The annual growth rate in spending on drugs may be cut in half over the next five years as people opt for less expensive
generic medicines over brand-name treatments, a health-care research group said Wednesday, highlighting the challenge pharmaceutical
firms like Eli Lilly and Co. are facing.
While global expenditures for medicines will still reach almost $1.1 trillion by 2015, the annual compounded growth rate
may be reduced to as little as 3 percent through 2015, compared with 6.2 percent over the last five years, according to the
IMS Institute for Healthcare Informatics in Parsippany, N.J. Still, emerging markets will double their purchases to as much
as $315 billion, the institute said in a report.
Expiring patents on branded medicines will yield $98 billion in net savings to government health plans and commercial insurers
during the next five years, with the U.S. providing the biggest increase in spending for generic alternatives, the institute
said. Market share for branded drugs will drop to 53 percent from 64 percent last year, according to the report.
“This patent dividend may actually be coming as a surprise to payers and not yet fully worked into their own estimates,”
Murray Aiken, the institute’s executive director, said in a conference call Tuesday. “It’s a reasonably
significant slowdown.”
The 2008 global financial recession and recent government actions to control drug prices in nations such as China, Italy
and Japan also are reasons for the slowing growth rate, Aiken said. Rebates and discounts offered by drugmakers aren’t
reflected in IMS audits and may add as much as $75 billion by 2015, the report said.
While the pharmaceutical industry’s research and development spending has increased, “everyone is focused on
trying to raise the productivity of the R&D investment and that continues to be a struggle,” Aiken said.
Last year, U.S. regulators approved 21 medicines for sale, the fewest since 2007. Indianapolis-based Lilly and industry peers
Pfizer Inc., Merck & Co. and Bristol-Myers Squibb Co. all failed in 2010 to gain approval for new drugs.
Already this year, Lilly and German drugmaker Boehringer Ingelheim GmbH were cleared to sell the drug linagliptin to help
improve blood sugar control in people with Type 2 diabetes, New York-based Bristol-Myers won U.S. marketing approval for its
skin cancer treatment Yervoy, and New Jersey-based Merck gained approval for the first hepatitis C medication, Victrelis,
in more than a decade.
“This comes back to ‘innovation wins out’ and if you have the innovative products, the global market is
only getting larger,” Aiken said. “If not, you’re competing against an ever-more aggressive set of generic
producers.”

















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