What? When? Why?

From the most rudimentary native apothecaries producing drugs derived from botanicals to wholesale production drugs today, pharmaceuticals have become a major global sector in the world economy. To be precise the pharmaceutical industry has been the forefront of the discovery, development, production, and marketing of drugs. Many of the pharmaceutical companies have also been active in charitable causes that have allowed drug donations in underdeveloped and developing countries who are in dire need of medications. Most of these causes are mainly for cancer, aids, malaria, tuberculosis, parasitic and other tropical diseases. The drugs provided in such situations are either branded or generic.

The global pharmaceutical market is a vital aspect of the world economy in recent times with it accounting for about one trillion US dollars in revenues annually. When it comes to market share the United States leads the pack with a global pharmaceutical industry worth over 341.1 billion USD which is almost accounting to 40% of the global share. In many European countries, pharmaceuticals have been observed to have high revenues in prescription sales Although the US is dominating the market Chinese, southeast Asian, Eastern European and South American markets are emerging rapidly. The Chinese market, for example, is abundant with preclinical and early-phase drugs and is the center of growing biotech activity. There’s going to be a global growth in the coming years' thanks to the increasing wealth and demand around the world.

Pharmaceutical companies are constantly affected by the repercussions of patent expires and payer’s cost-control efforts, but the growing acceptance of high-priced innovative drugs and the ongoing industry consolidation are expected to drive sales for the years to come. The year 2015 saw a huge dip in the total global pharma sales due to various reasons like exchange rate effect and the impact of cost control efforts in several markets. However, there is some optimism when it comes to sales with a growth of 4.4 percent annually expected between 2016-2020.

Various factors such as the aging population and a growing middle class in emerging economies have boosted demand for both branded and generic medicines as a result of which pharmaceutical manufacturers have shown consistent growth. Longer life expectancies have compelled many individuals to purchase medications to enhance their quality of life. In addition, the emergence of new viruses, pandemics, and drug-resistant infections has thrown a new life into research and development activity improving pharmaceutical manufacturers with revenue from more products in their drug domain.

Over the five years leading to 2018, industry revenue has grown at a rate of 2.1% annually to 1.2 trillion USD. With the pharmaceutical manufacturers expanding into new emerging markets the industry revenue has increased significantly, especially with the manufacturers concentrating on targeting prevalent region-specific diseases.

A significant number of major pharmaceutical companies have reformed their R&D departments in order to cut costs and improve productivity. Several new partnerships have been formed between pharmaceutical companies and academic institutions to promote research-based innovation. Additionally, major global companies have formed alliances with generic drug manufacturers to make their presence be felt in emerging markets. Some companies took over other ones simply to gain access to their drugs in development in an attempt to keep research costs low. As a direct result of this, the number of companies in the industry is expected to decrease at a rate of 1% annually. Similarly, the number of employees is expected to decrease at a rate of 3.3% annually due to an increase in automation.

The ongoing trend of acquisitions and mergers is most likely going to continue, given the globalized nature of the major companies of the industry and their need to sustain diminishing drug pipelines due to the patent cliff. In addition to this, a number of acquisitions are expected to place crossing national boundaries on a smaller scale. However, in the United States, with the implementation of inversion laws, the willingness to acquire foreign companies that are at least one-fourth of their size has gone down, potentially slowing down acquisition and merger activity.

Many global governments have sought to reduce drug costs which have received a huge backlash from the industry players. This has been particularly evident in European countries. The pharmaceutical companies have responded by altering their drug portfolios from primary care medicine to specialties such as oncology, immunology, and inflammation where the high prices are accepted by the regulators due to their importance. One of the major hindrances to the revenue of the industry are counterfeit drugs. According to the World Health Organization, counterfeit drugs account for about 10% of the global market, but in some of the emerging markets, this proportion is as high as 30% to 40%. Drug counterfeiting business is believed to be valued around 250 billion USD a year according to the data from the World Customs Organization.

Many measures are being taken around the world to lower healthcare costs which are acting as a constriction to the industry revenue growth. Although in 2015 the Chinese government removed it drug pricing cap, with the introduction of price bidding for drugs it is expected that price-based competition will largely intensify for industry operators that manufacture products for the Chinese market. Few markets, such as Germany, have migrated towards value-based pricing which will value the drugs based on their efficacy. A method wherein national lists of essential drugs and their respective prices are published is employed in countries like India and Brazil. While a lot of manufacturers will aim at developing blockbuster drugs within a small market, many will look to concentrate their resources in the development of drugs that demonstrate efficacy for value-based healthcare models. With the elderly population rapidly rising at a significant rate, the five-year period leading up to 2023, industry trade is expected to rise at an annualized rate of 4%. Also, the direct effect of this could be the demand exceeding the production capabilities of many manufacturers in developed markets.

For any potential new company looking to enter this market the high R&D costs act as a major barrier. Initially high levels of capital is needed to set-up a manufacturing plant geared towards producing high-cost, high-tech drugs. With the market constantly changing continuous technological and research investments are needed over the capital already invested. The time factor also plays a pivotal role as the development of a product from conception to the regulatory approval process could take up to 15 years. As a consequence of this less than one-third of the drugs that make it to the market successfully recover the R&D costs.

Pharmaceutical serialization is a major step taken towards the connectivity of different production processes. Pharmaceutical production is still at an early stage when you compare it to other industries similar to where it is with continuous processing. With developments in digitization advancing and software modules helping in controlling and monitoring production and quality data as well as logistical processes flexibly according to customer requirements implementing serialization has become much simpler. These new possibilities help reduce costs. Apart from this they also enhance product quality and make it possible to provide patients all over the world with safe medication.

• Pfizer- The world’s largest pharmaceutical company which has its headquarters in Connecticut, USA. The research-based company has its veins in many domains including immunology, oncology, neurosciences and rare diseases.
• Roche- The swiss pharmaceutical giant specializes in developing innovative drugs and devices in several key areas such as oncology, immunology, infectious diseases and neuroscience.
• Johnson and Johnson- The 130-year-old company has become a primary name in many households due to hugely popular consumer products like Aveeno, Neutrogena and Listerine.
• Sanofi- Having its roots in France, Sanofi has become one of the biggest names in pharmaceuticals. Over 25% of the company’s revenue came from its three best selling drugs, Lantus, Lovenux and Aubagio.
• Merck & Co- The American based company is often referred to as MSD outside its home continent. The main areas where the company develops drugs are cardiovascular, oncology, endocrinology and other infectious diseases.
• Novartis- One of the leading companies in pharmaceuticals from Switzerland, the company focuses on a wide range of disease areas including immunology/dermatology, neuroscience and respiratory.
• AbbVie- Research-driven American biopharma firm AbbVie has constantly maintained its position among the best in the business. One of the most anticipated drugs in development upadacitinib was recently announced by AbbVie. This will be used to treat atopic dermatitis.
• Amgen- Amgen is an American Biopharmaceutical company based in California. It specializes in the development of novel therapeutics, with a focus on cardiovascular disease, oncology, bone health, neuroscience, nephrology, and inflammation.
• GlaxoSmithKline (GSK)- GSK is a leading British Pharmaceutical company that has always had a strong collection of innovative drugs. The company has been successful in an extensive range of therapy areas, but it particularly specializes in fields of HIV/AIDS, respiratory and vaccines.
• Bristol-Myer Squibb (BMS)- A fairly new entrant into the best pharmaceutical companies list. It’s a leading American firm headquartered in New York City. The company specializes in four key areas namely oncology, cardiovascular, immunoscience and fibrosis.