Healthcare reform will support revenue growth as it extends coverage to more people
Los Angeles, CA (PRWEB) June 11, 2012
The $156.3 billion Brand Name Pharmaceutical Manufacturing industry has proven resilient to the economic downturn, but it has not been as hardy against threats from generic drugs. Over the five years to 2012, revenue is expected to decrease at an average annual rate of 0.3%, including a fall of 2.5% in 2012. Sales have been bolstered by favorable demographic trends and the use of medication as a significant part of healthcare in the United States. “Manufacturers benefit from patent protection,” says IBISWorld industry analyst Sophia Snyder, “but the patent cliff in 2011, when numerous patents on blockbuster drugs expired, began hurting revenue in 2012 and threatens future sales.” Since generics are sold at a significant discount to brand-name drugs, the industry has tried to adapt to expiring patents by producing generic medicines. In addition, operating profitability has been decreasing because government and commercial payers have pressured pricing.
The Patient Protection and Affordable Care Act of 2010 introduced a method for the US Food and Drug Administration to approve generic biologics and initiated a 12-year patent period on these types of drugs. “While this trend increases the threat from generic pharmaceutical manufacturers in this segment of the industry, it also paves a clearer path for operators to manufacture generic biologic drugs,” adds Snyder. Consequently, follow-on biologics will continue to play an important role in shaping the future of the Brand Name Pharmaceutical Manufacturing industry.
Healthcare reform is also expected to boost sales as more individuals gain prescription drug coverage in 2014. IBISWorld forecasts that revenue will rise during the five-year period to 2017. Operating profit margins will decrease slightly as a result of the industry's agreement to pay out $84.8 billion in taxes and discounts over the next 10 years as part of the 2010 healthcare reform. To maintain profitability, industry operators are expected to continue consolidating and reducing costs, mainly through employment and research and development reductions. Consolidation has been occurring for more than five years, but a marked increase has occurred in recent years. The biggest headlines involved mergers and acquisitions (M&A) by major players, including Pfizer-Wyeth, Merck-Schering-Plough and Roche-Genentech. M&A activity has been primarily driven by the escalating costs of research and development (R&D), shorter exclusivity times and the need for global marketing power. Additionally, consolidation has been spurred by changes to the pricing and other competitive strategies of pharmaceutical companies, which include information technology, new federal legislation and the emergence of institutions that include health maintenance organizations and pharmacy benefit managers. For more information, visit IBISWorld’s Brand Name Pharmaceutical Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
Brand-name pharmaceutical and medicine manufacturers are primarily engaged in developing innovative prescription and over-the-counter products that are used to prevent or treat illnesses in humans or animals. Brand-name drugs are products with patent protection. Industry operators are significantly engaged in the research and development of new drugs. The industry does not include contract manufacturers or manufacturers of nutritional supplements or cosmetic beauty products.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.