24 INTERNATIONAL PHARMACEUTICAL INDUSTRY Summer 2015 Volume 7 Issue 2

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Changing Healthcare Landscape and its Impact on the Pharmaceutical IndustryIntroduction The pharmaceutical industry is a success story, providing employment and ensuring that essential drugs at affordable prices are available to the therapeutic-naïve population. At the same time it is one of the most regulated industries across the globe. Until recently, pharma investments in R&D and innovation resulted in patent-protected, high-margin revenue streams. Doctors prescribed drugs. Patients accepted the doctor’s prescription. And payers footed the bill. The business was lucrative. Lean practices were not needed in the pharma industry. This has increased the value of the global pharmaceutical market. Figure 1 indicates the expected growth worth nearly $ 1.6 trillion by 2020. The growth markets include, in descending order of size, China, Brazil, Russia, India, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan and Vietnam. The EU big 5 is France, Germany, Italy, Spain and the United Kingdom.

Figure 1: Expected growth of pharma industry Source: Business Monitor International

However, over the last decades the exclusive domain of the pharmaceutical sector has entered an era where they have become confronted by a variety of complex issues affecting their operational efficiency and profitability. Today the pharma industry is scrambling to deal with big challenges and changes that include market uncertainty, responding to price pressure, rising competition, regulatory changes, the patent cliff, power shift from doctors to payers and patients, and patients’ empowerment, etc. Thus every big and small pharmaceutical firm is seeking every

advantage to maximize its value in terms of R & D efforts, quality products, cheaper medicines and public trust instead of volume. This editorial highlighted the changing healthcare landscape and its impact on the pharmaceutical industry.

Maturing Emerging Markets Today, China and India together contain the 40% of the planet’s population and stand on the threshold of global superpower status. There is an increase in the number of middle-class consumers. More than half of the people in China, South Korea, Brazil, India, Russia, Turkey, Mexico and Indonesia are middle-class consumers. These markets are playing a major role in driving the growth of the global pharmaceuticals market. While the market for pharmaceutical products will grow on average by 4.5% annually through 2016, growth in emerging markets will increase by almost 12%.1

Governments are also stepping up for growth across the region. For example, the Indian government has started offering incentives to domestic and multinational drug makers to encourage new drug discovery.2 Simultaneously, companies are eager to capture a portion of the region’s comparative advantages in talent, costs, patient pools and disease demographics from a biopharmaceutical development perspective.

Technology DevelopmentCompetitive and technological

development in the pharmaceutical industry from powerful new drug chemistries to innovative R&D partnerships and marketing plans are reshaping the business strategies of many pharmaceutical and biotechnology companies. Technological growth not only rapidly changed the way we live and work, but it also enabled great leaps in productivity, interactivity, connectivity and transparency. It utilizes the data analytics to identify the best-targeted and most cost-effective therapy, and uses social media to engage with customers. For example, the makers of Clarityn created an app which provides users with detailed information about local pollen count, and where to find nearby medication to help ease seasonal allergy symptoms.3 Various trends in technology impacting the industry are highlighted in Table 1.

Changing Government PoliciesWhile the goal of the pharma industry is to enhance care and safety remains constant, the methods, resources, and government policies that are designed to reach this goal are continuously being updated. These changing policies may have a positive or negative impact on pharma industry. For example, in 2010 Portugal introduced mandatory price cuts which reduced the prices of generic medicines by 30 per cent, and branded drug prices by six per cent.4 Similarly,

26 INTERNATIONAL PHARMACEUTICAL INDUSTRY Summer 2015 Volume 7 Issue 2

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the Ireland government in 2011 reduced wholesale mark-up on most drug items from ten per cent to eight per cent, which resulted in additional savings of more than €34 million.5 The firm and rigid regulatory framework is needed for stability of the pharmaceutical sector.

Consumer BehavioursMany pharmaceutical companies use demographic data and health condition to determine the types of patients best suited for their products. Such data may not always provide an exact picture of consumer behaviour and attitudes. Consumers want their medication experience to be personalized and meaningful. If their expectations are met, they’re more likely to follow the proper course of treatment for longer. Other elements, like strength of social networks, stress and habits, extentof self-reliance and community reliance, willingness to share experiences with others and trust in others, also play an important role in analysing consumer behaviour. In the west, consumers will seek more products and services that are environmentally friendly and are produced according to fair trade practices. Consumers in emerging economies look for affordability, utility and durability to stand up to harsh conditions.Customers in all markets want real value for their money. While analysing the consumer, pharmaceutical companies need to look into their behaviour and motivations and should learn how to create loyal customers.

The Patent Cliff Expiry of patent drugs on one side and growing competition of low-cost generics on the other side causes a loss

of billions in revenues to pharmaceutical companies. For example, in November 2011, four major drugs, viz. Lipitor, Caduet, Combivir and Solodyn, lost patent protection. Combined, these four drugs accounted for more than $7 billion in lost sales.6 Discovery and development of a promising agent will address unmet medical needs and are profitable. Structural reorganization and downsizing will help inpreserving future profitability. Mergers and acquisitions will also change the face of the pharma industry. Some pharmaceutical companies are already entering into agreements with generic manufacturers, licensing them the right to sale “authorized generics” identical to branded drugs that have gone, or will go, off patent. Others have established their own generic manufacturing companies or subsidiaries. In short, the financial future of the industry depends on how they manage the transition of many of their brand drugs to the generic market, and their own efforts to adapt to the changing global business climate.

