Business environment

The pharmaceutical sector is changing

Economic developments are accelerating change in the pharmaceutical sector. Orion develops products that are sold worldwide and marketed in over a hundred countries. Human pharmaceuticals sold through its own network or marketing partners account for about 80% of Orion’s net sales.

Orion’s own sales network covers almost all key European markets. Outside Europe Orion operates through marketing partners. Sales through partners account for about one-fifth of the Orion Group’s net sales.

Finland is Orion’s most significant market, and the Finnish market accounts for about one-quarter of Orion’s net sales. Treatment of Parkinson’s disease is still the most important individual therapy area for Orion, and accounts for about one-sixth of the Group’s net sales.

Orion is a medium-sized company in Europe and about the 70th largest pharmaceutical company in the world.

Europe and United States still the key markets

The pharmaceutical sector is relatively stable and steadily growing. According to IMS Health pharmaceutical sales statistics, the global market for pharmaceuticals is forecast to grow by 4–7% per year and is estimated to exceed USD 1 300 billion by 2018. The fastest growth will be in developing markets, where annual growth will be 8–11%. Over a quarter of the growth is forecast to come from China.  In the United States the market growth is expected to be at 5-8% and the Japanese pharmaceuticals market is estimated to be growing by 1–4%. In Europe the growth will remain at 0-3% per year due to austerity measures. In Europe growth in pharmaceuticals markets is increasingly coming from Eastern Europe. However, the United States, Europe and Japan still account for over half of pharmaceuticals markets by value.1)

Growth in generic pharmaceuticals market remains strong

The generic pharmaceuticals market has continued to grow faster than the entire pharmaceuticals market. In the past five years, the generic pharmaceuticals market has been growing by over 10% per year. Generic pharmaceuticals already account for over half of world pharmaceuticals markets by volume, but only about a fifth by total value.1)

The expiry of patents on many pharmaceuticals companies’ main products in the next few years will support to some extent the growth of generic pharmaceuticals markets. In addition, in many market areas the cost-cutting pressures in healthcare are increasing demand for cheaper alternatives, in other words generic pharmaceuticals.

Governments continue stringent saving drives

The general global economic situation has forced governments to seek ways to make savings, and this has created its own challenges to growth of pharmaceutical companies. There has been a desire to cap the costs of drug treatments through, for example, more stringent reimbursement requirements and market-specific price cuts. Due to the strict requirements some pharmaceuticals companies have even decided not to launch all of their new products in some European countries.

In addition, to gain further cost savings, many European countries have increased patients’ co-payment for medicines and/or introduced mandatory INN prescribing, i.e. prescribing with the generic (vs. brand) name for the active substance.

Pricing pressure seems to be especially strong in Europe, but also increasingly in other established markets.

Customer’s many faces

The tougher financial situation has made the payers of drug treatments an increasingly important customer group for pharmaceutical companies, as their role in decision making has grown. The payers can be a government authority, insurance company, hospital district or individual hospital, depending on the country. Doctors and other health care professionals are of course still an important and crucial target group.

Pharmacies are a very important link in the pharmaceutical distribution chain, because they play a part in deciding what products are offered to the end-user. The end-user of the drug is a patient, whose role in treatment selection is also growing, as information becomes ever more widely available about diseases and treatments.

1) IMS Health 2014