long years, is irreparable and beyond
measurement.
Growth Drivers and Resistors of Big Pharma Performance 5
Regulatory Conundrums
Patents help Big Pharma protect their molecule franchises for twenty years. Successful
molecules result in huge sustained cash flows, which can be extremely profitable and
molecules. Out of the total patent expiries between 2002 and 2007, 66% of the
molecules will be from Big Pharma portfolios, which translates to a 78% share of the
total revenue loss that will accrue due to patent expiry, at today’s sales value.
These are only the obvious financial implications, but by factoring in barren pipelines,
impact of drug recalls and the uncertainty over USFDA approvals, the total implications
The advent of the generic players, post patent-expiry, can wreak havoc with revenue
streams. Generic impacts have caused sales erosion, even to the extent of 80 % of
sales within one year of patent expiry. Such a sales void can be extremely arduous to
In 2004, generic drug approvals in the US were more than 10 times the number of new
branded-drug approvals. Growth in generics outpaced that of branded drugs 3:1 due to
sheer affordability. Generic players have also become smarter and swifter at attacking
vulnerable Big Pharma franchises, even before expected patent expiry periods.
Growth Drivers and Resistors of Big Pharma Performance 6
prescribed drug, in the world’s largest market, the US4. Prohibitive drug costs are
Insurance companies and powerful patient lobbies, an ominous sign for Big Pharma and
Demographic Dynamics
World wide, the increased life expectancy is a result of better nutrition, effective
medicines and improving healthcare facilities. People above 60 years of age, are
growing at thrice the average world population growth rate. The frenetic pace of life,
stressful and sedentary lifestyles coupled with junk food and irregular eating habits, are
triggering worldwide demand for a variety of chronic (long term) therapies like mental
The age group vulnerable to such maladies has reduced from 50+ years in the 1980s to
to 30+ years today5. Serious diseases are being contracted early, but people are living
longer, and hence the total treatment periods for serious disorders have trebled from 10
years in the 1980s to 30 years today6. This prolonged drug usage ends up causing
newer side effects, as drugs are being consumed for periods much greater than what
The growing number of the elderly patients is ensuring a higher incidence of geriatric
A rich and image conscious but aging society, that is prepared to fork out money to slow
down the natural aging process, is propelling demand in the price insensitive lifestyle
segment. Drugs that improve mental agility, reduce weight and rejuvenate sexual
These tectonic demographic shifts have resulted in a boom for chronic therapies, where
Big Pharma is well entrenched and focused on. The Top 10 therapy areas (TA) account
for 72 % of the world pharmaceutical market value and are the principal growth drivers.
Big Pharma accounts for more than 50 % share of all the major therapy areas with
Over the next 5 years, as populations age and/or become westernised, mental health,
obesity, diabetes, cancer, metabolism and heart disease segments would drive growth.
As Big Pharma remains a major player in the therapy areas estimated to be significant
by 2010, their continued presence and competence in these segments could be their
Conclusion
As Big Pharma domination of the world pharmaceutical market increases, the key
dynamics affecting Big Pharma performance assume importance. Growth drivers like
harnessed, with an eye on the future. Current growth resistors like R&D productivity,
new drug output and patent expiry management, all earlier inherent Big Pharma
clinical needs, value pricing and safe medicines to win back patient and physician trust.
Equipped with a Masters in Marketing Management from Mumbai University and 15 years of
around the key dynamics and demographics, affecting pharmaceutical strategy and performance.
Email- amitrangnekar@gmail.com
Bibliography
• IMS
• Scrip
• Pharmabiz www.pharmabiz.com
• USFDA www.usfda.gov
• Forbes
• Economist
References
1
Emerging Standards for Drug Discovery and Development:Perspectives on Technology, Strategy and
Relationships October 8, 2002 http://www.milestonedevelopment.com/CPSA/2002/tu_oa1.html
2
Tufts center for study drug development, Outlook 2001, Tufts university
3
Grabowski, H., “Returns on Research and Development for 1990s New Drug Introductions,”
Pharmacoeconomics 20 (December 2002): suppl. 3, 11-29.
4
Gross D., Prescription Drug Prices in Canada: What Are the Lessons for the U.S., AARP, retrieved from
http://www.aarp.org/international/Articles/a2003-07-11-ia-perspectives.html
5
Centaur databank, Survey of Indian physicians, patients and pathologists- Nov 2004
6
Centaur databank, Survey of Indian physicians, patients and pathologists, Nov 2004