A Close Look at US Pharmaceuticals

The latest report on trends in the pharmaceuticals industry came out on January 16th, and we’re diving into the US section of the report.

Our US Pharmaceuticals expert Patrick Scardina looked into the US Pharmaceutical trends. He found that overall, in 2024, the global production and sales in the pharmaceuticals industry are expected to increase by 4.6% and 5.1%, driven mainly by the Asia Pacific region. Companies making specialty products like medicines for chronic conditions and generic drugs will find growth opportunities with aging populations.

Now, let’s look specifically at the US. Overall, things are looking good. The credit risk in the sector is low, and businesses are performing well. The US has strong liquidity, an aging population, and new products that present opportunities. Branded pharmaceuticals are doing well, leading to solid cash flow and credit profiles. Many pharmaceutical companies seem financially strong or have enough money sources.

The demand for pharmaceuticals will keep growing, thanks to the aging population. Baby Boomers, now aged 59-77, will rely more on pharmaceuticals as they age. There’s also an increased demand for weight-loss drugs benefiting major US pharmaceutical producers.

The Biden government aims to strengthen supply chains, bring back production, and reduce reliance on imports of active pharmaceutical ingredients (API). While this could lead to more growth, bringing back pharmaceutical production is not easy. Regulatory issues and the cost advantages of keeping large-scale API factories overseas are slowing down the push for change.

Despite good credit conditions, continued demand, and new opportunities, there are also some potential issues to keep an eye on. There’s a slowdown expected in US pharmaceutical sales due to drug pricing regulations and liability litigation affecting the industry. Sales increased by 7% in 2023, but this year, a slower growth of 1.4% is predicted as the economy weakens. Consumer spending on discretionary drugs, like over-the-counter medicines, will slow down due to tighter finances, a weaker job market, and stricter lending conditions. Brady McKinney, Atradius Risk Underwriter commented further saying “healthcare bankruptcies hit a 5 year high in 2023 but moderated towards Q4 of 2023.  The expectation is that bankruptcies in the healthcare sector will continue at a similar level in 2024. Moving into 2024, mergers and acquisitions will continue in the pharmaceutical and healthcare sectors  as financing markets recover, competition heats up and drug pricing regulation takes shape.”

Labor shortages and government pressures to lower drug costs for consumers are impacting the sector. The Inflation Reduction Act allows Medicare to negotiate prices with pharma producers, with ten medicines already selected for price cuts and 50 more to follow in the next four years. Some parts of the industry are against this price regulation, fearing it could affect investment and innovation. Some companies have even filed lawsuits to challenge the new regulations. Another issue facing the industry is product liability risk, particularly in cases like recent opioid settlements affecting manufacturers, distributors, and retailers.

Read the full report to learn about what this is looking like in other countries here.