2016 Top Markets Report Pharmaceuticals

Overview and Key Findings

Introduction
The pharmaceutical industry is comprised of companies
engaged in researching, developing, manufacturing and
1
distributing drugs for human or veterinary use. New
drugs have an enormous positive influence on global
health, prosperity and economic productivity by saving
lives, increasing life spans, reducing suffering,
preventing surgeries and shortening hospital stays.
Advances in medicine have eliminated deadly diseases
and have brought other life-threatening conditions
under control. Drug therapy is now an integral part of
nearly every facet of healthcare, and new
breakthroughs promise to revolutionize the treatment
of non-communicable diseases.
Understanding Pharmaceutical Industry Products
For the sake of simplicity and unless otherwise noted,
pharmaceuticals (or drugs, medicines) in this report
refers to innovative and generic products, chemicallyderived and biologically-derived products, and
prescription-based and over-the-counter products. See
below for a breakdown of pharmaceutical product
sectors:
Pharmaceuticals (biopharmaceuticals, drugs,
medicines) are defined as any substance intended for
use in the diagnosis, cure, mitigation, treatment or
prevention of disease or any substance (other than
food) intended to affect the structure or function of the
2
body. Drugs are produced in forms such as pills,
tablets, capsules, vials, ointments, powders, solutions
and suspensions.
Innovative (originator) chemically-derived drugs are
developed through extensive R&D and clinical trials in
both humans and animals. The innovator relies on
patents, regulatory data protection and other forms of
intellectual property rights (IPR) to justify the

investment required to bring a product to market. The

U.S. patent term is 20 years, and drugs are eligible for
at least five years of market exclusivity depending on
the time between patent validity and U.S. Food and
Drug Administration (FDA) approval. The
pharmaceutical industry is heavily dependent on the
development of new molecules to replace the revenue
stream of older drugs that are approaching the
expiration of their patent terms. Pricing of new drugs is
designed to cover past and future R&D expenditures.
Generic drugs are copies of innovative pharmaceuticals
that contain the same active ingredients and are
identical in strength, dosage form and route of
administration. In the United States, upon either patent
expiration or a successful challenge of relevant patents,
a manufacturer can produce a generic drug as long as it
3
meets FDA approval and bioequivalence standards.
Generic companies typically focus on high volumes to
earn profits, requiring efficient production methods
4
and distribution chains.
Generics that are sold under the chemical name are
known as commodity generics. Commodity generics
are often manufactured by more than one company
and compete mainly on price. Branded generics are
marketed by a drug company under its own label and
typically command higher prices than non-brand
generics.
Biologics (biotech drugs, biological drugs,
biopharmaceuticals) include a wide range of products
such as vaccines, therapeutic proteins, blood and blood
components, tissues, etc. In contrast to chemically
synthesized drugs, which have a well-defined structure
and can be thoroughly verified, biologics are derived
from living material (human, animal, microorganism or
plant) and are vastly larger and more complex in
2016 ITA Pharmaceuticals Top Markets Report

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U.S. Department of Commerce | International Trade Administration | Industry & Analysis

structure. Biologic medicines are revolutionizing the

treatment of cancer and autoimmune disorders and are
5
critical to the future of the industry.
Biosimilars (follow-on biologics) are versions of biologic
products that reference the originator product in
applications submitted for marketing approval to a
regulatory body. Gaining regulatory approval in
developed markets is far more complex for biosimilars
than for chemical generics and may involve costly
clinical trials. Those that succeed will also have to
compete with the originator companies who are
unlikely to exit the market. The biosimilars market is
expected to increase significantly with an approval
6
pathway now available in the United States. Prices of
biosimilars may not be drastically cheaper than their
7
patented counterparts.
Over-the-counter (OTC) drugs are distinguished from
innovative and generic drugs in that consumers do not
need prescriptions to purchase them. OTC drugs are
considered by regulators to be safe for self-diagnosis
and self-medication. In the United States, there are an
estimated 100,000 OTC drug products marketed and
sold in a variety of outlets, such as pharmacies and
8
convenience stores. Sometimes drugs become OTC as
a result of extensive market use that enables regulators
to determine that the product is safe to dispense
without a prescription. The innovator may also move to
apply for OTC status upon patent expiration.
Active pharmaceutical ingredients (APIs) and excipients
are ingredients in a medication. APIs are the
compounds that make drugs effective. Excipients are
the inert substances that give a medication its form,
such as cornstarch (to make a tablet) or sterile water
(to make a liquid), and serve as a delivery vehicle to
transport the active ingredient to the site in the body
where the drug is intended to exert its action. Other
functions of excipients include keeping the drug from

