pharmaceutical industry growth

Make Your Move: A Global Prescription for Growth Opportunities

Rising incomes and aging populations are making the prospects for drug manufacturers bright.

The U.S. economy is continuing to expand, and IndustryWeek readers should be planning on a generally more positive environment through the next two quarters. Employment is steadily increasing, industries are producing more, retail sales are improving and home prices are recovering. More good news is evident in that the European economy is now in recovery and we expect Asia will also return to stronger growth soon.

The current period of worldwide growth will create opportunities to expand your business. I suggest that you use 2014 to prepare for a post-2014 period of prosperity (regular readers will know that we are expecting the U.S. economy to slow in the latter half of 2014). Look around your business and determine where the bottlenecks are that will inhibit your growth when demand ramps up post-2014. Who are the key people you will need? What are the key systems that need upgrading? Take a hard look at your operational readiness and determine where you need to spend some money in order to maximize profitability 18 months from now. 

See Also: Global Manufacturing Economy Trends & Analysis

A History of Growth

Few industries characterize growth potential better than the pharmaceutical industry. With a strong history of growth, the pharmaceuticals industry is worth investigating if you are not already working in this space. According to IMS Health Inc., global drug sales have nearly doubled over the last 10 years, from $502 billion (U.S. dollars) in 2003 to $962 billion last year. An aging population in economically developed nations and a growing middle class in the developing economies will support robust future worldwide growth in this industry.

In the United States, the aging baby boomer generation and the growing prevalence of chronic illnesses such as high blood pressure, high cholesterol and diabetes will continue to create a need for enhanced medical care, pushing drug sales higher in the coming years. Also, the implementation of the Patient Protection and Affordable Care Act -- and its potential to extend health care benefits to an estimated 30 million uninsured -- will create significant demand and be a boon to the drug industry. This growth potential will be tempered, however, by increasing pressure for cutbacks in government spending and deficit reduction initiatives. Don't let the negative dissuade you from seeking out domestic opportunities.

The countries of Western Europe are similarly affected by government intervention. Austerity measures put in place during the recession reduced government spending on social programs. European demand for pharmaceuticals will increase with economic growth and because of Europe's aging population, but the regulatory landscape is also similar to the U.S., in particular the EU's adoption of pharmacovigilance legislation in 2012, which increases the reporting and regulatory burden for pharmaceutical companies doing business in that area.

Eastern Europe, on the other hand, should be considered an area with extensive opportunity for growth and expansion. With several countries under the mantle of the EU, there are significant regulatory hurdles to conducting business in that area. However, the growth of manufacturing in countries such as Turkey, Romania and Poland has grown the area's middle class, pushed per-capita health care spending higher and enhanced the opportunities for drug manufacturers.

In Asia, China's uneven distribution of wealth has limited access to health care for this populous country and has restrained sales growth, but there is hope. The government's effort to grow the middle class has increased the standard of living and will continue to create additional demand for health services, especially as the government looks to extend universal health care to its entire population by 2020.

Follow Alan Beaulieu's Make Your Move blog (www.iw.com/blog/make-your-move) for expert, accurate economic analysis.

As the global economy heals and individual wealth grows, the demand for access to health care and the resulting increase in life expectancy will create opportunities to invest in drug manufacturing and distribution networks. Use the next year to begin the process that will lead you to success in this burgeoning market.

Contributing Editor Alan Beaulieu is an economist and president of ITR (itreconomics.com). He is co-author, with his brother Brian, of "Make Your Move," a book on spotting business-cycle trends.

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