Pharmaceuticals Industry Risk Report

The pharmaceutical industry plays a vital role in global health by researching, developing and producing medicines that prevent, treat and cure diseases. It is a highly innovative and capital-intensive sector, driven by scientific advancement, strict regulation and rising healthcare demand—especially in aging and expanding populations. While dominated by a few large multinational firms, the industry is also shaped by emerging biotech companies and dynamic R&D partnerships. Key growth areas include oncology, immunology and metabolic disorders, with innovation and access remaining central to long-term sustainability. In terms of consumption, the world’s top five importers of pharmaceutical drugs are the US, Germany, Switzerland, Belgium and China. In terms of production, the US and Europe are and will continue to be the industry leaders by far.  American Big Pharma generated USD453bn of revenues in 2024, which was 1.2x higher than that of European peers and 4.8x higher than that of Asian companies.

Having proved its prowess to the world during the pandemic crisis of 2020-2022, business activity in this industry expanded significantly, with the top 30 pharmaceuticals in the world consolidating revenues of USD900bn in 2022, a peak never seen before, given the record speed at which laboratories managed to create new Covid-19 vaccines and related treatments. With the health crisis behind, revenues in 2023 declined by -5.1% y/y, but then in 2024 they recovered again (+6% y/y) mainly thanks to the explosive success of new weight-loss drugs, strong demand in emerging markets and the launch of several high-value innovative treatments (particularly in oncology). For 2025 we expect revenues to jump again by around +5.5% y/y (USD980bn), with increases of +3% and +5% in the US and Europe, respectively, and of +8.0% y/y in APAC. This improvement should again be supported by new drugs that have been recently launched in the market addressing untreated diseases and the steadily growing population.

In the short-term, the pharmaceutical sector faces three major risks with significant potential impacts globally: First, although there is still no clear announcement on how and when potential higher tariffs could be implemented on the pharmaceutical sector, their impact could be huge, representing a notable threat, particularly for generic drug makers. The healthcare system in the US is also highly vulnerable to this because the US has the highest per capita spending on prescription drugs in the world and it has also become very reliant on imported generics (particularly from India and China). Any tariff increases could reduce supplier willingness to compete in the American market since generics companies compete at very low margins. Second, the administration’s aggressive push to reduce drug prices through an Executive Order mandates cuts between 30% and 80%. Large US and European firms, heavily exposed to US revenues, have responded by committing substantial investments (over USD230bn so far this year) to build new production facilities domestically, aiming to strengthen their negotiating position and comply with potential regulatory demands. Lastly, the industry faces the ongoing risk of patent expirations, with over USD350bn in revenue at risk from generics competition as more than 130 drugs will lose exclusivity by 2030. This threat is more pronounced for US companies, which stand to lose a larger share of sales to generics. With relatively few groundbreaking drug discoveries recently, the inability to replenish market share through innovation could exacerbate revenue declines, putting further pressure on pharmaceutical firms. Together, these factors create a complex and uncertain environment for pharma players in the near term.

For the long-term, the main pillar for the industry to remain relevant is innovation. As of today, there are still hundreds of diseases that cannot be fully prevented or cured, which means there is a lot of room for science exploration and growth potential. M&A is, for instance, an efficient and common way in this industry to generate greater synergies and boost innovation. Therefore, we can expect this strategy to be strongly deployed in the years to come. Oncology will continue to be, without a doubt, the focus of R&D, as it is still the number one source of income for pharmaceuticals. As of today, there are around 16,000 different cancer-related drugs in the pipeline, of which 43% are in the preclinical phase and 18% in the discovery phase. Immunology has the second place with 5,775 drugs in the pipeline, while diabetes is third with 1,400.