U.S. Ethical Drug Market: Strategies for Sustained Growth

Report Highlights

• Emerging and updated drug marketing strategies are expected to contribute $181.2 billion of the $243 billion in U.S drug sales in 2003 and grow to $313.3 billion of the expected 2008 total market of $362 billion.
• The emerging/updated segment is rising at an average annual growth rate (AAGR) of 11.6% compared to an 8.3% AAGR for the total U.S. market.
• RX to OTC switching is growing in response to cost cutting demands, saving the American public more than $20 billion each year. There are more than 1,000 drug products in the OTC marketplace that only were available by prescription a decade ago.
• Generic drug companies have become aggressive in filing legal challenges against drug patents.
• The use of direct-to-consumer (DTC) advertising generated an estimated $12.2 billion in revenue in 2003.

INTRODUCTION

Today's pharmaceutical market is complex and multinational with products primarily aimed at the maintenance and improvement of people's health. The drug industry is served by a broad spectrum of drug companies ranging from large multinationals to small generic drug firms. Since research and development investigations are very costly, estimated at over $800 million to bring a drug to market, pharmaceutical companies look to maximize their profits for each drug and now expend large sums on marketing.

The ethical (prescription) portion of the drug industry currently is under attack from many sources including the generic drug industry. The high cost of drugs, particularly to the elderly and those requiring many medications, has become a major issue in the U.S. and throughout the world. This and other issues has required drug companies to examine their marketing practices and adapt new strategies and update existing strategies to expand sales for each product.

This BCC report discusses and analyzes strategies for sustained growth and market expansion that are being used by the U.S. ethical drug market. The study provides detailed information on the results of various strategies and an analysis of each, with particular emphasis on how these will impact the current and future status of the pharmaceutical market through 2008. The entire pharmaceutical industry is examined, with particular emphasis on those drug companies using innovative marketing strategies to be the market leaders of the next century.

The U.S. pharmaceutical industry, driven by scientific and technological advances, new drug discoveries, advances in therapeutic knowledge and changes in government and regulatory controls, generally is very successful. However, the accelerating cost of medical care and, in particular, the escalating cost of drugs (particularly to the elderly) has the drug industry under attack. In addition, other factors are at work to limit market growth.

SCOPE OF STUDY

The report provides information on and analysis of:

• The ethical drug industry including description of the performance of major sectors of the total drug industry

• Patent expirations and patent extension activities

• The impact of formularies in deciding which drugs are prescribed

• Strategic market actions used by pharmaceutical companies to expand their market segments

• Expanded applications and life cycle management

• Prescription to OTC switches and branded generics and "off-label" use of drugs

• Mail-order marketing and pricing practices.

METHODOLOGY

Data for this study were collected using both primary and secondary data research techniques. A literature search of BCC's extensive library, as well as pharmaceutical, medical and libraries was conducted. Extensive interviews with industry personnel, professional and trade organizations, government agency personnel, observers, scientists and industry professionals were conducted.

Data collected were analyzed by BCC personnel to determine specific findings and forecasts. Once these forecasts were obtained they were validated with industry experts; consequently, all estimates provided in this report represent a consensus of BCC personnel, industry participants and industry observers. Since some segments of this report are not routinely measured, BCC derived estimates from a variety of analogous sources. Whenever market estimates are derived they are fully noted. All dollar amounts are expressed in constant 2003 U.S. dollars.

INFORMATION SOURCES

Information contained in this report includes data obtained from government agencies, corporate publications and findings from industry trade associations. Other information sources were interviews with industry personnel, corporations, government and professional agencies and trade associations. Further information was obtained through our extensive literature search.

AUTHOR'S CREDENTIALS

Research analyst Barbara Breindel has advised the medical equipment and pharmaceuticals industries with product evaluations, domestic and foreign market analyses, and consumer trend forecasts. Her studies have examined drug delivery systems, drug packaging, pharmaceuticals, microorganism testing, skin, wound and hair treatment markets, as well as the medical diagnostic equipment and laser industries. Ms. Breindel has been with BCC for over 15 years. B.S., Lehman College, N.Y.; M.B.A., Marketing, Baruch Graduate School, CCNY.