Top 20 big pharmas represent majority of world pharma market

In last week’s column, we explored the world pharmaceutical market, the leading therapeutic classes of drugs and the drug blockbusters, super blockbusters and mega blockbusters.

Though the number of drug blockbusters is on the rise as key Big Pharma companies increasingly globalize their product launches with massive sales forces and globalized pharmaceutical advertising, this situation is still limited mostly to Big Pharma and a few select other companies.

The reality is that there are only about 30 Big Pharma companies around the world. My definition of Big Pharma starts with four key conditions:

1. Sales: more than $2 billion a year

2. International operations: companies that operate at a minimum with a significant presence in the Big 3 major markets (U.S., Europe and Japan) 3. Therapeutic classes: have R&D and marketing efforts going in at least five different therapeutic areas

4. FIPCO model: fully integrated pharmaceutical operations including internal R&D, manufacturing, clinical, regulatory, marketing and sales

As there are literally thousands of pharmaceutical companies around the world (this doesn’t even include the almost 5,000 biotech companies around the world – 1,500 of which are in the U.S.), this would indicate that all the rest make up three broad categories:

1. Generic pharmaceutical companies that do no R&D but just create copies of already marketed drugs having lost market exclusivity using price as the main marketing tactic

2. Biotech companies that heavily invest in R&D but usually don’t have commercialization capability

3. Specialty Pharma companies that usually operate in one major geographic region, are involved in two or three therapeutic areas at most and focus mostly on sales and marketing, outsourcing the other key functions

There is a fourth category that would include regional pharmaceutical companies. While this may look like smaller versions of Big Pharma, these companies typically only operate in their geographic backyard and may be very strong in their home court region. Still, they have little if any presence outside of that region.

Let’s again start with the world pharmaceutical market but this time with a bit more information than we provided last time:



Now let’s take a look at the leading Big Pharma companies in the world:



Wow! The top 20 Big Pharma companies represent almost 60 percent of the world pharma market. No wonder they’re called Big Pharma.

Having said this, the pharma market is still quite fragmented as compared to cars, computers or aircraft manufacturers. Nine of the 20 companies are American companies (two of which are in the Midwest), eight companies are European and three are Japanese (of the three Japanese companies, two of the three have a U.S. HQ in the Midwest).

A key reason why these companies are where they are is the amount of money they spend on R&D. Let’s take a look at the amount of the R&D spend for the leading companies:



The amount of R&D these companies spend is staggering!

Their R&D spend is higher than the sales of most pharmaceutical companies (including that of the second-tier companies). R&D as a percent of sales is among the highest of any industry. The question of why drugs cost so much is often asked. The answer is often related to the amount of money needed to develop a drug and bring it to the market. This is now surpassing $1 billion per drug.

Not evident here is that at least a third of R&D money is spent on the development of in-licensed drugs that come from either biotech companies or foreign companies. Next week, we will try to look in greater detail at the differences between Big Pharma and Specialty Pharma.

See you next week!