Atradius Atrium
Get direct access to your policy information, credit limit application tools and insights.
Authors
Industry liquidity and strong demand should support sector through potential global downturn.
The global pharmaceutical industry is healthy, supported by strong equity and liquidity, especially among larger businesses. The essential nature of pharmaceutical products means that they are also often insulated from the effects of economic cycles.
This means that while developments such as the threat of US tariffs may bring a degree of uncertainty to the industry, especially in big export markets such as Ireland, Denmark and Belgium, industry forecasts are mostly predicting growth.
That is not to say growth will be uniform across markets, or even guaranteed. A global economic downturn, along with a reduction in public healthcare spending by governments seeking to reduce fiscal deficits, could cause a slowdown. However, despite these potential constraints, demand for medicines and products to support ageing demographics, along with demand for weight loss medication, could act to balance out any industry downturn on a global scale.
Margins for branded pharmaceuticals remain strong in the US
In our latest Pharmaceuticals Industry Trends report, our industry specialists from the major markets provide their insights and overview. Brad McKinney, Atradius Underwriter in Baltimore, explains that margins for branded products in the USA remain strong.
There are some downside risks. For example many patented drugs are facing increased competition from biosimilars and generics, which could result in some squeezed margins. The US government is also increasingly negotiating prices of pharmaceutical products for its Medicare programmes, which could impact the margins for these specific products.
What’s more, the wider introduction of tariffs has led to a downward revision of the economic outlook for North America. Lower economic growth could result in lower demand for pharmaceuticals products, especially non-prescription medicines as consumers increasingly cut back on spending. Despite these downside risks, however, the industry is still expected to see growth over the next few years.
Asia Pacific enjoys pharma growth predictions
Our Senior Underwriter in Shanghai, Judy Ji, shares robust growth projections in the Asia Pacific region. She points to government interventions in both China and India, designed to support local industry growth, including programmes aimed at attracting foreign investment.
In addition to export market growth, China and India both enjoy strong domestic demand. A growing middle-class, with a greater disposable income, is supporting a growing demand for over-the-counter medication and drugs related to chronic illnesses.
Pharma outlook remains solid in Europe
Our European pharma specialist, Rubén del Río Hernández, Team Leader Large Buyer Unit in Madrid, notes that demand outlook for the region is solid, both in the near and longer term. He acknowledges production competition will come from China and India, but points to the stability that high production standards and secure supply chains are delivering in Europe.
Looking at the global picture, widespread uncertainty is currently causing jitters in the global economy, which in turn could cause a slow-down in pharmaceuticals demand. But, for now at least, the pharmaceuticals industry is enjoying a period of good health.
You can read more detailed industry insights in our latest Industry Trends report.