being released too early, allowing the drug to

disintegrate into particles small enough to quickly
reach the blood stream, protecting the products
stability so that it will be at maximum effectiveness at
9
time of use, and improving its taste and appearance.
APIs and excipients must meet standards established
by pharmaceutical standards-setting bodies (e.g.,
pharmacopeias), including purity, toxicity and
absorption rates.
Key Findings: Top Markets and Methodology
This Top Markets Report examines 50 different markets
in terms of economic development, value of U.S.
exports, aging populations, per capita pharmaceutical
spending, degree of price controls, intellectual property
protection and other factors that contribute to
pharmaceutical demand growth. It then assesses key
regulatory market barriers abroad that influence U.S.
industrys export competitiveness and provides an
estimated ranking of export markets by level of
opportunity through 2017. Top markets for
pharmaceutical products continue to be developed
countries in Western Europe, East Asia, and North
America with high per capita spending on healthcare,
growing elderly populations, and advanced regulatory
systems. Though ranked lower, there are growing
opportunities in developing countries like China as
incomes and healthcare spending increases.
Methodology
Global industry information and data on total
pharmaceutical sales, per capita pharmaceutical sales
and percentage of patented drug spend are primarily
sourced from Business Monitor International (BMI).
Pharmaceutical export values are obtained from the
Trade Policy Information System (TPIS). The ranking
weighs heavily BMIs Pharmaceutical Risk/Reward
Index, a comprehensive metric that includes

Figure 1: Near-Term Pharmaceutical Export Market Rankings (2016-2017)

1
2
3
4
5
6
7
8
9
10

Japan
Belgium
Switzerland
United Kingdom
Germany
Austria
Canada
Netherlands
France
Finland

11
12
13
14
15
16
17
18
19
20

Sweden
Spain
Denmark
Norway
Italy
Taiwan
Ireland
Czech Republic
South Korea
China

21
22
23
24
25

Portugal
Poland
Greece
Australia
Mexico

2016 ITA Pharmaceuticals Top Markets Report

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quantitative and qualitative factors that help determine

the attractiveness of a market. Rankings of price
controls are primarily sourced from a study by the
10
Information Technology & Innovation Foundation.
Other qualitative factors considered include U.S.
Commercial Service industry rankings. See Appendix for
more detail on methodology, data used, and full
rankings.
Industry Overview and Competitiveness

11

Economic impact
Large, diversified and global, the U.S. pharmaceutical
industry is one of the most critical and competitive
sectors in the economy. According to the
Pharmaceutical Research and Manufacturers
Association (PhRMA), more than 810,000 people work
in the biopharmaceutical industry in the United States
across a broad range of occupations, such as scientific
research, technical support and manufacturing. Directly
and indirectly, the industry supports over 3.4 million
jobs across the United States and added an estimated
12
$790 billion to the economy in 2014. Although
manufacturing jobs supported by the industry are
expected to decline over the next decade due to
continued productivity gains, it will remain an
important source of high paying jobs, providing salaries
way above the national average.
Figure 2: U.S. Snapshot
Population: 322 million
Population over 65: 48 million (15%)
Total healthcare expenditure: $3.12 trillion
(17.4% of GDP)
Government healthcare expenditure: $1.49
trillion (47% of total)
Private healthcare expenditure: $1.63 trillion
(52% of total)
Total pharmaceutical sales: $333 billion (1.9%
of GDP; 10.7% of total healthcare exp.)
Per capita pharmaceutical sales: $1036
Generic sales: $70 billion (21% of total sales)
Patented sales: $244 billion (70% of total sales)
OTC sales: $19 billion (6% of total sales)

Research and development (R&D)

The pharmaceutical sector has consistently been one of
the most R&D intensive industries in the United States.
The research-based industry generally allocates around
15 to 20 percent of revenues to R&D activities and

