The Evolving Drug Industry: New Strategies, Product Trends

Report Highlights

• The U.S. drug market continues to see the introduction of blockbuster drugs - drugs that have a high cost per dose and generate annual sales of over a billion dollars. Approximately 45 drugs reached this level in 2001 and more are expected through 2007.
• Current market conditions are perfect for the entry of numerous generic drugs since many of the largest branded drugs are approaching patent expiration.. An estimated $34 billion dollars worth of drugs will go off patent between 2001 and 2006.

INTRODUCTION

STUDY GOAL AND OBJECTIVES

 This report describes and discusses the evolving drug industry with an emphasis on product trends and the strategic actions being taken by the U.S. drug industry to continue its success. The industry is an evolving one driven by scientific and technological advances, new drug discoveries, advances in therapeutic knowledge and changes in government and regulatory controls. Innovative new technologies have led pharmaceutical researchers to many new discoveries, many of which are derived from new knowledge of the cellular mechanism of disease. Increased knowledge of DNA and cellular biology has opened new avenues of drug development. Since BCC last looked at the marketing of drugs in July 1999, the U.S. pharmaceutical industry has been very successful. Annual sales in 2001 reached an estimated $196.5 billion. In this report BCC provides information on the related advances in technology, the performance of major sectors of the drug industry, product trends, changing corporate objectives and strategies, the result of joint ventures, licensing, marketing alliances, mergers and acquisitions, the introduction of new drugs, and pricing.

Among the marketing strategies being employed by U.S. pharmaceutical companies are the introduction of new blockbuster products resulting from increased research and development, joint ventures, mergers and acquisitions, licensing, marketing alliances, direct-to-consumer advertising and new pricing strategies. The impact of these strategies will be measured by the performance of the drug industry as presented here. Much of this success is demonstrated by the introduction of new drugs that generate billion dollar annual sales. These "block buster" drugs, while providing wonderful benefits to patients, have also caused financial concerns both to patients and to insurance reimbursers. The U.S. drug industry has been under attack for the high cost of these drugs, particularly among the Medicare population, and politicians have promised some legislative relief.

Within the goals of this study BCC will provide detailed information on the results of the various strategies and an analysis of each, with particular emphasis on how these will impact on the current and future status of the pharmaceutical market through the year 2007.

REASONS FOR DOING THIS STUDY

Everyday the scientific community is presenting new discoveries relating to the human genome and its potential in providing new drugs and related therapies. At the same time many consumers are worrying about how they will pay for prescribed drugs. Many of the elderly have to conserve on other ordinary expenditures just to afford necessary medications. In addition, people are being bombarded with drug advertising on television, on radio and in print media. Daily conversations include discussions of newly introduced drugs and patients have become true advocates of their health care as they confront their physicians with information gained from these conversations and advertisements. Concurrently, as many of the newly introduced drugs achieve more than a billion dollars annually in sales, industry observers, industry participants, patients, legislators and health care reformers are beginning to question where the drug industry is heading. How will the companies incorporate the new scientific discoveries allowing for phenomenal new drugs and how will the high costs of these introductions be accepted by the market? The future health of the U.S. drug industry, therefore, may be in jeopardy. BCC undertook this study to examine these recent events and to provide information and analysis on:

• New scientific discoveries that will result in new drug therapies
• Performance of major sectors of the drug industry and product trends
• Changing corporate objectives and strategies in use by various pharmaceutical companies
• The result of joint ventures, licensing, marketing alliances, mergers and acquisitions, introduction of new drugs, and pricing strategies
• The influence of HMOs and an aging population
• Distribution methods and group purchasing programs
• The impact of the relaxed FDA regulations on direct-to-consumer advertising
• Worldwide aspects of the market and the results of the introduction of the Euro currency.

CONTRIBUTIONS OF THE STUDY AND FOR WHOM

This report should prove of particular value to both pharmaceutical marketing participants and observers, as well as to investors and venture capitalists, since it provides details on the United States pharmaceutical market, including:

• Market size, by major sector structure and dynamics of the industry
• Changes in traditional market strategies
• New marketing concepts and trends
• Changes in the drug marketplace and market segments
• Impact of outside influences such as government regulations, with particular emphasis on the identification of potential market barriers
• Identification and analysis of new distribution systems, with particular emphasis on their cost-saving benefits to drug consumers
• Corporate strategies
• International aspects of the market.

SCOPE AND FORMAT

In preparation of this report, the entire pharmaceutical industry was examined, with particular emphasis on those companies that are employing innovative marketing strategies to be the market leaders of the next century.

The U.S. drug industry is segmented into ethical and over-the-counter drugs in both the branded and generic forms. This report attempts to discuss all areas of the market and to identify significant suppliers, end markets and government and regulatory agencies. Participating companies will be discussed regarding relative market share, marketing strengths, participation in new segments and innovative marketing 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 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.

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 leaders from corporations, universities, physicians, government and professional agencies and trade associations. Further information was obtained through our extensive literature search.