The top three types of drugs based on the number of compounds in development are cancer with 561, infections with 229 and Central Nervous System (CNS) with 224. As of the end of 2007 Medco Health Solutions reported there were 1752 compounds in development. Medco predicts heavy spending in specialty drugs will more than offset the cost savings from generic versions of branded drugs off of patent. CMS estimates the cost increase of pharmaceuticals year over year was 6.7% in 2007 and will increase to a CAGR (Compound Annual Growth Rate) of 8.4% over the next 10 years. Spending for specialty drugs grew at 12.3% in 2007 and is expected to see double digit growth over the next few years. That is some serious growth! Growth in spending on specialty drugs will pose cost management problems for Medicare and employers.

5. Biogenerics

One of the trends that has not gained traction in the United States is biogenerics, also known as follow-on biologics or biosimilars. Biogenerics are, in layman’s terms, generic versions of biotechnology drugs. One major difference between a normal pharmaceutical compound and a biologic compound is that the former can be easily duplicated without complication. Biologic compounds are based on cells and independently developed biotechnology medicines are not identical. In fact, biotechnology companies have had compounds disapproved because they were not manufactured in the same plant. In April 2006 the first biologic was approved in the European Union. The U.S. government is working toward making biogenerics a less costly alternative in the near future. The Congressional Budget Office projects the widespread use of biogeneric drugs would save the U.S. $25 billion from 2009-2018. However, near term regulatory issues remain and the U.S. should not see widespread generic biotech drugs gain a large amount of market share until at least 2010.

These are some of the strongest trends in the healthcare industry over the past few years. Not all of the trends have led to big gains in the leaders in these markets. For example, Mylan Inc is down roughly 20% year to date and Allscripts is down about 38% year to date. In the future I will be breaking down each of the trends to see if a good trend can lead to a great investment.