13

invests over $50 billion on R&D annually. Although

the United States remains the global leader in
innovative R&D investment, producing more than half
the worlds new molecules in the last decade, its
continued leadership cannot be taken for granted. R&D
performed in the United States has become
increasingly expensive relative to emerging economies
in Asia, such as China and Singapore, where
governments have enacted policies to attract
investment and are poised for future growth.
Conditions that limited R&D offshoring in the past, such
as market proximity and availability of talent, are
rapidly shifting.
Domestic market
The United States has one of the worlds most
supportive domestic environments for the
development and commercialization of
pharmaceuticals with minimal market barriers. Its
strengths include an intellectual property system that
rewards innovation through patent and data
protection, a science-based regulatory system that is
considered the most rigorous in the world, the worlds
largest scientific research base fostered by academic
institutions and decades of government research
funding, and robust capital markets. The United States
attracts the majority of global venture capital
investments in start-up biopharmaceutical enterprises.
In addition to a favorable IP and regulatory
environment, U.S. laws allowing direct-to-consumer
advertising creates immense demand for specific
14
patented drugs. More importantly, the United States
is the worlds largest free-pricing market for
Figure 3: Researched-based Pharmaceutical
Companies
Research-based pharmaceutical companies
operate under a challenging, high-stakes
business model in which the failure rate is high.
The R&D and regulatory review process for new
drugs can often take over a decade and require
hundreds of millions, if not billions, of dollars in
investments. Around half of new medicines fail in
the late stages of clinical trials, and even those
that succeed often fail to make a profit. Only two
of out of 10 medicines generate returns that
1
exceed average R&D costs. In the United
States, more than 90 percent of
biopharmaceutical companies do not earn a
1
profit.

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pharmaceuticals. As a result, prices are comparatively

high to make up for lower profits in other countries and
to cover R&D costs. The United States also has high per
capita incomes, unmatched access to healthcare, a
large elderly population, a culture of end-of-life
prolongation, high rates of chronic diseases and drug
consumption and a strong consumer preference for
innovative drugs. All of these factors contribute to it
being, by far, the worlds largest pharmaceutical
market with $333 billion in sales in 2015, about triple
the size of its nearest rival, China. The United States
will remain the worlds most important market for the
foreseeable future with healthy growth expected
across all product sectors.
Industry trends
Fast growing segments of the pharmaceutical market
include biologics and generics. Biologics now account
for over a third of all new drugs in clinical trials or
15
awaiting FDA approval. U.S. generic drug sales
reached an estimated $70 billion, representing a
quarter of the global market, due to a large number of
drugs going off-patent and healthcare reforms favoring
generics. Although generics make up only 22 percent
of total prescription sales, its share of filled
prescriptions has risen from 19 percent in 1984 to 88
16
percent in 2015. The high volume and low value
reflects an extremely competitive sector with low-cost
imports adding increasing pressure on domestic
generics producers. It also points to high saturation in
the U.S. generics market, underlining the need to
expand abroad for future growth opportunities.
Meanwhile, the innovative pharmaceutical industry is
currently facing unprecedented challenges caused by
slower sales growth, expiring patents, increasing
competition from generics, shorter product life cycles,
tighter regulations, adverse media coverage and
reputational damage, and a decline in the number of
new innovative drugs under development. Many are
concerned that, despite enormous expenditure on
R&D, the industry is producing far fewer new drugs and
effective therapies than it did decades ago while sales
and administration costs are rising. This concern has
been mitigated to some extent with successful drug
approvals reaching record highs over the last couple
17
years. The industry is adjusting to a more competitive
environment by shifting manufacturing and other
operations overseas, revamping research pipelines,
reducing employment, particularly in sales but also in

manufacturing and research, and organizing mergers

and acquisitions (M&As).
A long string of M&As over the last few years has led to
a more concentrated global industry with both
innovative and generics companies engaging in
acquisitions of all sizes. Large firms often purchase
smaller, more focused innovator companies for new
drugs to accelerate the R&D process. The lines between
innovator and generic companies or between
pharmaceutical and biotechnology companies have
become increasingly blurred, and most major
multinationals now incorporate both biologics and
generics subsidiaries in their portfolios. As the
prevalence of biosimilars grows, the high
manufacturing and regulatory costs involved in
developing these drugs further clouds traditional
distinctions between innovative and generic business
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models and investment cycles.
Trade
Most finished pharmaceuticals consumed in the United
States are manufactured locally, particularly complex
products such as biologics, or imported from Western
European countries, such as Ireland, Germany and
Switzerland. The United States is a major hub for drug
manufacturing, as imports account for only around a
quarter of the market by value. Nevertheless, the sheer
size of the U.S. market means that imports were valued
at over $86 billion in 2015, making it the worlds largest
importer of pharmaceuticals.
Figure 4: U.S.s top five sources of imports of
pharmaceuticals (2015)
1.
2.
3.
4.
5.

