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Trends favor long-term growth.

NEW YORK -- Despite near-term uncertainties regarding pricing and patent expirations, the pharmaceuticals industry remains one of the healthiest and widest-margin industries in the United States.

Prospects for the longer term are enhanced by demographic growth in the elderly segment of the population, who account for about one-third of total pharmaceutical sales, and by new therapeutic products that have been spawned by discoveries in both genomics and biotechnology.

Merger cost economies and synergies should also bolster profits at many companies.

The pharmaceutical industry still has very strong underlying long-term growth fundamentals on its side.

According to an article in Health Affairs titled "Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming to Medicare," the latest health spending projections from the Centers for Medicare and Medicaid Services, which were released in late February 2008, show that total expenditures on prescription drugs in the U.S. rose to $231.3 billion in 2007, a 6.7% increase from those in the preceding year.

That rate of increase is expected to rise very slightly in 2008 and then to move sharply higher from 2009 through 2017.

The widely watched government forecast, which covers spending on drugs from all sources, projects a 6.8% rate of increase this year in overall drug expenditures to $247 billion.

The longer-term spending projections are for gains to average 8.2% annually between 2006 and 2017.

This translates into overall expenditures on drugs rising to $332.9 billion in 2012 and reaching $515.7 billion in 2017.

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Title Annotation:State of the Industry/The Issues
Publication:Chain Drug Review
Article Type:Brief article
Geographic Code:1USA
Date:Apr 28, 2008
Previous Article:Pharmaceutical makers face host of uncertainties: the prospects for generics and specialty drugs are positive.
Next Article:How the future looks for some industry powers.

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