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Industry Research Comments|Fan Chunzeng:Development Trend of the Pharmaceutical Industry

Alumni and External Relations Office 2021-09-24

The global pharmaceutical industry is developing rapidly with the scale increasing continuously. For example, the total output value of the global pharmaceutical industry recorded US$ 1.99 trillion in 2003 and US$ 5.79 trillion in 2019, and is expected to exceed US$ 7 trillion in 2021.

The pharmaceutical industry is a global R&D-intensive high-tech industry, of which the R&D need is expanding continuously. According to Statista, the global investment in pharmaceutical R&D was US$ 136 billion in 2012 and US$186 billion in 2019 and is expected to hit US$ 233 billion in 2026.

The uneven growth of the pharmaceutical industry with unceasing expansion of leading companies

According to the forecast by Torreya, the size of the global pharmaceutical industry will grow by 60% in 2030 compared with 2017, in which, the industry size will be expanded by 34% in the United States, 130% in China and 10% - 30% roughly in Germany, Japan, Italy and France. The industry expansion in South Korea and India will be over 40%.

By 2060, the industrial size of the global pharmaceutical industry will be increased by 217% compared with 2017.

In terms of the capacity to pay, the global capacity to pay was US$ 1042.545 billion in 2017, which will grow to US$ 1671.932 billion in 2030 and US$ 3307.407 billion in 2060. It is US$ 385.191 billion, US$517.678 billion and US$937.702 billion, respectively, in the United States, and US$122.728 billion, US$281.701 billion and US$557.260 billion, respectively, in China.

The growing industrial size and payment scale are the solid foundation for pharmaceutical R&D and innovation.

The market capitalization of the world's top 35 pharmaceutical enterprises reached US$1.6 trillion in 2011, US$3.0 trillion in 2015 and US$3.6 trillion in 2020, up by 87.5% and 125% respectively from 2011.

Among them, Johnson & Johnson, Pfizer and Merck had a market capitalization of US$175 billion, US$144 billion and US$100 billion respectively in 2011. In 2020, the amount grew to US$ 392 billion, US$ 205 billion and US$ 213 billion, respectively, increased by 124%, 42% and 113% (Torreya, 2020).

Rising R&D costs and increasing number of drugs under development

The success rate of new drug R&D has been decreasing in the face of the increased complexity. From 2016 to 2021, the success rate of new drug R&D decreased in most disease areas.

Bio-pharmaceutical industry is a capital and technology intensive industry. According to the estimation by Christopher et al. (2009), the investment in the R&D of a new drug is roughly US$ 27 -- US$ 86 million.

Based upon the study by DiMasi (2016), the R&D cost of each new drug increased from US$ 179 million in the 1970s to US$ 2.558 billion in the 2010s, up nearly 1.4 times every 10 years or so.

The statistical calculation on the R&D cost of new drugs made by different researchers is not always consistent. However, unlike Moore's law in IT industry, the pharmaceutical R&D cost tends to grow constantly in general, and the R&D cost of new drugs follows EROOM's law, that is, the number of new drugs approved by FDA per unit of investment in R&D halves every nine years. This is mainly because, with the changes of the times, the R&D chain is elongated, the R&D work is divided in a more refined way, and the R&D complexity is increasing.

The R&D cycle of new drugs is lengthy with high risks. The number of drugs under development worldwide continues to increase, from 5,995 in 2001 to 16,181 in 2009 and then 18,582 in 2021 (as shown below), with an overall steady and rapid growth.

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Number of R&D pipelines

Normally speaking, it takes a long time for a new drug to be developed successfully, with great uncertainties and risks. According to samples from the United States in 2011-2021, it is found that the time required for new drugs from the clinical trial phase I to get approval varies across disease areas, ranging from 9.2 to 12.2 years generally.

Slow change in drug value and prescription drug sales structure

In terms of the drug value structure, the value of small molecular drugs increased from US$ 1.67982 trillion in 2003 to US$ 3.435848 trillion in 2020, while the proportion of total drug value went down from 84.6% to 59.9%. The value of biological products increased from US$ 287.135 billion to US$ 2021.82 billion dramatically, with the proportion rising from 14.5% to 33.6%. Others, such as blood products, vaccines and gene therapies, and nucleic acid drugs, are also growing rapidly. Chemical drugs (small molecular drugs) and biological drugs together account for over 93% of all drugs, while other drugs/therapies account for less than 7% (Torreya, 2020).

In terms of the sales structure within prescription drugs, the sales of new drugs and orphan drugs dominate the sales of prescription drugs all over the world. The sales of generic drugs are rising slowly, while the sales of original innovative drugs and orphan drugs account for an increasing proportion of the total sales of prescription drugs. The growth rate of total sales of prescription drugs has fluctuated significantly, but kept an overall growth momentum.

 

Fan Chunzengleader of Antai pharmaceutical research team , Institute of Industry Research (IIR), Shanghai Jiao Tong University