As patents on brand-name drugs expire, and generic drug use increases, the United States, Europe, and Japan will account for a smaller share of worldwide spending on prescription drugs, a report from IMS Institute for Healthcare Informatics says. Yet rising incomes in countries such as Russia, China and India will drive demand in emerging pharmaceutical markets – sometimes called pharmerging markets. IMS estimates $1.2 trillion will be spent on prescription drugs worldwide by 2016, with 57 percent of that consumption coming from developed markets and 30 percent from emerging markets.

In addition to generic drugs and patent expirations, aging populations, costly chronic diseases, and greater emphasis on controlling health costs will dampen drug spending in developed markets such as the U.S. Expiring brand-name drug patents, alone, are expected to cut global spending on medicines by $106 billion from 2012 to 2016.

Countries with emerging pharmaceutical markets, on the other hand, have expanded coverage to more and more people. Rising incomes also will grow demand for prescription drugs, leading to an average $91 in drug spending per capita in emerging markets in 2016. Developed markets will still spend far more per person on drugs – $609 per capita in 2016 – than emerging markets.

A quick overview of the report’s findings:

  • Annual global spending is expected to grow from $30 billion in 2012 to $70 billion in 2016.
  • Annual pharmaceutical spending for pharmerging countries will double from $24 billion in 2012, reaching $35 to $45 billion in 2016.
  • 20 diseases and treatments to make up 42 percent of global drug spending, led by cancer, diabetes, asthma, and chronic obstructive pulmonary disease (COPD).
  • Patent expirations and the sustained impact of the global recession will slow developed market growth.
  • U.S. drug spending growth will remain historically low through 2016 due to low-cost generic alternatives following patent expirations.
  • European spending is expected to grow between -1 to 2 percent through 2016 vs. its 3.8 percent growth rate between 2007 through 2011.
  • Japanese pharmaceutical spending is expected to grow one to four percent during the next five years, punctuated by biennial price cuts.

To read the IMS Health report on The Global Use of Medicines: Outlook Through 2016, click here (PDF).

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Kip Piper is a Medicare, Medicaid, and health reform consultant, speaker, and author.  A senior consultant with Sellers Dorsey and Fleishman-Hillard, Kip advises health plans, hospitals and health systems, states, drug and device manufacturers, and investment firms throughout the U.S.  For more, visit KipPiper.com.  Follow on Twitter at @KipPiper and connect with Kip on LinkedIn.