The global pharmaceutical industry in a post-Covid world
In the post-covid landscape, the global pharmaceutical industry needs to pivot to self-reliance, automation, clinical studies and ethical practises
Despite the economic fallout of the Covid-19 pandemic, the global pharmaceutical industry is recording a compound annual growth rate (CAGR) of 5.6% and is projected to reach $1.6 trillion in 2025.
The pharmaceutical industry is mostly dominated by original brands with a market share of 56%, followed by generics/branded generics with a market share of 36%. The rest of the market share is accounted for by OTC (Over the Counter)/other products.
The revenue generation from biologics has increased by 70% in the last five years and currently this segment is occupying more than 25% of the total market. Over the past decade, generics/branded generics (copy of original drugs) and biosimilars (copy of original biologics) are growing faster than brands and original biologics.
The US alone comprises more than 30% of the global medicine market and their current growth rate is around 3% per annum. The European pharmaceutical industry generates a yearly revenue of $295 billion with a growth of 5.4%. These two regions are unparalleled in their position within the pharmaceutical business due to strong emphasis on research and innovation.
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Twenty-five percent of the revenues earned by the top companies of these two regions are reinvested in research and development (R&D). In fact, they are the leaders in introducing new medications to the world, housing nine of the top ten pharmaceutical companies of the world.
China is leading the emerging pharma countries and their overall spending on medicines is expected to grow at a CAGR of 4.5%-7.5% through 2025 to reach between $170 billion and $200 billion. China produces and exports around 40% of Active Pharmaceutical Ingredients (APIs) sent out to the world. The key drivers of Chinese pharmaceutical industries are low cost of utilities and emphatic government support.
Japan is one of the largest pharmaceutical markets in the world with a yearly turnover of around $110 billion. The generics market of Japan had been rising as the government started to promote the use of generics in 2007. As per IQVIA, the world's largest contract research organisation, Japan's overall growth will be the slowest among the developed markets with a compound annual growth rate (CAGR) between -2% and 1% in 2021-2025.
The Indian pharmaceutical industry, the world's largest provider of generic medications, generated domestic revenue worth $42 billion in 2021 which is estimated to reach $65 billion by 2024. This industry has shown a growth of around 15% led by the production of Covid-19 products in the last one year, compared to the single digit growth of 3% shown last year. India has the highest number of USFDA approved plants other than the US, and it is projected to supply 40% of the generic formulations for America and 20% for the world.
Bangladesh, as a generic pharmaceutical industry, is a role model for many developing nations. The industry is enjoying double digit growth almost every year and expected to hit $5.5 billion in the next three years. The country garnered the world's attention for introducing the first generic remdesivir, a broad-spectrum antiviral created to tackle Covid-19 infection. After meeting the local demand, Bangladesh exported some Covid-19 related medicines to the global community.
Despite the strong foundation of the global pharmaceutical industry, Covid-19 has brought changes to so many aspects of the business and these are creating both long- and short-term effects.
The short-term effects
a) Supply chain disruption: Covid-19 raised the demand for many drugs including antibiotics, antiviral, antiseptic, antihistamine, certain biologics, respiratory medicines, vitamin and mineral supplements, vaccines etc. As the demand rose sharply, facilities upgradation became the priority. Also, sourcing of raw materials was another challenge.
China is the major exporter of Active Pharmaceutical Ingredients (APIs) and intermediates in the world. They were severely impacted by Covid-19, which created a massive short-supply of certain drugs across the world. In addition to that, few countries restricted exporting antibiotics and other APIs considering their future demand, which added fuel to the fire of medicine short-supply. This supply chain disruption created the necessity for producing their own APIs or shifting the production sites to different locations.
Another big challenge was shipping goods from one country to another. The flight schedule was totally interrupted. These led to increased production cost of all products.
It is worth mentioning that despite being fully import dependent in APIs, Bangladesh was able to manage all their medicine demand during Covid-19 as they usually maintain an inventory cycle of six to nine months. Also, an efficient demand management system and selection of alternative API sources played a key role here.
b) Changes in R&D directions: Before Covid-19 began, the global pharmaceutical giants were investing a lot on research and development of biologics and personalised medication, while other top companies were busy with biosimilars. Covid-19 shifted the focus to vaccine development, given the urgency to manufacture the appropriate number of vaccines at the right time.
Expansion of facilities or enhancing their efficiency for quick production is now a concern as the market is highly competitive and time driven. In earlier cases, many countries were import dependent for all their vaccine requirements; however, currently they are setting R&D facilities for local vaccine development.
c) Changes in communication model: Pharmaceutical product promotion mostly takes place through in-person visit to the medical practitioners, but this changed to digital appointments due to Covid-19. In light of social distancing, seminars, clinical meetings and other scientific communications moved to virtual spaces. These changes involved reduced promotional cost.
At the same time, telemedicine is emerging as an alternative choice for doctor consultation. Various apps for patient connection and medicine selection are becoming popular and this is where pharmaceutical companies are paying their utmost attention.
The long-term effects of Covid-19 on pharmaceutical industries
a) Shift towards self-sufficiency: Covid-19 impressed the need for self-sufficiency and self reliance. Without meeting local demand, very few or no country will export medicines to others amidst a crisis. Therefore, all the developing and developed countries will plan for self-sufficiency in all types of medicines for crisis management.
This will lead to capacity enhancement also. Earlier research-based development was ongoing in developed countries; however, during the Covid-19 crisis some emerging countries, including Bangladesh, concentrated their efforts on vaccine development, which is one of the toughest jobs in pharmaceutical R&D.
b) Growth pattern changes of certain products: Awareness and antiseptic use will reduce the rate of infections, ultimately limiting the growth of the antimicrobial market. Antibiotics used in hospital settings will eventually taper off, compared to high volumes that were required during heavier case loads during the peak Covid-19 waves.
Due to excessive application of sanitisers and long-term use of face masks, few skin diseases may arise. Products with immunity boosting effects will draw attention from different corners. Flu and other vaccines will see a sharp jump in the coming years and many companies will invest in vaccine manufacturing plants.
Due to the sedentary lifestyle of the last two years, few chronic diseases' products markets are likely to grow. The unproven drugs like hydroxychloroquine, ivermectin etc, that enjoyed exponential growth, will face challenges to maintain regular growth in the upcoming days.
c) Special attention towards clinical studies: Except for the regulated pharmaceutical market, clinical study for individual products is very rare. However, for getting approval of a new product, it is mandatory to conduct a clinical study. Under these circumstances, many pharmaceutical companies will strengthen their capacity for quick arrangement of clinical study.
In addition, the Contract Research Organisation (CRO) will get a boost in their business as they play an enormous role in the launch of new products. It is to be noted here that the Bangladesh pharmaceutical industry needs distinct attention as we are still in a very early phase with regards to clinical studies.
d) Automation in operations: Covid-19 crisis will lead to automation in every operational procedure, even in medium size companies, which may reduce the number of employee count.
e) Ethical Issues: During a global health emergency, everyone is ethically required to help to combat the disease. Covid-19 taught us that incorrect information can change the business landscape in crisis periods, as was the case of hydroxychloroquine or ivermectin. Therefore, ethical pharmaceutical companies will be torchbearers who will speak up against drug misuse during a crisis.
Dr Md Abu Zafor Sadek is a Pharmacist and Former Short-term Consultant at The World Bank, Dhaka. Currently he is working as Assistant General Manager of UniMed UniHealth Pharmaceuticals Ltd and can be reached by email: azs_sohel@yahoo.com
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
