The 2019 CPhI Pharma Index Report

Examining this year’s industry performance

The CPhI Pharma Industry rankings report returns for 2019, providing vital insight into the performance of the main pharmaceutical markets across the globe.

The rankings were determined by hundreds of industry experts who, based on their own opinion, scored each market on a number of key performance indicators (KPIs). These KPIs included growth potential, API manufacturing, innovation, competitiveness and finished product.

Significantly, the collation of all these results provided an overall assessment of the industry’s performance in 2019 as a whole, which can be compared to last year’s index, allowing us to see whether pharma has advanced or dropped back in the previous twelve months.

Market growth potential

This year, China (7.66) topped the rankings for market growth potential, which saw it leapfrog past India (7.43) and the USA (6.92) to the number one spot, as well as boasting the largest percentage score increase (12.5%) from the previous year out of all assessed markets.

Increasing standards throughout the complete pharmaceutical supply chain are thought to be the main driving force behind this score, which has seen the market become more highly thought of by overseas players and has subsequently seen China’s domestic companies generate substantial international business.

Equalling the USA in this category is Germany (6.92), firmly establishing itself as Europe’s most pre-eminent market with respect to growth potential. This year’s hosts of CPhI Worldwide also achieved a remarkable 11.4% increase from the previous year, only bettered by the aforementioned Chinese market.

What is interesting is that this score increase seemingly mirrored the UK’s score decrease from the previous year, which the industry experts attributed to the prolonged fate of its European Union exit and they have seemingly predicted that Germany will be the primary beneficiary of this move.

API manufacturing

A quick overview of the rankings for API manufacturing show that the industry’s most developed markets remain ahead of the developing markets, which somewhat implies that product quality is indeed favoured above quantity by our pharma experts.

2019 saw Japan (7.97) rise above Germany (7.85) into the number one spot for API manufacturing, thanks to a small yet significant 2.5% score increase from the previous year. Despite this, Germany, having improved on its 2018 score (by 0.55%), consolidated itself as Europe’s top market in the category, despite notable moves from the likes of Spain (7.16), that experienced the biggest score percentage increase (6.4%) out of all the markets.

Falling just short of Spain with regards to score percentage increase was Korea (6.89), that was subject to a 5.5% rise; this appears to be reflective of our experts’ thoughts on the Korean government’s efforts to encourage the domestic manufacturing of APIs, and subsequently, generic companies locally sourcing said APIs for their production.

Both the USA (7.76) and the UK (7.30) managed to retain their respective positions from 2018, with positive score increases of 3rd and 5th, respectively.

Innovation

Whether new methods and/or technologies are being used for drug discovery, process optimisation, enhancing sustainability or drug packaging and delivery, innovation in abundance will always be a key indicator for any top-performing pharmaceutical market.

The top spot in the Innovation category for 2019 is retained by the USA (8.12), that can also pride itself on the largest score percentage increase, with a 2.45% rise from 2018. The remaining countries that make up the top tier for innovation are Japan (7.51) and Germany (7.43) that, like the USA, retain their respective positions from the previous year.

Similarly to API manufacturing, Korea boasted an impressive score increase from 2018, which saw the country surpass Spain (6.13) and India (6.01) to reach 6th place, with a respectable score of 6.54.

The UK managed to hold on to 4th position from 2018 with a score of 6.91, but this year saw the UK begin to slip down from the top tier markets, due to the country having suffered a score percentage decrease of 1.46%.

Again, this slip in market performance may be a consequence of Brexit, as leaving the European Union may lead to less funding for R&D in all industries, including pharma.

Competitiveness

The industry experts assessed each market’s competitiveness on a variety of factors including the country’s labour costs, quality of skilled labour, research potential and tax environment.

Yet again, the USA (7.04) managed to retain the top position for competitiveness, and that country is only one of four countries to see score percentage increases from the previous year.

Two notable moves in the rankings include Germany (6.47), with a 1.3% score decrease from 2018, slipping from second position to fourth, and China (6.56), rising to third, seemingly thanks to possessing the largest score percentage increase (3.9%) in competitiveness from all assessed markets.

Just as with growth potential, our experts attribute China’s growth in competitiveness to raising industry standards, which is being recognised around the globe, and ultimately generating more business from overseas. The UK again suffered a score decrease in 2019, achieving just 5.25, which is substantially lower than 2018’s score of 5.94.

Finished product manufacturing

Similarly to API manufacturing and Innovativeness, Germany (8.17), USA (8.11) and Japan (7.97) form the top tier for finished product manufacturing. In an unexpected move Italy, the country hosting CPhI Worldwide 2020 in Milan, scored a reputable 7.11, and has witnessed a near 14% increase compared to 2017.

In fact, according to Farmaindustria, Italy has equalled Germany in both total production of finished goods and production per unit. The UK (7.65) was one of the few markets to suffer a score percentage decrease from 2018, as its score dropped by 0.86%.

Korea (6.95) yet again made significant strides forward, boasting the biggest score percentage increase (3.72%) of all assessed markets, and saw that country overtake Spain (6.79), a country that inversely suffered the biggest score percentage decrease (3.10%) from 2018.

Both India (5.86) and China (5.28) remain at the bottom of the table in 9th and 10th place, respectively, as both countries experienced score decreases from the previous year. These decreases came as a bit of a surprise, given that both countries managed to top the rankings for market growth potential.

Change in overall scores for each country

Each country received an overall score that was calculated using a mean average of its scores for all assessed key performance indicators, thus giving each indicator equal weighting and importance.

After seeing them form the top tier market for most assessed categories, it comes as no surprise that the USA (7.56), Germany (7.37) and Japan (7.16) top the rankings for overall score, coming in first, second and third place, respectively. Such high scores reflect their dominance in the industry with regards to finished product, competitiveness, innovativeness and API manufacturing.

The UK (6.56) was subject to the largest overall score percentage decrease out of all ten markets, which saw it fall behind France (6.66) in the rankings. Similarly to Germany, it is likely that France is also benefiting from the UK’s lower score, given that it received a healthy 1.63% increase in overall score from last year.

Korea (6.50) clearly demonstrated its pharmaceutical market’s potential in 2019, as it was the only country to score increases in all five assessed categories, collating to give Korea an overall score increase of 2.6% compared to 2018.

But it is China that gained the largest overall score increase from the previous year, as it achieved a huge 4.04% rise, seeing its score jump from 6.03 to 6.27, thanks to remarkable score increases in growth potential and competitiveness.

How far has the industry come in 2019?

Following the assessment of each market’s overall score, it can be seen that the global pharmaceutical industry has experienced a 2.48% increase, which is indicative of its growing confidence. Looking at the bigger picture, according to the CPhI Pharma Index, the industry is witnessing a substantial annual growth of around 5.4%, signifying the current stability and potential of pharma heading into 2020.

CPhI Worldwide 2019. which this year returned to Frankfurt, Germany to celebrate its 30th edition, played host to a record-breaking 48,000+ attendees, including over 2,500 exhibitors from around the world.