ETF Trends
ETF Trends

Big pharma has been sitting on a cash cow for years, but patents for iconic drugs are nearing expiration. As cheaper generics become mass produced in emerging markets, the pharmaceutical exchange traded funds (ETFs) may mirror the new area of growth for the pharma industry.

Prescription-tracker IMS Health projects that global pharmaceutical sales will increase by 5% to 7% in 2011, or 33% more than in 2010, reports Matthew Herper for Forbes. Sales of generic drugs in emerging markets that are able to afford better health care will make up about half of the $40 billion in growth projected in 2011. [ETFs for a Changing Pharma Landscape.]

Some best-selling drugs will begin to lose their U.S. patent production, which will allow other companies to enter the market. Around 75% of prescriptions in the United States are available in cheaper generic versions, and IMS Health predicts that the number may increase to 80% in three to four years. [The Bulls May Prevail in Pharmaceutical ETFs.]

The industry will begin a shift from generic drugs to innovations in specialty drugs that treat complex and specific diseases, writes Alaric DeArment for Drug Store News. IMS Health expects the United States to remain the largest drug market, expanding 3% to 5%. Japan will grow 5% to 7%, and the five major European markets of the United Kingdom, Germany, Spain, Italy and France will see growth of 1% to 3%. The “pharmerging markets” may see growth of 15% to 17%.

For more information on the pharma industry, visit our pharmaceutical category. According to the ETF Analyzer, there are three primary pharmaceutical ETFs; drop by the analyzer to sort them by performance, assets and more:

  • iShares Dow Jones U.S. Pharmaceuticals (NYSEArca: IHE)
  • PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP)
  • SPDR S&P Pharmaceuticals (NYSEArca: XPH)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.