Canada has a robust pharmaceutical industry. Although some challenges like global competition and counterfeit products do exist, an increase in generic medicine and increased government initiatives for partnerships are likely to drive growth in the market.

• Definition / Scope
• Market Overview
• Market Risks
• Top Market Opportunities
• Market Drivers
• Market Restraints
• Industry Challenges
• Technology Trends
• Pricing Trends
• Regulatory Trends
• Other Key Market Trends
• Market Size and Forecast
• Market Outlook
• Technology Roadmap
• Competitive Landscape
• Competitive Factors
• Key Market Players
• Strategic Conclusion
• References
• Appendix

Definition / Scope

All biological and drug candidates, compounds or products that are being researched, tested, developed, manufactured or distributed by the company or any of its subsidiaries are collectively termed as pharmaceutical products. In both conventional and modern medicine, pharmaceutical products which are also known as medicines or drugs, are in fact a primary component.

Pharmaceutical drugs are discovered, developed and manufactured by the pharmaceutical industry. The drugs thus manufactured are used as medications to be administered (or self-administered) to patients to cure them, vaccinate them, or ease a symptom. Dealing with generic or brand medications and medical devices, pharmaceutical companies are subject to a variety of laws and regulations that govern the patenting, testing, safety, efficacy and marketing of drugs .

The pharmaceutical industry is thus a global sector as it is responsible for so many works related to pharmaceutical products which are used and manufactured worldwide and are of fundamental importance .In Canada, the pharmaceutical sector is one of the most pioneering industries. Companies that actively develop and manufacture original medicines and generic pharmaceuticals, as well as over-the-counter drug products, are part of this massive division.

A number of sub-sectors that service different market segments constitute this sector. Brand-name pharmaceutical companies, generic drug firms, biopharmaceutical small and medium-sized enterprises (biopharmaceutical SMEs), and contract service providers (CSPs) are some of those sub-sectors.

Market Overview

Being the 10th largest pharmaceutical market in the world and the second largest in North America, pharmaceutical sales compound annual growth has remained positive at 2.8% in Canada since the year 2011. Also, the Per-capita consumption and expenditure on pharmaceuticals is one of the highest in the world .

The Canadian pharmaceutical industry has a share of 2% of the global market. In 2015, pharmaceutical sales were estimated at $22.1 billion. This rose to about $22.6 billion in 2016 and is estimated to increase to $25 billion in 2021, at a CAGR of 2%.

Patented drugs accounted for 61.8% of the total sales in 2015. The medical device market in Canada was worth $8.7 billion in 2009, which increased to $11 billion in 2016. It is expected to grow at a CAGR of 4.2% from $11.5 billion in 2017 to $13.5 billion in 2021.

The main segments like ophthalmic devices, orthopedic devices, drug delivery devices, in vitro diagnostics and healthcare IT will drive the market growth.

Pharmaceutical exports and imports between Canada and the rest of the world increased by 44% and 32% respectively from the year 2001 to 2017. More than half of Canadian manufacture is exported (primarily to the United States) and a major portion (68%) of the Canadian market is supplied by foreign imports (37% of imports from the U.S. and 40% from the EU).

Market Risks

The primary risks faced by the Canadian pharmaceutical market in today’s time are counterfeit pharmaceutical drugs and competition with companies from other countries. Let us look at both of these risks in brief.

Firstly, forged pharmaceutical drugs pose a real risk to Canadians because they are showing up in brick-and-mortar pharmacies. A study by Fraser Institute estimated that the counterfeit pharmaceutical trade could be worth up to $89 million a year in Canada alone. Globally, it’s valued at approximately $200 billion annually .

Secondly, the risk lies in competition with other countries. By competition, it is in terms of many key factors including cost, talent, and market attractiveness. The competition in market attractiveness is defined by regulatory requirements, market access, IP legislation and pricing controls.

