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Global pharma spending to reach $1trn in 2014

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Greater access to medicines by emerging middle class, together with stronger economic prospects in developed nations, is expected to bring total spending on medicines to $1 trillion threshold in 2014 and to $1.2 trillion by 2017, the IMS Institute for Healthcare Informatics reveal.

While global drug spending is projected to rise at 3 to 6 percent compound annual growth rate (CAGR) over the next five years (up from 2.6 percent to $965 billion in 2012), new product launch is expected to dominate with innovative specialty medicines for the treatment of cancer and growing concerns over rising costs for these drugs set to intensify in developed and pharmerging markets, the report stated.

Global outlook for the pharmaceutical sector show that spending on speciality medicines for non-communicable diseases such as hypertension, diabetes, etc. is expected to reach $230-$240 billion in 2017, 38 percent from $171 billion in 2012, with these products expected to be the single largest contributor to branded drug spending growth to 2017.

Most access to them is in developed markets where spending is expected to increase 30 percent over the next five years to $190-$200 million, as pharmerging markets’-South Asia and Africa-spending for specialty drugs though limited, is expected to rise nearly 90 percent through 2017, to $40-$50 billion annually.

These projections are coming as pharmaceutical spending in Africa is expected to reach $30 billion in 2016, reveal IMH Health report titled “Africa: a ripe opportunity”.  This value is driven by a 10.6 percent CAGR through 2016, second only to Asia Pacific (12.5 percent) and in line with Latin America (10.5 per cent) during this period.

Spurred by a convergence of demographic changes, increased wealth and healthcare investment, and rising demand for drugs to treat chronic diseases, this market potentially represents a $45 billion opportunity by 2020.

The changing economic profile of Africa is also linked to an increased demand for chronic care drugs, reflecting a marked shift in the burden of illness towards non communicable diseases (NCDs) and the continued impact of human immune deficiency virus and acquired immune deficiency syndrome (HIV/AIDS) on the continent.

BusinessDay investigations show that as growth opportunities continue to move away from the traditional pharmaceutical markets, most multinationals look toward Africa for their expanding global footprint. The pharma and biotechnology sectors are expected to contribute major growth for this region, the report added.

The continent accounts for three percent of the global economy–but in the dynamics that drive sustainable growth at a time when the major established pharmaceutical markets face a more uncertain future.

Recent demographic shifts show that there is an increasing number of working-age Africans, a rising middle class which accounts for 34 percent of inhabitants in the continent  and urban population expected to exceed that of China’s and India’s by 2050.

To date, three types of pharmaceutical industry players have a track record of success, defined as sustainable revenue-generating business operation: innovative multinational companies (MNCs), Indian and Chinese pharmaceutical companies, and local manufacturers in Northern and South Africa.

IMS Health expects that annually, an average of 35 new medicines is launched with the potential to transform disease treatment. Increasing numbers of New Molecular Entities (NMEs) approvals are expected over the next five years, similar to the levels of the mid-2000s. Most new launches will address unmet needs in specialty disease areas, orphan diseases and small patient populations.

Recent and near-term launches of new medicines primarily address disease profiles of patients in high-income countries. A growing number of these conditions are also prevalent across the globe, but most of these burdens such as malaria, neonatal sepsis and tuberculosis- have few new treatment options.

By: Alexander Chiejina