Ireland
Germany
Switzerland
Israel
India

$15.2 billion
$14.5 billion
$9.4 billion
$6 billion
$6 billion

With $47 billion in exports in 2015, pharmaceuticals

rank as one the top exporting sectors for IP-intensive
industries in the United States. The largest export
markets include Belgium, the Netherlands, Canada, the
UK and Japan. Projecting forward, the increasing use of
low cost manufacturing bases for foreign-derived sales
will inhibit the export potential of U.S. manufacturers,
and patent expiries for high value export products will
19
place negative pressure on value. Despite these
pressures, high levels of R&D may provide new
2016 ITA Pharmaceuticals Top Markets Report

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products for export growth in the long-term as will

increasing penetration into emerging markets.
Figure 5: U.S.s top five export destinations for
pharmaceuticals (2015)
1.
2.
3.
4.
5.

Belgium
Netherlands
Canada
U.K.
Japan

$6.4 billion
$4.2 billion
$3.8 billion
$3.7 billion
$3.5 billion

It should be noted that U.S. trade statistics do not fully

reflect the globalized nature of the pharmaceutical
industry, which procures ingredients and manufactures
in locations based on cost and quality, among other
factors. For example, most of the low value active
pharmaceutical ingredients and excipients used in
finished drugs in the United States are manufactured
20
abroad, particularly in China and India. Products and
substances may cross borders at several points in the
manufacturing chains. Due to product perishability and
supply chain costs, foreign companies tend to have
substantial manufacturing operations in the United
States to better access the market. Likewise, there is
significant U.S. industry production of pharmaceuticals
in foreign markets, such as Ireland and Singapore, from
which companies export to third countries. There are
also a growing number of product-based strategic
alliances and joint ventures between U.S.- and nonU.S.-headquartered drug companies.
Global Industry Landscape

economies, however, are projected to hover in the low

to mid-single digits due to stagnating national
economies, tighter regulations, patent expiries and
pricing pressure.
In an era of global fiscal austerity, the industry expects
foreign governments, particularly in Europe, to
continue to put pressure on drug prices through 2017
and beyond, as the high visibility of drug prices makes
them a relatively easy target for healthcare providers
trying to reduce costs. Even in the United States, the
rapidly rising cost of healthcare is resulting in political
pressures and regulatory efforts to contain costs that
could significantly affect the industrys bottom line.
Comparative effectiveness determinations and valuebased pricing are also starting to be mandated by some
countries and insurers, who require evidence of cost
savings or a clear clinical benefit before including new
products in their formularies. Some have also entered
into outcomes-based contracts with pharmaceutical
companies. Such systems will force pharmaceutical
companies to dramatically adjust their business models
from simply selling medicines to managing outcomes
and justifying costs. Doing so will require increased
cooperation with the broader healthcare community
throughout government, academia, hospitals,
technology providers and so on to build health
management infrastructure and access data. In short,
traditional business models are under huge pressure,
and pharmaceutical companies will have to work much
21
harder to earn profits going forward.

The worldwide market for pharmaceuticals is projected

to grow from around $1 trillion in 2015 to $1.3 trillion
by 2020, representing an annual growth rate of 4.9
percent. Several global demographic and economic
trends are driving pharmaceutical consumption,
including a rapidly aging world population and an
associated rise in chronic diseases, increased
urbanization and higher disposable incomes, greater
government expenditure on healthcare and growing
demand for more effective treatments.

Developing markets

Developed markets

Despite their impressive potential, developing

countries pose immense challenges and risks for U.S.
companies. To succeed, companies must choose
markets selectively and devise tailored sales,
marketing, acquisition and pricing strategies.
Developed and developing markets often vary
politically, culturally, socially and religiously in ways
that effect pharmaceutical sales. They may vary, for

The primary pharmaceutical export markets in the

near-term will continue to be in the traditional
strongholds of North America, Western Europe and
Japan, which have high per capita spending rates on
healthcare, strong IP protections and streamlined
regulatory processes. Growth rates in these developed

Meanwhile, market growth is shifting toward emerging

markets in Asia, Latin America and elsewhere, where
pharmaceutical sales are forecast to expand at double
digit rates. Further reforms of legislative systems,
especially regarding patent protection and
enforcement, as well as improving regulatory
conditions, will make these markets increasingly
attractive for U.S. industry.

