Female pharmaceutical worker

Outlook is bright for global pharmaceuticals

Despite post-pandemic headwinds, pharma continues to enjoy growth

Historically pharmaceuticals have been better equipped than other industries to weather cyclical economic turbulence. But the past three years have been very different to normal economic cycles.

The pandemic put the industry under a lot of pressure to develop and deliver new vaccines at vast quantities in record time, and to produce enormous amounts of personal protective equipment, as well as virus testing kits. Many businesses involved in these activities, including our customers in this sector, experienced a pandemic boom and reported significant profits.

However, the boom times are now over. The world is facing record levels of inflation. Adding to that pain are high interest rates, imposed by many central banks as they adopt increasingly severe monetary approaches in a bid to bring down inflation.

Energy prices are eye wateringly high, increasing the cost of feedstocks and shipping. In addition to nibbling away at profit margins, these headwinds are pinching the pockets of consumers and reducing their spending power.

But this story of good times followed by bad is not a simple case of boom then bust. Despite the difficult economic environment, the pharmaceuticals industry continues to enjoy positive outcomes, with our forecasters predicting global industry growth to remain above 3% for the next few years at least. The customers that we work closely with are also optimistic and continue to thrive, despite challenges they are facing.  

Why is the pharmaceuticals industry experiencing growth?

So, what is going on? In the report we have just issued, Global Pharmaceuticals Outlook, three of our Pharma underwriting experts from the Americas, Asia and Europe unpick some of the key questions and give an overview of the major trends in their regions.

The highest levels of growth worldwide will be seen in Asia. My colleague Judy Ji, our Senior Underwriter in Shanghai notes that pharmaceutical production and sales in Asia-Pacific is predicted to grow by 6% next year and the year after, and the region is likely to enjoy a global share of more than 40% by 2030.

This growth trend is being driven by increased demand in emerging economies. As household incomes improve, greater numbers of people will enjoy better access to medicines, especially generics and over-the-counter medicines. At the same time, many emerging economies are investing in healthcare systems, in turn driving growth across the entire pharmaceuticals eco-system from medicine to medical instruments.

In contrast, growth is currently slowing in Europe, stuttering in the face of inflation and energy price headwinds. But this is not a doom scenario. The long-term outlook is good, driven in particular by ageing populations living for longer, often with chronic health conditions.

Our Pharma underwriting experts in Europe, Rubén del Río Hernández as well as in the US, Patrick Scardina, both note the importance of aging populations as a key driver of growth in developed markets.

Pharmaceutical laboratoryWhat challenges will the pharmaceuticals industry face over the coming years?

Although the future does look bright for the industry, with many opportunities presented by increasing numbers of people requiring or gaining access to medicines and healthcare, there are still challenges on the horizon.

Government policies will continue to impact the industry. These will include the need to adhere to regulations, as well as the challenge of navigating supply chains as some countries seek to gain greater health security through reshoring policies. Patent cliffs remain a perennial problem and although, arguably, patent holders have plenty of time to prepare, the ending of a major patent can still cause a ripple effect across the industry.

Overall, it is worth noting that by its very nature, the pharmaceuticals industry is often at the forefront of innovation. I am in continuously impressed at how forward thinking the customers I work with in this sector are. It is this, perhaps more than anything else, that will see the industry continue to innovate, adopt new technology such as AI and embed a continuing pattern of growth. I am committed to work alongside and support some of the leaders in this field to continue to grow long into the future.


Download the Atradius Global Pharmaceutical Outlook report here


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