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The European pharmaceutical industry is one of the leading industries in Europe. Due to the unique nature of the industry, where national governments are the main purchasers
of pharmaceutical products, the industry must maintain a delicate balance between the desire for profits and cost containment measures imposed by those governments. The
rising cost of research and development has increased the cost of innovative drugs and imposed added pressure on their ability to market in the E.U. This is in stark contrast to
the U.S. pharmaceutical industry that does not impose restrictions or cost containment measures on this sector. Mergers, a major factor in both markets, will slow employment
and affect growth in general. The opening up of markets such as Eastern Europe and Latin America should contribute heavily to company growth in the U.S. and in Europe.

According to a soon-to-be-released BUSINESS COMMUNICATIONS CO., INC. study RB-138
European Pharmaceutical Industry, the European pharmaceutical market is expected to account for nearly 40% of global production with sales of about $101.5 million in 2000. Growing at
an AAGR (average annual growth rate) of 8.1% this sector is expected to total $150 million by 2005, the increase due to European Single Market Convergence, which will provide competition

The U.S. pharmaceutical market is expected to grow at an AAGR of 12.3% during the 5-year forecast period. Even though Europe's share of the total market will fall to 35% by 2005, both the U.S. and European markets will benefit by the rising ranks of the elderly, as well as intensified global research and development.

The U.S. market should have stronger consumer spending growth, although in single digits, and exports should rise 10% per year due to the expanding foreign market in developing nations. Europe
should expect to see exports remain steady. This will be tempered however, by the rising cost of research and development and cost containment measures imposed by European Member States.

European drug manufacturers will have three of the top ten drugs in the coming year, with the remaining seven drugs being manufactured by U.S. companies. Two of the drugs will be manufactured by companies owned or operating in the UK, emerging as the strongest competitor within the EU. The Single market has not yet been achieved and market fragmentation hurts competitiveness. Although European policy does not provide as many tax and financial incentives,
such as the R&D tax credit, available in the U.S. eventual harmonization, already underway, should contribute to increased competitiveness. America has established a strong presence in the European pharmaceutical market, through investment as well as research and development. American pharmaceutical manufacturers will play an increased role in the competitiveness of the European
pharmaceutical industry. Individual European governments, as well as the EU level, are closely studying U.S. governmental regulations and incentives, in order to compete in the global pharmaceutical marketplace.

Strengthening the competitiveness of the sector should be a main priority of the EU and European national governments. The danger exists for less wealthy EU countries to become less attractive
investment sites. While the opening of Eastern Europe markets should contribute to competitiveness, ailing healthcare systems and weak intellectual property laws may weaken the EU overall. The increasing number of alliances across nations and continents as well as international agreements for intellectual property and mutual recognition procedures should help strengthen the
EU market, as well as the U.S. market.

($ Millions)
  1999 2005 AAGR % 
Europe 101.5 150.0 8.1
U.S. 150 268.0 12.3
Rest of the World 7.3 8.9 4.0
Total 258.8 426.9 10.5

RB-138 European Pharmaceutical Industry

Published: April 2000

Data and analysis provided courtesy of BUSINESS COMMUNICATIONS COMPANY, INC., 25 Van Zant Street, Norwalk, CT 06855,  Telephone: (203) 853-4266; ext. 309,  Email: publisher@bccresearch.com

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