Strong U.S. R&D keeps prices jumping
By Staff -- Purchasing, 4/9/1998
The pharmaceutical industry is in good shape. Pharmaceutical industry sales are forecast to hit $124.6 billion in 1998--a 400% increase over 1985, according to data from the Pharmaceutical Research and Manufacturers of America (PhRMA).The amount of money being invested in research and development by research-based pharmaceutical firms is soaring. PhRMA projects R&D spending to hit $20.6 billion in 1998, a 10.7% increase over last year.
While the pharmaceutical industry is growing and investing, it still faces some dramatic changes as consumers and health-care providers apply pressure for lower costs. The dramatic shift in recent years toward generic drugs will continue. In 1996, generics captured 41.6% of the prescription retail market, according a study conducted last fall by PhRMA. This shift toward generics benefits some companies but is troubling for those whose products are exiting the patent-protected stage. As part of this consumer demand, new over-the-counter drugs are flourishing, some of which are versions of previously prescription-only products.
In order to meet this call for lower costs, pharmaceutical companies are pushing hard into areas such as outsourcing, and paying even closer attention to raw-material costs. In addition, the use of bioengineered pharmaceuticals continues to grow, presenting new challenges for buyers.
Demand in the U.S. for pharmaceutical chemicals will grow at around 7.1%/yr through 2000, according to The Freedonia Group, a Cleveland, Ohio, market research firm. The best growth will be found in active bulk pharmaceutical chemicals--up 7.2%/yr. Part of this growth may be spurred by patents expiring, allowing a number of popular drugs to become available in generic form--including preparations for arthritis, infectious disease, hypertension, diabetes, and asthma.
By the year 2000, five therapeutic classes will generate bulk demand of over $1 billion/yr according to Freedonia. These are: central nervous system agents, anti-infective agents, cardiovascular agents, biological chemicals, and hormones and related agents. Bulk central nervous agents, for example, will benefit from the introduction of new therapies for Alzheimer's and the expansion of non-prescription analgesics for relieving mild-to-moderate pain conditions. Within anti-infective chemicals, cephalosporins and macrolides should see the best growth.
Demand for inactive pharmaceutical additives should rise at just over 6%/yr through 2000. Processing chemicals for pharmaceuticals will grow at near 6.3%/yr. The fastest-growing processing chemicals will include environmentally friendly solvents due to safety advantages and chiral intermediates due to improved therapeutic ratios.
As pharmaceutical producers continue to boost the use of outsourcing in efforts to reduce costs, demand for custom and toll processing will remain strong. The introduction of new drugs and shifts to over-the-counter status will likely benefit contract and toll manufacturing markets. They also will see growth from the increasing use of biotechnology and combinational chemistry compounds. U.S. pharmaceutical chemicals demand by the toll market should grow by 4.1%/yr through 2000, according to Freedonia.
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