Market Overview
The global pharmaceutical manufacturing market size was valued at USD 510.59 billion in 2022. It is estimated to reach USD 1,360.02 billion by 2031, growing at a CAGR of 11.50% during the forecast period (2023–2031).
The rise in pharmaceutical R&D spending significantly impacts the pharmaceutical manufacturing market, acting as a “backbone” for success in any drug discovery program, driving the market. The market refers to the global industry producing pharmaceutical drugs or medications. It encompasses companies and organizations engaged in pharmaceutical product research, development, formulation, production, quality control, packaging, and distribution. The market is driven by the desire for pharmaceutical drugs to prevent, treat, and manage diseases and medical conditions. The market is diverse and encompasses various segments, including prescription, over-the-counter (OTC), generic, and biopharmaceuticals. It covers various therapeutic areas, including cardiovascular, central nervous system, respiratory, oncology, and infectious diseases.
The market encompasses the global industry involved in producing pharmaceutical drugs. It is driven by the demand for medications, influenced by various factors, and subject to strict regulatory oversight. The market is competitive, and companies strive to develop innovative drugs and manufacturing processes to meet evolving healthcare needs.
Market Dynamics
Global Market Drivers
Rise in Pharmaceutical R&D Spending
The rise in pharmaceutical R&D spending significantly impacts the pharmaceutical manufacturing market. The R&D spending by pharmaceutical companies acts as a “backbone” for success in any drug discovery program. The amount of R&D spending serves as an essential parameter to reveal the company’s commitment to the development of drugs. It is reported that in 2019, various large pharmaceutical firms spent around 20% on R&D. For instance, as of June 2019, AstraZeneca spent around 25.63% of revenues on R&D. Similarly, Eli Lilly and Company spent 22.38% of its revenues on R&D as reported in March 2019. On the other hand, small-sized companies have lesser revenue generation; therefore, they often spend significantly higher amounts of their budget on R&D. The following figure represents the R&D spending by the top pharmaceutical companies.
Advancements in Pharmaceutical Manufacturing Technologies
Pharmaceutical companies are encouraged to streamline their processes and reduce drug development costs. Companies are optimizing complex processes by adopting cloud computing technologies to do so. The major advantages of cloud computing include low capital investment; it follows the “pay as you go” model, and low run costs during the drug development procedures. In addition, Artificial Intelligence (AI) is used to analyze and generate insights from that data, which is generated from cloud computing, accelerates R&D activities, and optimizes clinical trials. The following diagram represents some of the benefits of AI.
Global Market Restraints
Patent Expiration of Most Profitable Drugs
The patents of drugs allow pharmaceutical companies to have a defined period of exclusivity before competitors enter the market. The patents prevent other pharmaceutical companies from commercializing exact copies of a patented product. On the expiry of drug patents, low-priced versions of that drug, especially generics, are introduced in the marketplace. This results in the loss of product market share of a pharmaceutical company that had the patent for a specific drug and further reduces the company's profitability.
Global Market Opportunity
Increase in the Number of Trials
A continuous increase in clinical trials of pharmaceutical products is forecast to create numerous opportunities for pharmaceutical manufacturing market growth shortly. As per the data by ClinicalTrials.gov, as of April 2020, 337,545 clinical studies are ongoing, compared to just 2,119 active studies in the year 2000. Among these clinical trials, 34% are from the U.S. This increase in clinical trials between 2000 and 2020 indicates the growth of the pharmaceutical industry, which opens new opportunities for the pharmaceutical manufacturing market. The following figure depicts the number of registered clinical trials from 2000 to 2020.
Regional Analysis
North America Dominates the Global Market
Based on region, the global pharmaceutical manufacturing market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
North America is the most significant global pharmaceutical manufacturing market shareholder and is estimated to grow at a CAGR of 11.69% over the forecast period. Several factors contribute to the region's dominance and growth in the market. Firstly, North America is home to many major pharmaceutical companies and research institutions, driving innovation and drug development. These companies invest heavily in R&D, enabling the discovery and production of new drugs. The region's favorable regulatory environment and intellectual property protection support pharmaceutical research and development activities.
Additionally, North America has a large consumer base and high healthcare expenditure, which drives the demand for pharmaceutical products. The region's aging population, increasing prevalence of chronic diseases, and advancements in healthcare technologies contribute to the rising demand for medications. Furthermore, strong healthcare infrastructure and well-established distribution networks ensure the availability of pharmaceutical products to healthcare providers and patients.
Europe is anticipated to exhibit a CAGR of 9.80% over the forecast period. Europe indeed holds a significant global pharmaceutical manufacturing market share and is expected to grow steadily.The region's healthcare systems, well-established pharmaceutical industry, and focus on innovation contribute to its prominence in the market. Factors driving the growth of the pharmaceutical manufacturing market in Europe include increasing healthcare expenditure, the rising prevalence of chronic diseases, an aging population, and the demand for advanced therapies. Additionally, Europe has stringent regulatory standards and quality control measures, ensuring the production of safe and effective medications.
The Asia-Pacific region holds a prominent position in the global market. The region's growing population, increasing healthcare expenditures, favorable business environment, and investments in healthcare infrastructure contribute to its strong growth potential. With India and China leading the way, the Asia-Pacific market is expected to expand rapidly in the foreseeable future.
Latin America represents an emerging and promising market in the global pharmaceutical manufacturing industry. The region's large population, increasing healthcare expenditures, burden of diseases, and efforts to improve healthcare infrastructure contribute to its growth potential. With a strong domestic industry and growing investments in research and development, Latin America is poised to play an important role in the world pharmaceutical manufacturing market.
