Australia’s pharmaceuticals market will grow an average 4.7% a year to US$10 billion by 2012, driven by demand for lifestyle diseases and strong government support for generics, says a new report.

While other Asia Pacific countries are focusing on growing their generics manufacturing capabilities, Australia's high entry costs and stringent regulations discourage new players from establishing production in the mass-volume generics market. However, Australia presents lucrative opportunities for the marketing and distribution of new generics, says the report, from Frost & Sullivan.

Heavy R&D activity in biologics and the ability to afford high-cost treatments will also lead to strong growth in the biologics market, the study goes on, noting that while Australia offers drugmakers “huge growth potential,” it is also a saturated market with low unmet needs. “Pharmaceutical companies must focus on producing higher-end complex generics rather than achieving a mass-volume production model in order to thrive,” advises F&S director Simranjit Singh.

Obesity remains one of the primary causes for lifestyle diseases such as diabetes, cardiovascular diseases and hypertension. The annual “report card” on the nation’s health, published last month by the Australian Institute of Health and Welfare (AIHW), showed that in 2007-08, 61% of Australian adults and 25% of children were either overweight or obese, putting Australia’s obesity level “squarely among the worst third of Organisation for Economic Cooperation and development [OECD] countries,” said AIHW director Penny Allbon.

“In 2009, expenditure towards obesity management amounted to almost 18% of the overall reported US$8.7 billion Australian pharmaceutical revenue in 2009,” notes Mr Singh and, as a result of managing obesity and other diseases, the government is cutting back spending and introducing policy reforms to the national Pharmaceutical Benefit Scheme (PBS), which subsidises close to US$6.5 billion on over 80% of drugs.

At December 2009, the PBS covered a total of 874 drug substances, available in 2,168 forms and strengths and marketed as 3,949 brands, says the AIHW report, which is entitled Australia’s Health 2010.

The government is also supporting greater prescribing of generics, and this will increase PBS savings by approximately US$1.73 billion in subsidy rates yearly, the F&S report forecasts.

Australia’s generics market will be worth US$830 million this year and is expected to grow an average 7% a year, presenting “huge opportunities” for manufacturers through tapping into the diabetes, oncology, neurological and cardiovascular disease markets, it adds.

Diabetes is expected to be the fastest-growing market. The AIHW reports that the disease’s prevalence has trebled over the last two decades - over 800,000 Australians are now diagnosed with the disease and type 2 diabetes is projected to become the nation’s leading cause of disease burden by 2023. F&S forecasts that spending on diabetes drug treatments will rise by an average 13.9% per annum; sales will be close to US$950 million by the end of this year, with more room for growth every year, it adds.

F&S also forecasts that the Australian market for cardiovascular disease treatments will be worth some US$3.15 billion this year, rising 2.9% per annum, while treatments for neurological conditions and nervous system complications, worth US$644million in 2010, will grow an annual average of 13.4%. The oncology market – which is strongly supported by the Australia government in research, diagnosis and treatment - will be worth US$1.10 billion in 2010 and grow 8.1% per year.

The AIHW report card shows that hospital admissions in Australia rose by 37% in the 10 years to 2007–08, and health expenditure per person rose by around 45% in real terms. “New and better technologies, high community expectations, the ageing of our population and increases in chronic disease as the population ages are all driving that growth,” said Dr Allbon.

Responding to the AIHW’s findings, Medicines Australia chief executive Brendan Shaw said they present evidence that new medicines are helping keep patients out of hospital, “which is particularly important where hospital costs are under increasing pressure.”