2. An Increasing Demand for Prescription Drugs Drives Profitability
According to Fung Global Retail & Technology, the US prescription drug market totaled $450 billion during 2016, and increased at a CAGR of 7.5% from 2010 to There were 4.5 billion prescriptions filled during 2016, a 12.5% increase from 2010.
QuintilesIMS, a pharmaceutical data company, forecasted prescription drug spending to increase 4–7% through to reach $580 billion to $610 billion, but with likely rebates and discounts, actual spending for should be $375 billion to $405 billion.
QuintilesIMS lowered its growth projections due to fewer new drugs approved during 2016 and more competition. Pharmaceutical companies are also receiving pressure from politicians and insurance companies to limit price increases to single digits.

3. New Drug Therapies in the Pipeline
There were a record number of drug approvals during 2017, and Deloitte expects this trend to continue during 2018, although some companies have concerns about balancing the cost of innovation with treatments patients and insurers can afford.
Although the US Food & Drug Administration (FDA) only approved 22 new medicines during 2016, QuintilesIMS estimates that pharma companies will launch 40–45 new brands per year through 2021.
The three biggest areas of drug development are immune-oncology, which supercharges patients’ immune systems to destroy cancer cells; drugs for Alzheimer’s disease; and medical marijuana, or the modification of cannabis to target certain diseases.

4. Big Pharma
Analysts say 2018 will be a year when smaller companies introducing innovative new drugs will challenge the biggest pharmaceutical companies, causing a pricing war.
Blockbuster drugs with approximately $17 billion in annual sales will lose patent protection during the next 10 years, creating more competition from generics. For example, Teva Pharmaceutical’s newly launched generic Viagra will affect Pfizer.
There has also been an increase in biologic alternatives that compete with existing drugs. During early 2018, Novartis and Gilead received approval for CAR- T drugs, which use the patient’s own immune system cells to seek and destroy cancer cells.

5. Influence of Regulations
One of the main reasons for so much new competition in the market is the US FDA has increased its approval of copycat drugs, which impact both brand and generic drug prices and sales.
Some legislators are investigating drug makers that radically raise prices for life-saving or critical drugs. One such investigation focused on Bayer, Biogen, EMD Sereno, Novaris, Roche, Sanofi and Teva for their $90,000+/year multiple sclerosis drugs.
Although the Centers for Medicare and Medicaid Services could use its clout to lower pricing, it is unlikely it will do so during the Trump administration. Congress is considering changing the law to make it easier for the DEA to fight the opioid epidemic.

6. Disruptions in Distribution
Manufacturers traditionally sell pharmaceutical drugs through pharmacy benefit managers (PBMs), and then through pharmacies to consumers. PBMs negotiate lower prices through rebates with manufacturers on behalf of health plans.
There are three huge PBMs: Express Scripts, OptumRx and CVS Caremark. CVS Caremark bought Aetna, a health insurance firm, during 2017 and UnitedHealthcare owns OptumRx. During 2018, Cigna is in the process of purchasing Express Scripts.
The effective elimination of the PBM lowers health insurance company costs without impacting consumer cost. Another potentially disruptive development in the industry is the rumor of Amazon entering the pharmacy business.