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This report covers: the pharmaceutical industry (UK)

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Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Market Overview

INTRODUCTION

MARKET DEFINITION

INDUSTRY STRUCTURE

MARKET SEGMENTATION

TOTAL MARKET SIZE

KEY TRENDS AND DEVELOPMENTS

BUYING BEHAVIOUR

RESEARCH AND DEVELOPMENT

CONSUMER RESEARCH

DEMOGRAPHICS

COMMON COMPLAINTS

PEST ANALYSIS

GLOBAL PERSPECTIVE

Table 1.1: Number of UK VAT-Based Enterprises Engaged in the Manufacture of Pharmaceutical PreparationsÅ by Turnover Sizeband (£000), 1999

Table 1.2: Key Mergers and Acquisitions of UK-Based Pharmaceutical Companies, 1999/2000

Table 1.3: Number of UK Local Units Engaged in the Manufacture of Pharmaceutical PreparationsÅ by Employee Sizeband, 1999

Table 1.4: Selected Major Pharmaceutical Wholesalers in the UK by Turnover and Pre-Tax Profit (£m), 1998/1999

Table 1.5: The Total UK Market for Pharmaceuticals by Value (£m), 1996-2000

Table 1.6: Total UK Population and percentage of Population Aged Over 75 Years (million and percent), 1961-2021

Table 1.7: Number of Deaths in the UK by Type of Cause (000), 1997

Table 1.8: Penetration for Complaints Suffered in the Previous 12 Months ( percent of all adults), 1999

Table 1.9: World Trade Balance in Pharmaceuticals by Country (£m), 1998

Key Note Consumer Research

INTRODUCTION

COMMON CONCERNS

ACTIONS TAKEN WHEN ILL

Table 2.1: Summary of Respondents` Concerns Regarding Pharmaceutical Products and Related Issues ( percent of respondents agreeing), March 2000

Table 2.2: Which, If Any, of the Following Concern You? How About the Side Effects of Prescribed Drugs? ( percent of respondents agreeing), March 2000

Table 2.3: Which, If Any, of the Following Concern You? How About the High Prices of Over-the-Counter Medicines? ( percent of respondents agreeing), March 2000

Table 2.4: Which, If Any, of the Following Concern You? How About the High Prices of Prescription Charges? ( percent of respondents agreeing), March 2000

Table 2.5: Which, If Any, of the Following Concern You? How About Lack of Information About Drugs? ( percent of respondents agreeing), March 2000

Table 2.6: Which, If Any, of the Following Concern You? How About Delays for Appointments with General Practitioners? ( percent of respondents agreeing), March

2000

Table 2.7: Which, If Any, of the Following Concern You? How About the Side Effects of Natural Medicines? ( percent of respondents agreeing), March 2000

Table 2.8: Which, If Any, of the Following, Concern You? How About the Side Effects of Natural Therapies? ( percent of respondents agreeing), March 2000

Table 2.9: Summary of Actions Taken by Respondents When Ill ( percent of respondents agreeing), March 2000

Table 2.10: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Treating Minor Illnesses Yourself? ( percent of respondents agreeing),

March 2000

Table 2.11: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Making Your Lifestyle Healthier? ( percent of respondents agreeing),

March 2000

Table 2.12: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Consulting Your General Practitioner? ( percent of respondents

agreeing), March 2000

Table 2.13: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Buying Well-Known Branded Medicines? ( percent of respondents

agreeing), March 2000

Table 2.14: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Seeking Advice from a Pharmacist? ( percent of respondents agreeing),

March 2000

Table 2.15: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Seeking Advice Directly from Family and Friends? ( percent of

respondents agreeing), March 2000

Table 2.16: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Using Natural Remedies? ( percent of respondents agreeing), March 2000

Table 2.17: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Seeking Advice Directly from the National Health Service? ( percent

of respondents agreeing), March 2000

Table 2.18: Which, If Any, of the Following Do You Usually Do When You Are Ill? How About Using Natural Therapies? ( percent of respondents agreeing), March

2000

Competitor Analysis

RESEARCH AND DEVELOPMENT IN THE PHARMACEUTICAL INDUSTRY

PHARMACEUTICAL COMPANY STRATEGIES

MAJOR PLAYERS

Table 3.1: Research and Development Expenditure of the UK Pharmaceutical Industry by the Top Ten Ranked Companies (£m), 1995-1998

Table 3.2: Alliance UniChem PLCÅ Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st December 1996-1998

Table 3.3: AstraZeneca PLCÅ Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st December 1996-1998

Table 3.4: The Boots Company PLC and Boots the Chemists Ltd Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st March 1997-1999

Table 3.5: British Biotech PLC Financial Results by Turnover and Pre-Tax Profit (£000), Year Ending 30th April 1997-1999

Table 3.6: Glaxo Wellcome PLC Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st December 1997-1999

Table 3.7: Roche Products Ltd Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st December 1996-1998

Table 3.8: SmithKline Beecham PLC Financial Results by Turnover and Pre-Tax Profit (£m), Year Ending 31st December 1997-1999

