Stimulus packages won’t drag pharma out of slump; report
In a recent report Datamonitor predicted that sales growth would be significantly lower than the 8.2 per cent averaged from 2001 to 2007, primarily because of the 2011 patent cliff, and since then the financial situation has worsened.
The US and UK have been particularly badly affected by the economic crisis but the global nature of modern business means that few countries have escaped unharmed, which Datamonitor believes will add to Big Pharma’s woes.
With the patent cliff looming pharma looked to emerging markets, and their predicted 14-15 per cent growth rates, as a source of extra revenue but Datamonitor believes that the recession makes this less viable.
This is because healthcare budgets in emerging markets are “unlikely to support the buoyant double digit growth previously predicted”, which will contribute to Big Pharma’s sales growth dipping below two per cent.
No short-term relief
As well as Big Pharma’s current difficulties Datamonitor also examines the recent stimulus packages initiated by the G20 and individual governments in an attempt to steady the economy.
Datamonitor refers to the stimulus packages put in place by the US, Japan and Bulgaria, which all contain provisions to boost healthcare spending. However, Datamonitor expects Big Pharma to realise little direct benefit from these measures, with the funding predicted to help generic sales at the expense of their branded counterparts.
In the long-term these packages, and particularly the measures implemented by the G20, may reduce the length and the severity of the recession. This would help decrease unemployment and see people regain private healthcare insurance, which is important to Big Pharma’s sales.
However, an upturn in the economy would reduce the number of small, struggling biotechs that Big Pharma can acquire cheaply as the restoration of the flow of capital could end their funding difficulties.
This leaves Big Pharma with an unknown timeframe in which to use its cash reserves to buy struggling companies and replenish its pipeline, which is vital to ensuring that sales rise in the long-term.