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example, in their use of traditional medicines or in the

disease profile of the population due to different ethnic
origins, diets and environments. Developing countries
also possess very different economic attributes in
terms of size, healthcare infrastructure, distribution
chains and so forth. Adding to the complexity,
companies must overcome a range of regulatory
hurdles that differ greatly by country and type of
product. A lack of transparency and capacity within
regulatory systems, as well as weak or ineffectively
enforced IP laws, are all too common.
Importantly, emerging markets differ from each other
in their ability and political willingness to pay for
innovative drugs. Consumers typically have to fund a
larger share of their own healthcare costs as per capita
government expenditure on healthcare is low. On
average, low-income countries spend 4 to 6 percent of
GDP on healthcare, compared to more than 10 percent
of GDP for high-income countries, and current global
economic uncertainties are likely to slow healthcare
22
spending in the developing world in the near-term.
Although growing pockets of wealthy patients willing to
pay for high cost drugs provide opportunities for U.S.
companies, it will take decades before even the most
promising emerging markets can afford the latest
treatments and prices prevalent in rich countries on a
widespread basis.
Unsurprisingly, spending on cheaper, generic drugs is
driving, and will continue to drive, most of the growth
in emerging markets over the coming decade. While
this bodes well for generics manufacturers, companies
are not immune from increased price controls and
other sales constraints imposed in these markets,
23
which are already impacting revenues. Moreover,
companies will face increased competition from local
manufacturers as well as a variety of trade barriers, as
governments seek to promote domestic industries. The
pharmaceutical sector is often targeted by
protectionist or industrial policies as governments
around the world view it as strategically important: it is
non-cyclical, generally employs individuals at aboveaverage incomes and ensures supplies of medicines to
local populations.
Challenges and Barriers
Companies entering a foreign market face a plethora of
challenges. Not only does each country have unique
regulatory, marketing and reimbursement
environments, but foreign government policies and
practices can pose impediments to market expansion.

The most commonly cited problems include regulatory

review processes that are non-transparent; lack of
effective protection and enforcement for intellectual
property rights, which result in widespread sales of
counterfeit medicines; burdensome reimbursement
and pricing policies; and high tariffs. The following list
elaborates on some, but not all, of the main issues
24
facing U.S. companies in the pharmaceutical sector:
Regulatory approval
Differences in regulatory approval requirements can
lead to duplicative testing and clinical trial
requirements, delays in product approval and higher
costs to manufacturers. Many regulatory agencies lack
adequate training and resources to review submissions
in a timely and consistent manner, creating enormous
backlogs, approval uncertainty and market access
delays. There may also be concerns related to the
security and maintenance of confidential business
information (CBI), such as clinical data that must be
submitted for approval.
Patent approval
Similarly, patent backlogs and long, uncertain approval
timelines are common problems worldwide. Because
the term of a patent usually begins on the date an
application is filed, approval delays can greatly reduce
the value of granted patents. This is especially
concerning to smaller firms, which tend to be more
dependent on their intellectual property assets.
Unfortunately, many countries lack patent term
adjustment provisions or ways to address unreasonable
patent examination delays.
Patentability
Whether through regulations or court decisions, many
countries prohibit patents on important
pharmaceutical innovations, such as new dosage forms
or combinations that make it easier for patients to take
medicines. Such incremental innovations are often
essential for advancing treatments and add enormous
value to patients. Furthermore, while pharmaceutical
patents are typically filed and issued prior to clinical
trials, a number of regulatory bodies require large, and
some would say excessive, amounts of data
requirements at the time of filing to prove
patentability. These patentability restrictions are often
applied solely to pharmaceutical products and
discourage innovation.
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Figure 4: Global Regulatory and Harmonization

