The State of Pharma--By the Stats

Medicare Part D has helped increase the number of pills in Americans' medicine cabinets, but more of those bottles than ever are old generics rather than new branded products. The hardest-hit categories were in primary care. Meanwhile, specialty products make up 40 percent of the market, but are driving 62 percent of the growth--up from 35 percent in 2000.

"For informed audiences, this is not new per se--it's a pretty fundamental dynamic," said Murray Aitken, senior vice president of corporate strategy at IMS Health, who described the "lower and slower uptake of innovative products" in classes such as proton pump inhibitors, antihistamines, and antidepressants.

A state of the industry report from IMS yesterday found that 31 new products were launched last year in a market that grew a flat 7 percent. New drugs introduced between 2001 and 2005 contributed just $13.5 billion of the $643 billion market.

The industry is apparently taking note. There are about twice as many oncology compounds in development than in the next largest category, central nervous system products, according to Aitken. There's a reason for it: The oncology market grew 20.5 percent to $34.6 billion last year, and is still primed for more growth.

Medicare Part D, meanwhile, is increasing the number of prescriptions being filled. While emerging markets like China and India continue to experience double-digit growth, the US is doing its part to fuel the market. Sales here grew 8.3 percent, compared to 5.4 percent last year. In comparison, sales in Europe slowed to 4.4 percent compared to 4.8 in 2005.

"2006 was an exceptional year because one of the largest payers worldwide decided to expand access," Aitken said, referring to the US government. "Medicare was a good thing for the pharmaceutical industry."

Aitken expects the honeymoon to last until at least 2009 before prescription drug plans begin to exert significantly more pressure on drug pricing.

Patent challenges will also cut into sales in markets such as cardiovascular, which grew 7.5 percent to $35.2 billion, the fattest in the report. For now, despite the inroads generic simvastatin has made into the revenue of Lipitor (atorvastatin), the class as a whole is gaining from increased volume and new interest in drugs like Crestor (rosuvastatin) and Vytorin (ezetimibe/simvastatin).

Other notable markets mentioned in the report were respiratory agents--which grew 10 percent to $24.6 billion--and autoimmune agents, which grew 20 percent to $10.6 billion.

Yet the industry is clearly bracing for turbulence ahead. The recent epidemic of restructuring by industry giants that has seen heads roll and shuttered manufacturing plants is "a sign of some pretty fundamental stress," Aitken said.

He also cautioned companies to slow down before rushing into new therapeutic areas like oncology that--on the surface, at least, and in the short term--offer the most growth potential. "There's still a herd mentality in this industry," he said. "It's not going to end well for every company."