IMS Healthcare The recession is taking a toll on growth in the pharmaceutical industry, according to a closely watched forecast by IMS Health.


Big Pharma isn't so immune to the recession after all. In an indication the deterioration of the global economy is hitting drugmakers, a research group said on Apr. 22 that it's cutting a closely watched forecast for industry growth.

Global sales of pharmaceuticals will increase only 2.5% to 3.5% in 2009, down from a forecast for 4.5% to 5.5% growth issued in October, according to IMS Health (RX), which analyzes industry trends. That's the lowest growth forecast in 25 years.

IMS now expects global sales to total about $750 billion, down from the $820 billion predicted last fall. The change reflects both the lower growth rate of global economies and currency fluctuations. IMS, based in Norwalk, Conn., does offer some solace, saying the pharma sector will be less affected by the economic climate than other industries, but it will still suffer through 2010, when a rebound is expected.

Individual earnings underscore the IMS analysis. GlaxoSmithKline (GSK) reported a 12% drop in first-quarter earnings on Apr. 22, a day after Merck (MRK), Schering-Plough (SGP), and Forest Labs (FRX) reported weaker earnings and sales.

No Safe Haven

Pharma companies have been struggling due to a dramatic slowdown in new drug introductions that might replace the impending loss of billions of dollars in revenues when blockbusters such as Pfizer's (PFE) Lipitor lose patent protection in the next three years. But there has always been an assumption that pharma is something of a safe haven in an economic downturn, because people need to take medicines in bad times as well as good.

That's no longer a safe assumption, according to IMS. "There is a clear correlation between demand for medicines and key macroeconomic variables such as GDP, consumer spending, and government expenditures," says IMS Senior Vice-President Murray Aitken. "We see the worldwide financial crisis contributing to record-low sales growth this year."

Combine that with the number of patent expirations due in 2011 and 2012, and IMS expects the global compound annual growth rate for the pharmaceutical market to be 3% to 6% through 2013, compared with 6.6% to 7.9% for 2004 through 2007.
IMS found revenue growth is softest in those countries where patients pay a high portion of their drug costs, such as the U.S., China, and Brazil. Pharmaceutical sales in the U.S. market, the world's largest, will decline by 1% to 2% in 2009, the worst year-to-year change since IMS started keeping track. It also expects a flat U.S. compound annual growth rate through 2013.

Emerging markets will pick up some of the slack, growing 13% to 16% over the same period. China, currently the sixth-largest pharmaceutical market, will become the third largest by 2011, IMS predicts.