1
Initiatives
The U.S. Food and Drug Administrations (FDA)
mission includes the mandate to participate through
appropriate processes with representatives of other
countries to reduce the burden of regulation,
harmonize regulatory requirements and achieve
appropriate reciprocal arrangements. The FDA and
its counterparts around the world have been working
for years to harmonize regulatory standards through a
variety of forums. Examples include:
International Conference on Harmonization of
Technical Requirements for the Registration of
Pharmaceuticals for Human Use (ICH): Created in
1990, the ICH is the most influential regulatory
harmonization initiative for medical products. The
outputs of the ICH process include the Common
Technical Document (CTD) and the Medical
Dictionary for Regulatory Activities (MedDRA).
Asia-Pacific Economic Cooperation (APEC) Life
Sciences Innovation Forum (LSIF) Regulatory
Harmonization Steering Committee (RHSC): The FDA
participates in the RHSC and its working groups, such
as Supply Chain Integrity and Product Quality,
Pharmacovigilance, Good Review Practices, Multiregional Clinical Trials, Good Clinical Practice
Inspection, Cell and Tissue-based Therapeutic
Products, Biotherapeutic Products, etc.
International Pharmaceutical Regulators Forum
(IPRF): The IPRF facilitates the implementation of ICH
and other internationally harmonized technical
guidelines for pharmaceuticals. Working groups have
been established specific to: Gene Therapies, Cell
Therapies, Good Clinical Practices (ICH E6),
Biosimilars, and Nanomedicines.
Pan American Network for Drug Regulatory
Harmonization (PANDRH): PANDRH supports
regulatory convergence/harmonization in the
Americas.
Pharmaceutical Inspection Cooperation Scheme
(PIC/S): The PIC/S, comprised of regulators from 23
countries around the world, pursues the international
alignment of pharmaceutical inspections through
information exchange, training and harmonization of
GMP standards and procedures among regulatory
agencies.
World Health Organization (WHO): The FDA is
involved in a number WHO programs, such as the
PAHO/WHO Collaborating Center for Biological
Standardization, providing expertise and research in
developing WHO written standards and guidelines.

Data supplementation in patent applications

In consideration of the time and expense required to
gather data on pharmaceutical inventions, it is best
practice for reviewing bodies to permit applicants to
file supplemental data after a pharmaceutical patent
application is submitted. Countries, however, are
increasingly restricting the permissibility of post-filing
data submissions, adding enormous uncertainty, costs
and marketing delays for companies. Again, these
restrictions are also often applied solely to
pharmaceutical products.
Patent enforcement
An effective IP system should offer patent holders
strong enforcement tools for defending against
infringement. Such tools include patent linkage
provisions, which give companies the opportunity to
dispute infringing patents before they enter a market
and damage their business. Many countries lack such
early dispute resolution mechanisms and may even
have polices that discourage companies from pursuing
patent claims.
Compulsory licensing (CL)
CL refers to when a government allows someone else
to produce a patented product or use a patented
process without the consent of the patent holder. It is
one of the flexibilities on patent protection included in
the TRIPS Agreement, which lists required conditions
for issuing compulsory licenses, including non-exclusive
nature, limited scope and duration, a right to
25
remuneration that must be adequate and so on. A
number of countries, however, grant CLs without
adequate justification on public health grounds,
consultations with stakeholders or consideration of
alternative options. CLs sometimes also appear to be
used as an excuse to promote local manufacturing at
the expense of foreign competitors. Governments
periodically use the threat of CLs as leverage in pricing
negotiations with manufacturers.
Regulatory data protection (RDP)
RDP complements patent rights by providing innovative
companies protection for a limited duration against
disclosure and unfair commercial use of the safety and
efficacy data submitted to drug regulatory authorities.
Given the time and expense required to produce such
data, it is often extremely valuable intellectual
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property. RDP is particularly critical for biologic

medicines, which may not be adequately protected by
patents alone because of their inherent complexity. For
this reason, the United States provides 12 years of RDP
for biologics. Many countries, however, do not provide
adequate, if any, RDP or provide protection only for
small molecule treatments but not for biologics.
Pricing
Naturally, pricing is of paramount concern to
pharmaceutical manufacturers. Artificially depressed
prices set by governments can ultimately cripple drug
supplies and reduce incentives for further investment
in a market. While the U.S. government is sensitive to
concerns related to cost-savings and the affordability of
both generic and innovative drugs, it encourages
transparency on pricing decisions and appropriate
recognition of the value of innovative medicines. U.S.
companies indicate that they are often not sufficiently
consulted when governments make pricing decisions or
determine the methodologies used to set prices.
Unfortunately, lack of transparency, consistency and
due process is widespread across the world and hinders
business decision making.
Common price controls and cost-containment
mechanisms used by foreign governments may include
international reference pricing (IRP), whereby a
government sets the price of a drug by comparing its
price from a basket of select countries, and therapeutic
reference pricing (TRP), whereby a government
designates medicines that treat a specified condition as
therapeutically equivalent and sets a maximum
reimbursement limit or reference price for that group.
U.S. industry has asserted that the TRP process often
assumes that all products used to treat the same
condition are interchangeable without adequate
scientific justification. Treating medicines that contain
different ingredients as if they are identical solely
based on the therapy they provide can harm patients,
erode the benefits of patent protection, impede
competition and inhibit future innovation.