Prescription-Only Medicines

INTRODUCTION

KEY TRENDS

MARKET SIZE

MARKET STRUCTURE

MAJOR PLAYERS

BUYING BEHAVIOUR

FORECASTS 2001 TO 2005

Table 4.1: The UK Market for Prescription-Only Medicines by Value (£m), 1996-2000

Table 4.2: The Number of Registered Retail Pharmacies in the UK, 1993-1997

Table 4.3: Selected Major UK Manufacturers of Prescription Pharmaceuticals by Turnover and Pre-Tax Profit (£m), 1998/1999

Table 4.4: Forecast UK Market for Prescription-Only Medicines by Value (£m), 2001-2005

Over-the-Counter Medicines

INTRODUCTION

KEY TRENDS

MARKET SIZE

MARKET STRUCTURE

MAJOR PLAYERS

BUYING BEHAVIOUR

FORECASTS 2001 TO 2005

Table 5.1: The UK Market for Over-the-Counter Medicines by Value (£m), 1996-2000

Table 5.2: Growth in UK Retail Chemists` Sales of Over-the-Counter Pharmaceuticals by Major Therapeutic Category ( percent change), January 1998-January 1999

Table 5.3: Major Retail Pharmacy, Drugstore and Grocery Chains by Number of In-Store Pharmacies, 1998/1999

Table 5.4: Major Pharmaceutical Over-the-Counter Companies by Leading Brands, 1999

Table 5.5: Main Media Advertising Expenditure on Major Over-the-Counter Pharmaceutical Brands by Therapeutic Group (£000), Year to December 1998 and 1999

Table 5.6: Penetration for Frequency of Use of Headache Remedies and Analgesics by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.7: Penetration for Frequency of Use of Cold and Influenza Remedies by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.8: Penetration for Frequency of Use of Hay Fever Remedies by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.9: Penetration for Frequency of Use of Cough Mixtures by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.10: Penetration for Frequency of Use of Indigestion and Stomach Remedies by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.11: Penetration for Frequency of Use of Throat Lozenges and Pastilles by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.12: Penetration for Frequency of Use of Laxatives and Salts by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.13: Penetration for Frequency of Use of Rubs and Rheumatism Remedies by Sex, Age, Social Grade and Region ( percent of adults), 1999

Table 5.14: Forecast UK Market for Over-the-Counter Medicines by Value (£m), 2001-2005

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

The Future

FUTURE TRENDS

FORECASTS 2001 TO 2005

Table 7.1: Forecast Total UK Pharmaceutical Market by Value (£m), 2001-2005

Table 7.2: Forecast UK Market for Prescription-Only Medicines by Value (£m), 2001-2005

Table 7.3: Forecast UK Market for Over-the-Counter Medicines by Value (£m), 2001-2005

