Thursday, April 23, 2009

US Pharma Industry Not Immune To Recession

. Thursday, April 23, 2009

By stockOzone team

Pharmaceutical sales, generally considered recession proof, are expected to fall by 1% to 2%, according the drug data firm IMS health. It would be the first decline in US pharma sales in more than 50 years, the firm noted. Worldwide pharmaceutical market growth is likely to slow down 4.5–5.5 percent growth to 2.5–3.5 percent, the report said. “The US market will be smaller in 2009 than it was in 2008.” said Murray Aitken, senior vice president, Healthcare Insight, IMS. “And if we look out through 2013, the compound annual growth rate is essentially zero.”"This is the lowest growth rate we've seen in 25 years," said Murray Aitken, a senior vice president at IMS.
US Pharma industry would be primarily hit by a combination of recession, strengthening dollar and increasing competition from generic drugs . “Most of this can be attributed to the deterioration of expectations for global economic growth that has occurred over the last six months or so,” Aitken said. “Pharma has been on a slowing trend for the past few years.”

Aitken admitted that the industry is in no way completely immune from the economic downturn“Patients can start responding differently because there is lower discretionary expenditure, which is a problem in high cash-pay markets,” Aitken said. He added "We appear to be seeing a reduction in number of patients who are starting a chronic therapy regimen for the first time," for diseases such as diabetes, depression, insomnia and high blood pressur.“The other type of change is more on a policy or funding front, where because of budget deficits there’s less money available to precipitate price cuts or restrictions in access.”

However, according to IMS, emerging markets would be a bright spot for the industry and by 2013, pharma sales such markets are forecast to grow 13–16 percent by 2013.The emerging markets for pharma industry include India, China, South Korea, Brazil, Mexico, Russia, and Turkey; they are expected to contribute 40 to 50 percent of the total global growth each year over the next five years.

“Our clients are not only concerned about the immediate effect of this economic crisis, but the cumulative effects of loss of exclusivity, fewer products coming to market, slower uptake, etcetera,” Aitken said. “The economic crisis is adding another layer of complexity to the issues they already face, and it is, we believe, precipitating more action on [pharma manufacturers’] part to redesign their commercial models to fit the needs of the current and future world order.”

However, it appears that recession has not stopped big pharma from scooping up smaller companies. In last few months, a number of large cash rich healthcare companies have announced acquisition of rival drug firms.

Disclosure: Author does not own any of the stocks discussed here.

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