Localization
Some trading partners, potentially in an effort to
protect or develop their own domestic industry, limit or
ban certain imported pharmaceuticals. Many also
condition market entry on local content requirements
or local manufacturing, exploit standards requirements
to impose de facto bans on imports, require technology
transfer or disclosure of business confidential
information, impose procurement rules favoring local
suppliers and so on.
Tariffs
Foreign tariffs, taxes and other fees also present
significant market access barriers to U.S.
pharmaceuticals. Not only do such expenses
unnecessarily increase drug costs to patients, but they
also often slow product delivery due to U.S. companies
having to make payment on and credit complying
transactions.
Counterfeits
A counterfeit drug is a pharmaceutical product that is
produced and sold with the intent to deceptively
represent its origin, authenticity or effectiveness. It
may contain inappropriate quantities of active
ingredients (or none at all), may cause bodily harm,
may contain ingredients that are not on the label or be
supplied with inaccurate packaging and labeling.
Estimates on the size of the global counterfeit drug
market range from $75 to $200 billion and can make up
26
half of all drugs sold in some low-income countries.
Counterfeit drugs are a dangerous source of unfair
competition and financial harm for both the innovative
and generic industries. Counterfeits ultimately raise the
price of medicines by requiring legitimate
manufacturers to use considerable resources to ensure
a safe supply chain for genuine pharmaceuticals.
Existing government policies and enforcement efforts
are often insufficient to address counterfeiting
problems.

2016 ITA Pharmaceuticals Top Markets Report

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As defined by the Census Bureau.

Food and Drug Administration, FDA Glossary of Terms,
http://www.fda.gov/Drugs/InformationOnDrugs/ucm079436.htm
3
In general, a generic drug does not have to duplicate the clinical trial requirements for market approval with the
exception of bioequivalence trials. See: The Drug Price Competition and Patent Term Restoration Act of 1984
(Hatch/Waxman Act) as amended.
4
In general, it might take just two to three years and cost $50 to 100 million to develop and market a generic drug.
5
Managed Care, Michael D. Dalzell, In 5 years, >50% of top-selling drugs will be biologics, October 2013,
http://www.managedcaremag.com/archives/2013/10/5-years-50-top-selling-drugs-will-be-biologics
6
The Patient Protection and Affordable Care Act signed into law on March 2010 authorized the FDA to approve
biosimilars, or follow-on versions of biologic drugs that were approved under the Public Health Service Act of 1944 or
the Federal Food, Drug, and Cosmetic Act (FFDCA).
In 2015, Zarxio became the first biosimilar product approved by the FDA in the United States. Food and Drug
Administration, FDA approves first biosimilar product Zarxio,
http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm436648.htm
7
The Wall Street Journal, Jonathan D. Rockoff, Knockoffs of Biotech Drugs Bring Paltry Savings, May 2015,
http://www.wsj.com/articles/knockoffs-of-biotech-drugs-bring-paltry-savings-1462458209
8
Consumer Healthcare Products Association, FAQs About the Regulation of OTC Medicines,
http://www.chpa.org/FAQsRegOTCs.aspx
9
International Pharmaceutical Excipients Council (IPEC) Americas, Frequently Asked Questions,
http://ipecamericas.org/about/faqs
10
The Information Technology and Innovation Foundation (ITIF), J. John Wu and Stephen J. Ezell, How National
Policies Impact Global Biopharma Innovation: A Worldwide Ranking, April 2016, http://www2.itif.org/2016-nationalpolicies-global-biopharma.pdf?_ga=1.31130998.83834353.1460473341
11
Figure 2: U.S. Snapshot:
Pharmaceutical sales, Pharmaceutical sales per capita: Centers for Medicare and Medicaid Services (CMS),
Consumer Healthcare Products Association (CHPA), BMI
OTC medicine sales: The Nielsen Company, Consumer Healthcare Products Association (CPHA), BMI
Generic drug sales: Centers for Medicare and Medicaid Services (CMS), Generic Pharmaceutical Association
(GPhA), local companies, BMI
Patented drug sales: Centers for Medicare and Medicaid Services (CMS), Consumer Healthcare Products
Association (CHPA), BMI
Health spending, Govt. health spend, Private health spend: World Health Organization (WHO), BMI
Population, Population over 65: World Bank/UN/BMI
See also: BMI, United States Pharmaceuticals & Healthcare Report, January 2016 (referenced throughout)
12
Battelle/Pharmaceutical Research and Manufacturers of America (PhRMA), The U.S. Biopharmaceutical Industry:
Perspectives on Future Growth and The Factors That Will Drive It, http://www.phrma.org/sites/default/files/pdf/2014economic-futures-report.pdf
13
Pharmaceutical Research and Manufacturers of America (PhRMA), Pharmaceutical Profile 2015,
http://www.phrma.org/sites/default/files/pdf/2015_phrma_profile.pdf
14
BMI, United States Pharmaceuticals & Healthcare Report, Competitive Landscape, January 2016
15
EvaluatePharma, World Preview 2015, Outlook to 2020, June 2015, http://info.evaluategroup.com/rs/607-YGS364/images/wp15.pdf
16
The Generic Pharmaceutical Association (GPhA), Generic Drug Savings in the U.S. Seventh Annual Edition:
2015, http://www.gphaonline.org/media/wysiwyg/PDF/GPhA_Savings_Report_2015.pdf
17
Food and Drug Administration, FDA and Accelerating the Development of New Pharmaceutical Therapies,
http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Reports/UCM439183.pdf
18
BMI, Special Report: Advances in the Biosimilars and Injectable Generics Market, January 2016
19
BMI, United States Pharmaceuticals & Healthcare Report, Structural Trends, January 2016
20
The United States imports 80 percent of all APIs and 40 percent of all finished drugs.
Food and Drug Administration, Drugs Imports Exports Compliance, http://www.fda.gov/ucm/groups/fdagovpublic/@fdagov-drugs-gen/documents/document/ucm348836.pdf
21
Price Waterhouse Coopers, Pharma 2020: Challenging business models, http://www.pwc.com/gx/en/pharma-lifesciences/pdf/challenge.pdf
22
World Bank, Health expenditure, total (% of GDP),
http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?order=wbapi_data_value_2014+wbapi_data_value+wbapi_dat
a_value-last&sort=asc
2

