Global prescription drug sales grew at just 7% in 2004, the lowest rate since 1998. Sales growth was slowed by government pressure to reduce prices, concerns over drug safety and the impact of patent expiries. Over the next five years, sales are forecast by IMS Health to grow at a meagre 6-9% compared with growth of well over 10% in the last five years. The slowdown in growth reflects continuing generic competition, a dearth of new products, regulatory tightening and pricing pressure. This comes at a time when the product development paradigm is undergoing significant change. Most current blockbuster drugs were developed through traditional biochemistry, but it is generally accepted that opportunities to develop truly innovative breakthrough drugs in this way are now exhausted. The completion of the Human Genome Project has opened up the possibility of developing drugs based on genomics, but these are 5 to 10 years away. In the meantime, Big Pharma is reacting by increasing in-licensing activity, particularly from the biotech sector, targeting M&A opportunities, expanding into new geographic markets such as China, and searching for cost-reduction opportunities in-house. Pharmaceuticals companies are also taking a fresh look at specialist markets. Historically, a blockbuster $1bn drug had to be a primary care product, but since the spectacular success of Genentech’s breast cancer drug Herceptin, the blockbuster specialist product is now a reality. Specialist niche markets such as cancer, Alzheimer’s and HIV are expected to be major opportunities over the coming years.
In the longer term, for growth to be sustainable drug companies must re-establish their relationship of trust with the patient and physician, which has been severely tested in recent years as fraud investigations, safety issues and perceived high prices have entered public consciousness. Notwithstanding these issues, the healthcare market, and pharmaceuticals as an integral part of it, will continue to grow as the world’s population ages and becomes more affluent. The pharmaceutical company that makes intelligent investment decisions, effectively creates and exploits its intellectual property, and manages its relationship with key stakeholders, will continue to benefit from that growth.
PwC provides a wide array of services to help pharmaceutical companies identify future growth opportunities and implement strategies, processes and structures to achieve that growth. Our Licensing Management team provides assistance in every stage of the licensing process, from due diligence through the development of contract terms through to reviews of the company's controls around maintaining alliances. We can also assist companies in improving revenue streams and managing risk by reviewing compliance with licences and other business arrangements and by advising on appropriate procedures to manage royalty revenue payments and proceeds. PwC can also leverage its unparalleled global network to facilitate expansion into any territory and help to manage the attendant risks. Our Valuation & Strategy team will help to identify the most fruitful areas of R&D investment, using an effective portfolio evaluation and management approach, and our Compliance team can provide expertise to help pharmaceutical companies identify and manage any legal, regulatory or operational risk associated with new areas of growth.