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

BONNIER INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

The UK pharmaceutical market is a successful, research-driven,
high-technology industry. The UK market is dynamic and increasingly competitive and, with a trade surplus of £2.44bn in 1998, it ranks third after Germany and Switzerland in the global pharmaceutical industry rankings in terms of trade balance. According to the Association of the British Pharmaceutical Industry (ABPI), the industry employs around 75,000 people, of whom over 25 percent are graduates.
Research and development (R&D) is extremely important to the pharmaceutical market. It takes many years and hundreds of millions of pounds to develop and launch a new drug, with the ever-present threat of failure. At the same time, product lifecycles are shortening because of increasing competition within the different therapeutic categories. In 1998, in the UK, pharmaceutical R&D expenditure was £3.54bn, almost a third of total UK expenditure on R&D. The ABPI claims that the UK pharmaceutical industry invests more than 20 percent of its total turnover in R&D and is responsible for over 70 percent of pharmaceutical research within the UK.
The increasing costs of drug R&D, coupled with increasing cost rationalisations and control in healthcare systems throughout the world, has fuelled the huge amount of acquisition and merger activity within the industry, which has now reached another stage. The agreement to merge in January 2000 of the UK industry leader Glaxo Wellcome with SmithKline Beecham, to form Glaxo SmithKline in a $76bn mega-merger, will have an enormous impact on the UK market, not least on industry employment as the company rationalises operations. Almost all the other major pharmaceutical companies operating in the UK have undergone or are in the process of undergoing mergers and acquisitions, including AstraZeneca, Pfizer and Warner Lambert, Shire and Roberts, and Celltech with Chiroscience and Medeva.
The market is divided into two sectors: prescription-only medicines (POMs) and over-the-counter (OTC) medicines. POMs are obtained only with a prescription from a qualified medical professional and dispensed only by a registered pharmacist in a licensed pharmacy outlet. Promotion of prescribed pharmaceuticals is extremely limited, being confined to advertising in professional journals. The vast majority of prescribed pharmaceuticals in the UK are prescribed through the National Health Service (NHS).
According to the ABPI, UK expenditure per person on prescription medicines, at around £88 per year, is low in comparison to other major European countries -- only around half that of France or Germany. However, the proportion of expenditure on drugs in the NHS is rising, in spite attempts to contain costs. It rose from 8.7 percent of the total NHS budget in 1980 to 12.7 percent in 1997. The proportion of people exempt from NHS prescription charges has also risen steadily, from 60 percent of all prescriptions in the 1970s to more than 85 percent in 1998.
In recent years, the NHS has been in an almost constant state of financial crisis, which has led to severe budgeting problems. There has been widespread reporting of so-called `rationing` of certain drugs, leading to a `lottery of care` where the availability of treatment can be dependent on the patients` health authority. The Government is committed to standardising and improving care across the UK and in the March 2000 Budget authorised an immediate extra £2bn for the NHS from April 2000, followed by an average 6.1 percent annual real terms growth for the next 4 years.
The UK is reported to be the highest user of cheaper generic drugs in Europe, as well as being the lowest user of new drugs -- with the proportion of generic drug prescribing having risen from 41 percent in 1991 to more than 60 percent in 1997.
In contrast, the market for OTC pharmaceuticals is consumer orientated. Certain products, designated pharmacy-only products, do not require a prescription but can only be sold at a licensed pharmacy under the supervision of a registered pharmacist. Other products, designated general sales list (GSL), can be obtained at a wide variety of retail outlets with no requirement for a pharmacy or pharmacist. Multimedia promotion of GSL products is widely permitted. Main media advertising expenditure for OTC pharmaceuticals (excluding vitamins and supplements and medical goods), rose from £97m in 1998 to £116.8m in 1999, an increase of 20.3 percent.
In recent years, the numbers of drugs being delisted has been increasing. Successive governments are keen to encourage people to buy their own
self-medication on economic grounds, while drug companies are keen to exploit the OTC market to extend the lifecycle of their products and capitalise on the brand recognition and loyalty built up over years of prescription. As the competition in the OTC market increases, it is will become increasingly price sensitive, in spite of industry efforts to retain resale price maintenance (RPM). Price cutting for own-brand products, particularly in supermarkets, is already occurring.
The most commonly used OTC pharmaceutical products are headache remedies and analgesics. According to BMRB International`s 1999 Target Group Index (TGI) survey, 83.9 percent of the adults questioned had used this type of medication in the 12 months prior to the survey, with 15.3 percent of adults classified as heavy users (taking headache remedies or analgesics twice a week or more often). A significant proportion of the adults surveyed (57.9 percent) had used cold or influenza remedies in the last 12 months; 48.9 percent had used throat lozenges or pastilles; and 40.9 percent had used indigestion and stomach remedies.
The total market for pharmaceuticals in the UK was estimated to be worth £9.05bn in the year 2000, with a growth of 8.3 percent from 1999. Of this, the market for POMs constituted 82.3 percent and the OTC market 17.7 percent.
Distribution of pharmaceuticals is highly complex and diffuse, as retail outlets are polarised between the enormous High Street retailers such as Boots the Chemists Ltd and small, community-based pharmacies. Pharmaceuticals are generally distributed via specialist wholesalers such as Alliance UniChem or AAH Pharmaceuticals. With increasing harmonisation of regulations and markets within the EU and the increasing adoption of mutual recognition agreements throughout the world, the global market is opening up. In 1998, pharmaceutical exports to other EU countries rose by 38 percent.
In the UK, parallel importing is on the increase, with 730 new product licence approvals in the first 6 months of 1999, compared to 665 for the whole of 1998.
The UK market for pharmaceuticals is highly regulated under the Medicines Act of 1966 and 1971, which established a working foundation. Under the Act, licensing arrangements extend to the manufacture and wholesaling of all medicines. In the UK, the licensing authority is the Medicines Control Agency (MCA); there is also a European-wide organisation, the EMEA.
Consumer research, commissioned exclusively by Key Note and carried out by The Gallup Organization, indicated that people were concerned over a number of issues involving the pharmaceutical market. A large majority (80 percent) of adults questioned were concerned over the side effects of prescribed drugs, compared with 55 percent of respondents who expressed concern over the side effects of natural remedies. Around 75 percent of those questioned were concerned about the high prices of prescription charges but an even higher proportion (77 percent) were concerned over the costs of OTC medications. The research also indicated that 91 percent of respondents treated themselves for minor complaints when ill, indicating the popularity of self-medication, while 69 percent agreed that they would consult a general practitioner (GP) if ill. The majority of those questioned (79 percent) were willing to modify their lifestyles for health benefits when ill.
The NHS will continue to be under pressure for the foreseeable future, with the demands of an increasingly ageing population on one hand and the introduction of new therapies on the other. The OTC market will be fuelled by the increasing numbers of drugs (often well known) entering the OTC marketplace. The total market for pharmaceuticals is forecast to grow by 39.2 percent between 2001 and 2005, from £9.72bn to £13.54bn. Of this, the OTC market is predicted to constitute 16.9 percent of the total market in 2005.

Text © 2000 Key Note

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Last updated by Mendoza Spinelli 24th May 2000