Healthcare reform will support revenue growth as it extends coverage to more people.
New York, NY (PRWEB) May 10, 2014
Brand-name pharmaceutical manufacturers have grappled with one of the largest waves of drug patent expirations in history. As the patent cliff occurred from 2010 and 2012, many blockbuster drugs lost patent exclusivity, which has allowed low-price generic drugs to inundate the market. “Due to this trend, many brand-name pharmaceutical manufacturers have contended with intensifying competition from generic manufacturers, which has cut into revenue growth,” according to IBISWorld Industry Analyst Sarah Turk. In response, many industry operators have consolidated and entered into agreements with generic drug manufacturers, such as licensing the right for generic drug manufacturers to sell generics that are identical to brand-name drugs that have lost their patent. Furthermore, many brand-name pharmaceutical manufacturers have moved toward including biotechnology, particularly biologic drugs, in their product portfolio.
However, to lower mounting healthcare costs, government and health insurance providers have implemented measures to stimulate generic drug use, such as setting reimbursement rates more favorably for generic drugs. For example, generic drugs make up 64.0% of Medicaid prescriptions, yet account for 18.0% of Medicaid drug spending, according to US Pharmacist, which has constrained industry revenue growth. In the five years to 2014, industry revenue is expected to decline at an annualized rate of 1.8% to $163.5 billion, including 0.9% growth in 2014. Profit is expected to rise, as pharmaceutical manufacturers have focused on high-margin biologic drugs, which have a 12-year patent exclusivity period, thus bolstering industry profitability. “Also, consolidation and merger and acquisition activity have bolstered industry profitability, as more manufacturers had the financial resources to invest in research and development (R&D) and share the related risk,” says Turk.
Many pharmaceutical manufacturers will likely derive sales volumes from biological drugs, while also contending with the entrance of biosimilar, or generic biological drugs, into the market. Investing in R&D that will generate a high return on investment will occur, as many pharmaceutical manufacturers strengthen their drug pipeline with orphan drugs, which typically have a smaller disease population and have a lower requirement for the number of patients needed during clinical trials.
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
Pharmaceutical manufacturers develop prescription and over-the-counter products that are used to prevent or treat illnesses in humans or animals. Brand-name drugs and medication have patent protection. This industry does not include nutritional supplement or cosmetic product manufacturers.
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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