Top Market Opportunities

Some major market opportunities that companies can make successful use of could be a shift towards externalized research and development (R&D) through partnerships, initiation of programs by the government and use and promotion of generic medicines. The country’s pharmaceutical industry is shifting towards externalized R&D via partnerships and collaborations.

Also, the government is setting up programs such as the Business-led Networks of Centres of Excellence (BL-NCEs), Centres of Excellence for Commercialization of Research (CECR) and other innovation initiatives such as the Structural Genomics Consortium.

Since the quality and expertise of Canada’s research clinicians and healthcare sector is internationally recognized, it has attracting partnership investment from companies like Johnson & Johnson and Teva in recent years. This can again be taken as a good market opportunity.

Finally, the government has recently taken initiatives to promote generic medicine, and with increasing quality perception among patients, the market is expected to see a continuous growth. In 2016, the value of the generic pharmaceutical market was $6.2 billion, with generic drugs accounting for around 70% of prescriptions in Canada, compared with 89% in the U.S.

Even though generic drug sales account for only 22.4% of the overall pharmaceutical market, this is expected to grow as awareness about the quality of generic medicines is increasing. The use of generic medicines saved nearly $20 billion for the government in 2016

Market Drivers

The major market drivers of the Canadian pharmaceutical industry are increased investments in academic-industrial translational activities, clinical trials, a shift towards externalized research and development and establishments of partnerships by the government. Firstly, increased investments from global pharmaceutical and biotechnology companies towards academic industrial translational activities have played a major role in driving growth in the country.

In addition, further growth is driven by clinical trials being carried out by pharmaceutical companies and an increase in elderly population. Canada’s strong research and development (R&D) environment is now shifting towards externalized R&D, wherein the government is establishing partnerships and collaborations through programmes such as the Business-led Networks of Centres of Excellence (BL-NCEs), Centres of Excellence for Commercialization of Research (CECR), and the Structural Genomics Consortium.

With many provinces and territories implementing incentives to strengthen generic drug utilization rates, the Brand Name Pharmaceutical Manufacturing industry has dealt with generating sales volumes over the past five years. Rising discrepancy between generic and brand-name drugs has led many public and private payers to aim towards bolstering generic drug use, intensifying competition for the industry

Market Restraints

Manufacturers may face several restraints to capitalize on this market’s potential, for a number of reasons. Some of them are strict enquiry, Canada’s complex healthcare system, differences in the country’s provinces and payers and treatment of the Canadian market as simply an extension of the United States by some manufacturers are some of such restraints.

First of all, scrutiny regarding drug pricing and questions about drug value continue to come from a host of different stakeholders. Also, Canada’s complex healthcare system, and differences between each of the country’s provinces and payers has been acting as a hurdle in achieving optimal market access.

At the same time, since smaller emerging economies are now expected to have greater potential for growth than Canada in the coming years, some manufacturers may overlook the Canadian market or simply treat it as an extension of the United States

Industry Challenges

Some industrial challenges faced by the Canadian pharmaceutical market are contributing to the slowdown in Canadian market growth since the second half of the past decade. They are record levels of loss of exclusivity for major brand products, a lack of new blockbuster products, sluggish uptake of new products, a slowdown in new product approvals and longer processing time to access public formularies.

Although such challenges like poor market growth and pressures from global competition have been faced by the industry, there still remains a very viable industry which if aided by stronger industrial sector support can flourish and successfully compete in this new and much more globally competitive business environment.

Technology Trends

Interacting with consumers directly has been a long used strategy by pharma companies, which has led to some limitations in experiences with consumer-facing business models. Thus, the industry’s traditional means of engagement will no longer be sufficient, and with the aim of reaching a wide swath of consumers, they will have to become much more proactive and go beyond verbal interactions.

Some pharma companies have started to explore fresh ways to demonstrate the clinical and economic value of their products and solutions. These companies have begun to adopt new technologies for data analytics that can manage and assess the results of personalized medicine delivery and determine the direction of product development.

