Scope Ratings, a privately held credit rating agency, has given its outlook for pharma in 2019, gauging that the industry remains in a positive environment – citing EvaluatePharma research pointing towards a compound annual sales growth rate of 6.4% through to 2024.
Underpinning the agency’s confidence in the pharma market is it the number of US Food and Drug Administration (FDA) approvals for new drugs. In 2017, the FDA beat the Scope’s expectations for new approvals, with 55 given the green light instead of their projected 40.
Moving forward, the agency noted “the quality and potential of likely new approvals as being sufficiently strong to eventually result in expected significant future market growth.”
Stable 2019 predicted for pharma despite political and regulatory risk, finds credit agency
Scope’s report finds biologics likely to be protected from severe biosimilar erosion but sees warning signs for the generics industry.
Scope Ratings, a privately held credit rating agency, has given its outlook for pharma in 2019, gauging that the industry remains in a positive environment – citing EvaluatePharma research pointing towards a compound annual sales growth rate of 6.4% through to 2024.
Underpinning the agency’s confidence in the pharma market is the number of US Food and Drug Administration (FDA) approvals for new drugs. In 2017, the FDA beat the Scope’s expectations for new approvals, with 55 drugs given the green light instead of their projected 40.
Moving forward, the agency noted “the quality and potential of likely new approvals as being sufficiently strong to eventually result in expected significant future market growth.”
It is expected that four key therapeutic areas that will drive growth in the years to come: immuno-oncology, immunology, rare diseases and vaccines.
Causes for concern
Despite innovative medicines providing a solid base for the industry, Scope has concerns for the generics industry.
Pricing, according to the report, may be one of the biggest issues the industry will face, “significantly stronger pricing pressure in this segment compared with the innovation-driven patent drugs sector.”
The pricing pressures extend into the US market, which has led to some larger companies shedding their portfolio in the space. In one recent example, Novartis sold its US generic oral solids and dermatology units to Aurobindo for $900m (€791m).
Biosimilar impact
Market leading drugs, such as AbbVie’s Humira (adalimumab) and selected therapies within Roche’s portfolio, will begin to face biosimilar competition this year and next. In total, Scope predicts total sales risk of $50bn from patent expiration for the industry between 2018 and 2024.
However, the report notes that this could be mitigated by a slow uptake of biosimilars and the possibility that such rival treatment would not be able to ‘crowd-out’ the originator drugs. Scope projects an average of 20% market erosion experienced from biosimilars.
There have been examples, particularly in the US market, where biosimilar competitors have had a limited impact on the market; Pfizer has taken legal action against Johnson & Johnson accusing it of restricting uptake of its Remicade (infliximab), Inflectra.
The report concludes that “this perceived stronger resilience of biological drugs to replacement by biosimilar competition will have a stabilising effect on cash flows after the patents expire on biological drugs.”
Uncertainty
Scope paints a positive picture of the industry in 2019, but provides the caveat that there are still a number of uncertainties to consider – these considerations include potential US drug pricing reform, and Brexit’s impact in Europe.
President Trump has been vocal on pricing reform, without having yet implemented concrete measures to influence industry pricing. However, a pricing plan for funding treatments provided by Medicare by pegging cost to an international index is in discussion.
Brexit brings a degree of uncertainty about whether a trading deal will be reached before the deadline, which has industry worried over a potential six month period of disrupted trade.
Due to the uncertainty of both factors, Scope did not take either into account whilst making its projections.