The United State’s pharmaceutical market was able to reach double digit growth in the early 2000’s. There has not been much growth since that time, but it may be on its way soon. Over the years there has been a 1-3% annual increase, and even a decline in 2012. However, the pharmaceutical market was bale to grow 11-13% by the end of 2014. The pharmaceutical market in the United States was able to reach between a range of $377-384 billion. In comparison, the global market is predicted to rise 4-7% over the next four years while the United States is projected to rise 5-8%.
As mentioned, the United States’s pharmacy industry is expected to grow at a quicker rate than that of the global pharmacy industry. This could be for a plethora of reasons; firstly would be actions such as CVS Health Corp (NYSE:CVS) paying Target $1.9 billion to buy all of its pharmacy stores. This means that CVS, in June, expanded by 1,600 stores and over 80 medical clinics which boosted CVS past its competitors for the time being. Now CVS will be able to increase the amount of prescriptions filled out in the United Staes, as well as other benefits such as lower drug acquisition costs. Actions such as these will certainly lead to a large increase in the pharmacy industry.
Similarly, months later in October, Walgreens Boots Alliance Inc (NASDAQ:WBA) acquired Rite Aid Corporation (NYSE:RAD) for about $9.4 billion in order to expand its medical distribution. The Rite Aid Corporation (NYSE:RAD) deal was able to combine the second and third largest drugstore chains in the United States. As a result, Walgreens Boots Alliance Inc (NASDAQ:WBA) totaled to approximately 12,800 locations which brought it up past CVS Health Corp (NYSE:CVS) This acquisition will lead to Walgreens’ earnings will be able to save over $1 billion due to cost overlaps. Not only does this expand drugstore locations for Walgreens, but it also manages drug benefits for insurers and employers which is currently dominated by CVS.
The final and most important reason that the United States pharmacy industry will continue to grow is due to political changes. Many presidents have offered drug reforms that pharmacy companies could look forward to in 2016; one specific one that will be observed is Hillary Clinton’s. Clinton’s plan is not exactly like Obamacare but it is similar. Both health laws planned to bring many uninsured Americans to health benefits which was predicted to grow the U.S. pharmaceutical industry’s market value by 33% to $476 billion in 2020.
The only difference will be that there will be price ceilings meaning companies cannot raise prices 5,400% in a day. This might actually be beneficial because the amount of people willing and able to buy the products will be greater. Overall, because of so many acquisitions as well as a political changing coming in the next year or so, this is the perfect time to begin looking at pharmaceutical stocks.