The companies are designing systems that let them communicate more effectively with patients and monitor outcomes. They also aim to re-examine the way they look at the value of their products and their pricing and distribution structures.

Pricing Trends

In recent years, drug spending has accounted for an increasingly large proportion of expenditures in the Canadian health care system. These expenditures are growing faster than any other component of health care. Expenditures on drugs have beaten spending on physician fee to become the second largest cost in the health care system, after hospitals .

In 2017, the increase in patented medicine prices was, on average, less than the rate of inflation, as measured by the Consumer Price Index (CPI), and therefore, did not contribute to sales growth.

Figure provides the average ratio of the 2017 price to introductory price (the price at which the medicine was sold in its first year on the Canadian market). The results in Figure 2 imply no consistent tendency for prices to either rise or fall after introduction, with the 2017 price of a typical patented drug product being within a few percentage points of its introductory price, regardless of when it was introduced to the Canadian market.

Regulatory Trends

Regulations exist in the pricing and reimbursement of innovative pharmaceuticals in Canada. The regulations in these two areas in the Canadian pharmaceutical industry are done at three levels: by the federal Patented Medicine Prices Review Board, by the 17 federal, provincial and territorial public drug plans and by the Common Drug Review. This system means that in order to set the price of a new drug by a certain manufacturer, it must obtain the approval of 19 different bodies.

The country’s pharmaceutical industry is shifting towards externalized R&D via partnerships and collaborations, with the government setting up programs such as the Business-led Networks of Centres of Excellence (BL-NCEs), Centres of Excellence for Commercialization of Research (CECR) and other innovation initiatives such as the Structural Genomics Consortium.

Innovation is vital to advancing health care. The provisions of Canada’s Patent Act are intended to nurture an investment climate favorable to pharmaceutical research and development (R&D) in Canada. However, the percentage of R&D-to-sales by pharmaceutical patentees in Canada has been falling since the late 1990’s and has been under the agreed-upon target of 10% since 2003. In 2017, it was at 4.1% for all patentees and 4.6% for members of Innovative Medicines Canada .

Other Key Market Trends

Canada’s pharmaceutical industry is strong, being one of the leading locations for clinical trials. In recent years, global companies and biotechnology firms have increased their investments in academic-industrial translational activities in Canada, and major pharmaceutical companies conduct a significant portion of their clinical trials there.

This strong R&D and clinical trial environment has been driving the growth of the market, along with Canada’s increasing elderly population.

In 2017, the manufacturing portion of the sector employed an average of approximately 30,000 people and over the last 5 years, employment grew by 10.7%.

Market Size and Forecast

The Annual Report of PMPRB, shows that the total pharmaceutical sales (including non-patented over the counter medicines) in Canada have doubled to $25.5 billion, of which 88.4% were sold to retail drug stores and 11.6% to hospitals. Out of the total, Governments account for 42.7% of drug expenditures and private spenders account for the remaining 57.3% (private coverage and individuals).

In 2017, the Annual domestic pharmaceutical manufacturing production has reached the value of $9.6 billion with a compound annual growth rate of 0.66% since 2008. The Cross-border internet pharmacy sales between Canada and the U.S from 2015 to 2016 have reached $111.6 million, or 1.3% of total pharmaceutical products exports to the United States falling by 2.7%. Although it grew rapidly from 2000 to 2003.

Since 2011, the annual growth of pharmaceutical sales compound has stayed optimistic at 2.8%. In 2016 sales of patented medicines increased by 7.6% and the sales reached $15.6 billion which increased to $16.8 billion by 2017. Similarly, in the year 2009 the medical device market in Canada was worth $8.7 billion, it accreted to $11 billion in 2016 and is expected to grow at a CAGR of 4.2% from $11.5 billion in 2017 to $13.5 billion in 2021.