Patients are EmpoweredTraditionally, pharmaceutical companies have had very little direct contact with patients with regard to treatment. However, as patients are more knowledgeable and empowered, they gain influence, so pharmaceutical companies are changing the nature of their engagement with patients. Today’s patients know more about their diseases, choices for medication and methods of treatment, and are more assertive about defending their interests in a healthcare landscape. In a survey of 1300 patients, most of the patients found medical information online, with 73% of patients

feeling that this gave them greater control over their illness, and 85% of patients taking that information to their doctor.7

Knowledgeable patients can provide benefits to pharmaceutical companies. By using patients as a channel of communication, they can reach out to a different audience effectively.

Power Shift An increasing generic market has given a number of choices to patients and payers for the purchase of medicines. With the variety of generic versions of branded drugs, the price benchmark has been reduced and people are insisting on value for money. In the past, the doctor was the final decision-maker in providing healthcare facilities. But nowadays, the power has shifted from doctors to patients and payers. This power shift helps to stabilize the cost of drugs. Thus, the pharmaceutical companies must design a simple, reliable service or solution around the patient. Some companies often express their desire to be patient-centric organisations. Whether inspired by patients or driven by science, the heart of everything is focused on the patient’s needs. Our efforts have to be relevant and meaningful, and we have to be ready to do something that really helps patients.

Conclusion In a growing and changing economic environment, pharmaceutical companies are faced with new challenges and opportunities. Some challenges are easy to tackle, and others have consequences for the pharma industry; however, effective dealing will help the industry to grow faster and earn more profit (Table 2). In today’s technological world,

INTERNATIONAL PHARMACEUTICAL INDUSTRY 27www.ipimedia.com

Regulatory & Marketplace

manufacturers should consider new kinds of healthcare as opportunities for development. It has become vital for industry professionals to increase their preparedness and be ready to develop tactical plans of action. Companies that can offer high-quality products at reasonable prices require efficient administration, marketing and sales models. Companies should conduct their medical affairs and R&D activities locally, develop a strong local sales organisation and collaborate with regional companies in order to gain effective access to patients willing to pay higher prices. In general, pharmaceutical companies need efficient production and sales initiatives to drive their sales and earnings. Similarly, other stakeholders, including consumers, doctors and regulatory authorities, need to be proactive so that patients can enjoy consistently safer and more effective healthcare systems.

DisclaimerThe article has been written in the authors’ personal capacities. All opinions expressed herewith are those of the authors and do not reflect the views of their organisation.

Conflict of interestNone

References1. Roland Berger. Global

pharmaceutical industry is in a strategic crisis – Business models must be adjusted. January 6, 2013. Available at: http://www.rolandberger.com/exper t i se/indus t r i e s/pharmaceu t i ca l s/Pharmaceutical_industry_in_a_strategic_crisis.html (Accessed on 14th Jan 2015)

2. h t t p : //e conom i c t ime s . i nd i a t i m e s . c o m / n e w s / e c o n o m y /f inance/Centre-may- in jec t -2-bn/yr-into -drug-research/a r t i c l e s h o w / 4 2 1 0 0 7 4 . c m s (Accessed on 10th Dec 2014)

3. Six Tech Trends That Will Shape the Pharmaceutical Industry in 2013. Contributed by Acenture. Dec 10, 2012.

4. Portugal Pharmaceuticals and Healthcare Report Q1 2011, Research and Markets, November 2010. Available at: http://www.researchandmarkets.com/research/a948d5/por tuga l_pharmaceu. (Accessed on 9th July 2014)

5. Health (Pricing and Supply of Medical Goods) Bill 2012: Second Stage, House of Oireachtas, 19 July 2012. Available at: ht tp://debates.oireachtas. ie/seanad/2012/07/19/00009.asp (Accessed on 9th July 2014)

6. Jack DeRuiter, Pamela L. Holston. Drug Patent Expirations and

the “Patent Cliff”. U.S. Pharm. 2012;37(6)(Generic suppl):12-20.

7. Andy Robertson.Patients Advocating Pharma – It’s as Simple as Arming them with the Right Information. 27th Feb. 2014. Available at: http://social.eyeforpharma.com/content/pat ien ts -advocat ing-pharma-E 2 % 8 0 % 9 3 - i t % E 2 % 8 0 % 9 9 s -s i m p l e - a r m i n g - t h e m - r i g h t -information(Accessed on 11th Feb 2015)

Dr Sameer S. Parekh, BHMS, MBA, CCRP is a clinical trial manager for the Serum Institute of India Ltd., who combines knowledge and experience from diverse fields such as research and

clinical development, public health, and pharmaceutical management. He has over eleven years of experience in the biopharmaceutical industry, with increasing responsibility in national and international research and clinical development efforts. With a primary focus on infectious diseases, pediatrics and oncology, his specialties include multifunctional team leadership, development of study design, drug safety and medical writing. He contributed to the conception and design, drafting and final approval of this article. He can be reached at Email: parekhsameer@gmail.com

Sunil D. Shewale, M. Pharm, PGDCTM, MBA is an assistant project manager at the Serum Institute of India Ltd. (SIIL), where he has more than seven years of experience in clinical research and

quality assurance of pharmaceuticals. He is a professional in product handling, documentation, trial monitor¬ing, data management, medical writing, and overall project management. He has coauthored several original re¬search publications for vaccine trials at SIIL. He has also published number of review articles. He can be reached at Email: ms.shewale85@gmail.com