Emerging markets to dominate as drug sales hit $1.2T

As 'pharmerging' countries boost their share, drugmakers face hurdles to their own growth
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It's no wonder that Big Pharma is looking to emerging markets to lift sales. These fast-growing countries are about the only areas where drug spending will increase significantly. The global drug market may be aiming for $1.2 trillion by 2016, but 16 "pharmerging" countries will take a much bigger bite of that total.

As IMS Health's Institute for Healthcare Informatics reports, sales in those countries--including China, Brazil, India, and the other usual suspects--will account for 30% of worldwide drug spending by 2016, up from 20% last year. Europe's share will shrink to 13% from 17%, and the United States' to 31% from 34%.

But emerging-markets bets are far from a sure thing. Consider India. Its drug spending is mushrooming as the government boosts healthcare investment, the middle class grows, and chronic diseases like diabetes become more prevalent. India also has a slew of local genericsmakers, including a few of the world's largest. And just this week, the Indian government rolled out a new program to get free drugs to the poorest patients. It specifically excludes branded meds.

Or China, arguably the fastest-growing drug market in the world. The government has pledged billions toward building up a better healthcare system. Big Pharma has been building up its local R&D, manufacturing, and sales networks to take advantage of increased demand. But domestic companies are investing, too, sometimes in partnership with Big Pharma; they want a share of the growth, too. Meanwhile, recent drug-purchasing tenders put the squeeze on prices.

Still, as Bloomberg reports, major drugmakers have managed to grow their emerging markets sales; Merck ($MRK), for one, saw sales in those countries grow by 11% in the first quarter, compared with 7% in the U.S. Pfizer's ($PFE) emerging markets revenues rose by 10%, while its U.S. sales fell 15%.

Which brings us to another consequence of the West's falling share of drug spending. As international drugmakers focus their attention away from U.S. and Europe, their operations at home could continue to shrink. Already, companies such as Eli Lilly ($LLY) and Sanofi ($SNY) have slashed their sales forces in U.S and Europe while hiring by the hundreds in China. Plants and R&D sites in mature markets are shutting down, while the likes of Novartis ($NVS) and AstraZeneca ($AZN) are building new ones in emerging markets. There are some exceptions; GlaxoSmithKline ($GSK), for instance, is building an expensive new facility in the U.K. But for the most part, where pharma sales go, so goes investment.

- download the IMS Institute report
- read the Forbes story
- get more from Bloomberg

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