Market Outlook

Canada observed a steady growth on expenditure in healthcare and medicines in 2017. It reflects sturdy potential for development of new medicines, infrastructure and expansion towards new entries and opportunities. In both Pharmaceutical sales and consumption, there has been an upsurge resulting in a strong outlook to 2025 driven by strong pharmaceutical market fundamentals .

The value of the generic pharmaceutical market was $6.2 billion in 2016, where generic drugs accounted for around 70% of prescriptions in Canada compared with 89% in the US. Nonetheless, it only accounts for 22.4%, of the total pharmaceutical market but its use saved nearly $20 billion for the government in the same year.

The government promotes generics usage and quality perception among patients have also improved, Based on these indications, the Global Data believes the market to grow. The market segments like orthopaedic, ophthalmic and drug delivery devices, in vitro diagnostics and healthcare IT is said to drive market growth.

With a represented annual growth of 3%, sales of generics which account for 24% of the total market and 67% of prescription volume are expected to grow from $4.3 billion in 2015 to $5 billion by 2020.

Technology Roadmap

The two major shifts, downward pressure on pricing and the move towards prevention, early diagnosis and real cures prevails in the pharmaceutical arena and these changes are distressing the established order by opening the door to new competition, and compelling companies to rethink their playground or ‘playing fields’ and the key players and it requires a growing emphasis on collaboration and partnership.

Several pharmaceutical companies are apparently beginning to recognize the impact of these major shifts. Among others, the three new ‘playing fields’ are emerging in response to disruption: pharma tech, genetics and immunotherapy .

• Pharma tech

Several pharmaceutical firms and, indeed, medical device companies are affiliating and incorporating with technology businesses. They have been developing numerous ‘apps’ to track various conditions, connect with healthcare providers, assist professionals in their preventive efforts and inform patients on the same.

• Genetics

In recent years, The Genetics has accelerated with solid pace, with gene editing stimulating a new wave of potential applications in aiding both prevention (via early detection) and real cures. Biotech players are the leading genomics firms. They are acting either independently or through collaboration.

• Immunotherapy

Boosted by Technology, Immunotherapy is set to be a more established field of play. Various companies are centring on developing immunotherapies to treat and, ultimately, to prevent diseases. They are also acting either independently or in collaboration with big pharma players.

Competitive Landscape

The national industry of Canada is made up of about 140 companies; over 50 are research based, with the largest multinational companies accounting for an estimated 60% of total making a major manufacturing base for pharmaceutical company’s sales .

Canada has some of the premier prices for generics in the world. The government promotes generics usage and quality perception among patients has also improved resulting in an anticipated growth. Similarly, the bolstered growth in this sector is also ensured by the Patent expirations and improved regulatory pathways for biosimilars. This account for 60% of the total Market.

Competitive Factors

“Patient first” has become a burning demand in the pharma industry. However, not all companies can live up to that plead. On the whole, the most successful firms are deviating away from a traditional, top-down model of product promotion.

They are moving toward a flexible and interactive approach that offers patients better tools and more focused information about their drugs. The insights about the drugs they are taking and the ways to manage their conditions as provided by the drug-makers, helps patients reduce potentially hazardous errors related to its consumption and minimize the time to be spent handling their disease and navigating the healthcare system.

Moreover, because of the recent advances in digital and medical technology, pharma companies and healthcare providers can seamlessly obtain patient data, with little inconvenience for patients and, in real time.

This is made possible with the newly approved equipment like, vital signs tracking devices, miniature implants, remote monitoring biosensors, and non-invasive diagnostics which can be combined and arranged with online portals and mobile apps to promote better and prompt communication.

This has been fostered by several pharma manufacturers with the development of smartphone apps to connect with patients, review them about their pain levels and other symptoms on daily basis, and prompt them of their prescribed medication schedules.

Likewise, in some cases, the pharma company connects patients with healthcare providers when necessary with the help of their continual survey results and. Apart from that, such apps can also be used to track the headway of a disease or its recovery and aid healthcare companies better understand the patients need.