2016 ITA Pharmaceuticals Top Markets Report

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23

Deloitte, Global life science outlook: Adapting in an era of transformation,

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-2015-lifesciences-report.pdf
24
The following reports are excellent sources used throughout this section as well as in the country case studies:
Office of the U.S. Trade Representative, 2016 National Trade Estimate Report of Foreign Trade Barriers,
https://ustr.gov/sites/default/files/2016-NTE-Report-FINAL.pdf
Office of the U.S. Trade Representative, 2016 Special 301 Report, https://ustr.gov/sites/default/files/USTR-2016Special-301-Report.pdf
Pharmaceutical Research and Manufacturers of America (PhRMA), Special 301 Submission 2016,
http://www.phrma.org/sites/default/files/pdf/PhRMA_2016_Special_301_Submission.pdf
Biotechnology Innovation Organization (BIO), 2016 Special 301 Submission,
https://www.bio.org/sites/default/files/files/2016%20BIO%20Submission.pdf
International Generic and Biosimilar Medicines Association, IGBA Recommendations for 2016 Special 301 Review,
http://www.igbamedicines.org/doc/IGBA%20301%20Submission%202016%20-%20FINAL.pdf
U.S. Chamber of Commerces Global Intellectual Property Center, 2016 Special 301 Submission,
http://image.uschamber.com/lib/fee913797d6303/m/1/Special+301+GIPC+Submission+2016+FINAL.pdf
The Generic Pharmaceutical Association (GPhA) and Biosimilars Council, GPhA & Biosimilar Council Comments on
2016 Special 301, https://www.regulations.gov/contentStreamer?documentId=USTR-2015-00220019&attachmentNumber=1&disposition=attachment&contentType=pdf
25
World Trade Organization, Compulsory licensing of pharmaceuticals and TRIPS,
https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm
26
World Finance, Trade in illegal medicine hits pharmaceutical sector, http://www.worldfinance.com/home/specialreports-home/trade-in-illegal-medicine-hits-pharmaceutical-sector
World Health Organization, WHO Fact Sheet, Substandard, spurious, falsely labeled, falsified and counterfeit
(SSFFC) medical products, http://www.who.int/mediacentre/factsheets/fs275/en/

2016 ITA Pharmaceuticals Top Markets Report

10

This case study is part of a larger Top Markets Report. For additional content, please visit www.trade.gov/topmarkets.