The Australian pharma sector has been seeing major changes lately after it crossed the A$-20 billion mark; according to estimates it is expected to touch A$-30 billion by 2020. The industry is Australia’s largest exporter, with products worth approximately A$-4.1 billion shipped to over 60 markets worldwide. Although the pharma sector in Australia is quite small and ranked 15th around the world, all of these changes indicate a healthy trend which suggests that Australia is slowly growing beyond the competition in this sector. The beginning of this growth trend emerged during the times of global recession where the Australian pharma sector began pulling itself away from its competitors to become the most attractive market for pharmaceutical investment in the Asia Pacific region.
The Drug development industry in Australia is expanding due to the fact that the country has excellent access to medicines and a fast recovering economy with a massive growth potential. The industry seems set to grow further amid extensive government reform centered on the A$-6-7 billion plus per year Pharmaceutical Benefits Scheme (PBS). Moreover, with structural adjustments in the pharma sector there is increased focus on the lack of productivity in drug development pipelines, patent expiration of high revenue generating drugs, and declining returns on pharma companies with considerable investments in research and development.
There is a huge potential for investments considering the growth observed in the pharma sector. One important area to be addressed would be the reform processes adopted by the Australian government, which would essentially regulate exports and investments. Looking into the future of the Australian pharma scene it is evident that those pharma businesses that want to survive should explore new business models to replace revenues lost due to declining pipelines and increasing competition. Regulatory change is an important parameter to determine the way forward for pharma majors looking at increasing sales. The growth observed in generic drugs also indicates the direction in which pharma companies in Australia are migrating, this seems to be the area of focus for the pharma majors. The major drug manufacturer in Australia is Pfizer which has been leading the drug sales followed by AstraZeneca.
The Australian pharma scene is governed by the PBS which is as important as a prerequisite for informed policy development in Australia. However, the PBS has wider significance because of various aspects of the scheme, in particular the use of economic analysis in price setting and listing decisions. The PBS which has hit the Australian pharma scene also brings its share of issues which need to be addressed; they include withdrawn products, a struggling generics industry, and reorganization within the wholesale sector.
The growth driver for pharma seems to be Australia’s life expectancy combined with increasing lifestyle diseases and leading health problems. It was noted that Pfizer’s Liptor, a statin used in the treatment of high cholesterol, was the significant market leader in 2009 with sales in excess of A$-550 million.
Australia would have to take a cue from countries such as India which is a major generic drug market; there can be a drive in Australia to essentially expand the market by considering sourcing of material for generic drug production and drug manufacturing equipment from developing economies. Collaborations for technical knowhow are also imperative in the health care sector going forward.
There is an opportunity in the Australian clinical trials industry which is estimated to generate revenues of A$-1 billion annually. However, some ground has been lost in recent years to developing countries. There is a need to revive this industry and herein lies an opportunity to run clinical trials at a lower cost and have access to large patient pools.
In terms of exports the top destination for respondent companies in the Australian pharma exports by FOB value was Asia followed by South Africa. Both of these destinations contribute to more than 50% of the total exports. The need for increased investments in research and development of generic drugs has arisen and all major Australian pharma companies are banking on it, therefore, there is an opportunity here to cash in.
With the Australian pharma market observing gradual growth and beginning to encroach on the top pharma bracket there seems to be a hope for investors and exporters. The pharma sector seems ready for a take off with more help from the policy makers and renewed research and development initiatives and investments. The number of deals involving Australian drug developers has noticeably ticked up in the last few years; an example for this was noted in 2010 which saw 10 sizeable transactions worth A$-1.4 billion.
The pharma phenomenon in Australia is only set to hit new heights after the gradual build up. Brendan Shaw, CEO of Medicines Australia, said, “Medicines are among Australia’s largest manufacturing exports to Asia, and with Australia’s latent competitive strengths in this area, we have the potential to grow this significantly.”
With Australian pharma exports growing and the industry expanding there seems to be an opportunity to build on this by advocating the practice of global sourcing. Australian pharma majors can look at other markets in the Asia Pacific region to supply them with quality materials and equipment for drug development. The companies can then look at exporting the finished medicines at lesser costs compared to now, there by extracting good profits.
Australia is poised to capture the pharmaceutical sector and there is a huge opportunity waiting for investors in the pharma sector in Australia. There is a need for new strategies to implement sourcing of materials and equipment for production of drugs and healthcare products from countries such as India and China. This would mean that there is an increased need of global sourcing; Brickwork Sourcing works with global pharma companies and has capabilities of providing end-to-end sourcing as well as vendor and supply chain management solutions.
Can Australia take a cue from India’s generic drug market?