Key Market Players

Johnson & Johnson with the sales of USD 2.93 billion leads the way and is tailed by Novartis with USD 1.24 billion and TEVA with USD 1.19 billion .

• Johnson & Johnson: Johnson & Johnson has remained a household name for quite a time now and with a massive market capital of $300 billion, stays at the top on this list and in its industry based on consumer healthcare revenue with revenue of $71.89 billion. Tylenol, Aveeno, and Bandaid are some of the popular American products of this company. The company had a profited first quarter in 2018 as the sales increased 12.6 % to $20 billion compared to the same quarter in 2017.
• Novartis: Novartis is one of the largest pharmaceutical companies by both market capitalization and sales. This company similar to Roche Holdings is based in Basel, Switzerland. Novartis’ first quarter financial results revealed a four % increase in net sales. This was mainly from sales of Cosentyx, Entresto, and its oncology area with Promacta/Revolade, Tafinlar and more. Apart from that, the company also focuses in cardio-metabolic, cancer, immunology, neuroscience, and dermatology, among others.
• Teva Canada: Teva Canada is a branded, innovative specialty medicines company which is guided by a desire to enable people to have greater control over their health. They have been a part of Canadian healthcare since 1965 and have been delivering services with a firm belief that all Canadians deserve access to affordable and innovative medications. Today, there are over 1,500 Canadian employees and they invest in creating generic and brand-name medications in this country. They develop, manufacture and distribute generic pharmaceuticals, from diabetic agents to antibiotics and from heart medications to cancer treatments.
• Pfizer: Pfizer has a significant impact on drug discovery and development. Its work ranges in health products and treatments from therapeutics to technologies. Pfizer is considered to be the brains behind Advil, Emergen-C, and Robax. Although the company had only 1% growth of $127 million in revenue from first quarter of 2017 to that of 2018 its drug ‘Trumenba’ did receive a designation of breakthrough therapy in the quarter.
• Roche Holdings: Roche Holdings has been pioneering global pharmaceuticals and creating products in rheumatology, metabolism, oncology, and virology among others. The Swiss Roche Holdings pharmaceutical division sales grew 7% in the first quarter of 2018, to $10.67 billion. Apart from that, the company had two drug approvals; Ocrevus for forms of MS and Hemlibra for hemophilia A in the first quarter.
• AbbVie: AbbVie is a global company which originated as a spin-off of Abbott Laboratories. It has been developing and commercializing advanced therapies and oncology treatments. In comparison to the first quarter of 2017 to that of 2018, the company’s worldwide sales increased 21.4 % to $7.93 billion. This was predominantly driven by Humira and Imbruvica sales, which increased 20% and 47.2%, respectively.
• Apotex: Apotex is a Canadian pharmaceutical corporation founded by Barry Sherman in 1974. Its sales exceed CAD$1 billion per year making it the largest manufacturer of generic drugs in Canada. Being one of Canada’s largest producers, this company has over 300 products selling in over 115 countries and has over 10,000 employees. Apotex has a annual revenue of about CAD$1.19 billion and it manufactures and distributes generic medications for diseases and health conditions such as infections, blood pressure, diabetes, high cholesterol, glaucoma, and cancer.

Strategic Conclusion

Canadian pharmaceutical industry has a sturdy industry in the present, and holds a promising future. While purchasing prescription drugs, Canadians must be aware of the risks of counterfeit pharmaceutical products. Also, an increased awareness about the quality of medicines and the use of generic medicines is necessary, and fully possible to grow among Canadian consumers.

In order to check the rise of counterfeit drugs, Canadian policymakers could strengthen penalties for offenders and pursue international treaties with other developed countries in order to deal with the counterfeit trade. Increased government initiatives to promote partnership and collaboration are promising and are likely to bolster the industry’s growth.

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Appendix

Acronym

• CAGR: Compound Annual Growth Rate
• US$: US Dollar
• SMEs: Small and medium-sized enterprises
• CSPs: Contract service providers
• CPI: Consumer Price Index