Segmental Analysis
The global pharmaceutical manufacturing market is bifurcated into drug development type, formulation, route of administration, therapy area, prescription, age type, and sales channel.
The global market is bifurcated based on drug development type into outsourced and in-house.
The In-house segment dominates the global market and is projected to exhibit a CAGR of 12.5% over the forecast period. The in-house method of medication development enables major firms to exercise more control over the quality and quantity of the goods. This approach to medication development also enables businesses to quickly alter the scope, timeframes, and quantity of drug products in response to market demand. In-house production maintains the quality control of the products. Moreover, the product of drugs in their facilities keeps the company's intellectual property safe, thereby minimizing the risk of critical product information loss, which is one of the major issues in outsourcing. Moreover, most large-scale companies undertook mergers and acquisitions of various contract manufacturers, thus allowing the latter to be locally present in the parent company's facility. This is a beneficial approach for both the parent company and the CROs and CMOs.
Based on drug development type, the global market is bifurcated into tablets, capsules, injectables, sprays, suspensions, powders, and other formulations.
The tablets segment dominates the global market and is projected to exhibit a CAGR of 9.8% over the forecast period. Tablets dominated the pharmaceutical manufacturing market in 2022. This is due to the wide acceptance of these formulations by both patients and physicians, ease of manufacturing, and continuous advancements in pharmaceutical sciences that have led to the creation of tablets with the desired characteristics. Tablets are available in a wide variety of colors, shapes, and sizes, which makes it easier for patients to easily distinguish one product from another. Some of the tablets are scored, which makes them convenient to be broken into uniform pieces as per the need. There are three types of tablet coating—enteric, film, and sugar coatings. Film coating improves the appearance of the tablets and protects the API from moisture or other degradative agents present in the microenvironment. Sugar coatings improve the aesthetic appeal and palatability of the tablets. These coatings also alter the size, shape, and weight of the original compounds. On the other hand, the enteric coating protects drugs from exposure to the lower pH of the gastric medium and changes the absorption pharmacokinetics of the drugs.
Based on the route of administration, the global market is bifurcated into oral, topical, parenteral, inhalation, and other routes of administration.
The oral segment dominates the global market and is projected to exhibit a CAGR of 11.2% over the forecast period. Orally administered drugs dominated the market revenue share in 2022 because it is the most convenient, safe, and affordable approach. Various drugs, such as tablets, liquids, chewable tablets, elixirs, effervescent powders, and capsules, can be administered orally. The orally administered drugs are mostly ingested and occasionally absorbed in the stomach and small intestine. A small percentage of these medicines is also enteric coated to withstand the stomach's digestive juices and disintegrate in the small intestine. Moreover, the top-selling drugs and most prescription medicines are available in solid oral doses, which results in a larger share of this segment.
Based on the therapy area, the global market is bifurcated into cardiovascular diseases, pain, cancer, respiratory diseases, and other diseases.
The cardiovascular diseases segment dominates the global market and is projected to exhibit a CAGR of 10.8% over the forecast period. The top branded drugs that account for the major revenue share of the cardiovascular diseases segment are Eliquis by Bristol-Myers Squibb, Xarelto by Bayer and Johnson and Johnson, Entresto of Novartis AG, and Uptravi and Opsumit by Johnson and Johnson. Moreover, continuous product approvals and huge pipeline drugs for cardiovascular diseases are expected to drive the segment. Although the cardiovascular disease segment is comparatively mature and heavily genericized compared to other medical conditions, this segment is replete with unmet needs because most cardiovascular disorders are incurable. This creates a huge opportunity for drug manufacturers to tap into this potentially lucrative segment with novel and ideal disease-modifying therapies.
Based on the prescription, the global market is bifurcated into prescription medicines and over-the-counter (OTC) medicines.
The prescription medicines segment dominates the global market and is projected to exhibit a CAGR of 11.2% over the forecast period. The continuous growth in global prescription drug expenditure is one of the major elements attributed to the market's largest share of prescription medicines. Several research studies have estimated that overall prescription drug spending was expected to increase by around 4%-6% in 2019 in the U.S. Similarly, estimates from Vizient's Pharmacy Program reported that hospital prescription drug spending is likely to rise by nearly 4.57% in 2020. The following figure illustrates the total prescription drug expenditure in the U.S. from 2009 to 2019.
Based on the age type, the global market is bifurcated into children and adolescents, adults, and geriatric.
The children and adolescents segment dominates the global market and is projected to exhibit a CAGR of 12.2% over the forecast period. Most prescribed drugs for children are not tested on children before their launch. Before a pediatric program was initiated by the FDA, approximately 20% of drugs approved by the FDA were labeled for use in children. By necessity, healthcare professionals have routinely provided “off-label” drugs to children, which means the drug has not been approved for pediatric use based on the demonstration of efficacy and safety in adequate and well-controlled clinical trials. With recent legislative and regulatory changes, there has been a voluntary and mandatory mechanism to perform clinical studies in children, leading to an exponential increase in pediatric drug trials.
Based on the sales channel, the global market is bifurcated into retail and non-retail.
The retail segment dominates the global market and is projected to exhibit a CAGR of 11.5% over the forecast period. In 2022, the retail sector dominated the market because of the continuous rise in medical costs and health insurance, which have shifted individuals’ preferences toward self-medication for treating minor health issues. In 2017, more than 42 million individuals were enrolled in Medicare Part D plans in the U.S. Moreover, in 2017, individuals aged 50-64 filled around 27.6 prescriptions per person in the U.S. Addressing the needs of this large population is one of the major trends of retail pharmacies. Furthermore, OTC medicines have gained popularity as an easy and cost-effective option, which boosts the uptake of these pharmaceutical products directly from retail stores.
