Industry Trend Analysis - Cost Pressures To Provide Challenge For Drugmaker Revenues - MAR 2018


BMI View: Multinational innovative pharmaceutical firms will continue to invest heavily in Western Europe on account of the stronger regulatory environments and greater ability to afford high-value medicines. However, these markets will no longer provide significant revenue growth due to aggressive cost-containment ; rather , growth opportunities will be plentiful in emerging Europe. We note that due to continued regulatory challenges, the vast majority of this growth will be driven by the generic medicines sector.

The USD325bn (EUR294bn) European drug market is forecast to post a 3.2% compound annual growth rate (CAGR) at constant exchange rate (CER) terms through to 2021. The USD62bn (EUR56bn) Emerging Europe region will post a 9.1% CAGR through to 2021. In contrast, the USD263bn (EUR237bn) Western Europe region will post a 1.8% CAGR over the same period. Europe's pharmaceutical market will post a five-year CAGR of 4.1% in USD terms and 3.0% CAGR in EUR terms.

Pharmaceutical Market Forecast
2012-2026
f = BMI forecast. Source: BMI

Ageing demographics and the continued focus on increasing access to healthcare services - particularly in emerging markets - will continue to boost demand for, and consumption of, medicines. In response, governments across the region will face challenges in meeting this demand sustainably. Initiatives to boost domestic drug production; increasingly forceful pricing pressures; cross-border collaboration on pricing, reimbursement and procurement; and a focus on cost-effectiveness and generic substitution are trends that are likely to continue over our forecast period. These will, in turn, pose revenue-earning challenges for drugmakers. Nonetheless, despite the heavy focus on generic medicines in markets across emerging Europe, the increasing affordability of medicines will allow for greater access to medicines and, in turn, will boost sales growth in the region.

REGIONAL PHARMACEUTICAL SALES, HISTORICAL DATA AND FORECASTS ( Europe (Region) 2013-2021)
2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f
f = BMI forecast. Source: BMI
Pharmaceutical sales, USDbn 360.418 371.727 325.333 324.819 339.455 344.412 368.106 385.136 397.880
Pharmaceutical sales, USDbn, % y-o-y 4.71 3.14 -12.48 -0.16 4.51 1.46 6.88 4.63 3.31
Pharmaceutical sales, USD per capita 401.9 413.2 360.4 358.7 373.7 378.0 402.9 420.5 433.3
Pharmaceutical sales, % of GDP 1.56 1.58 1.61 1.66 1.69 1.68 1.74 1.74 1.73
Pharmaceutical sales, % of health expenditure 16.9 17.2 17.6 17.6 17.5 17.5 17.4 17.4 17.3