The impact of the Affordable Care Act has been the subject of much discussion in the pharmaceutical industry. The initial enrollment period has been a bit rickety for consumers and insurers but what will be the impact on pharma one or two years from now?
A new report from IMS Institute for Healthcare Informatics emphasizes that it’s still unclear what the long-term impact of Obamacare on the pharma industry will be when it comes to drug spending. But some trends can already be discerned. Drug developers are facing pressure to shift away from drugs that can offer only incremental improvements in favor of drugs that can demonstrate bigger improvements in outcomes. As small molecule drugs expire, generics and biosimilars will become more competitive and account for a greater portion of the market.
The report offers three scenarios for how Obamacare will pan out in 2017– a bit like a pros and cons of Obamacare for pharma. One looks at the best-case scenario for pharma and one looks at the worst.
The best-case scenario assumes Obamacare works as its authors anticipate, with full enrollment of the currently uninsured and rapid movement toward a performance-based payment system. This would see the biggest increase in pharma spending. There would be an increased demand for medicines to manage existing conditions. The value of innovative medicines with a strong clinical profile would also be recognized. Spending in this scenario would range from $420 billion to $460 billion.
In a scenario that would reduce pharma spending, young invincibles would not enroll in the numbers anticipated, the insurance model fails, and employers shift large numbers of employees to private exchanges. There’s also significant decline in healthcare utilization for prevention and treatment of chronic illness. There would also be limited acceptance of medications with a price premium. Drug spending in this scenario is projected at no more than $300 billion to $320 billion.
Among some of the findings of the report
- It sees an increase in spending levels in 2014 after two years of reductions, due to expansion of healthcare access and lower patent expiry levels.
- Impact of health insurance reforms will positively impact growth in 2014; the majority of the impact will be seen in the retail and primary care sectors.
- There will be a shift to more specialized drugs for smaller markets with a bigger focus on rare diseases and unmet needs. Specialty medicines will be the biggest driver of branded drug spend growth and most apparent in developed markets where spending is expected to increase by 30 percent over the next five years to $193 million by 2017.
- By 2017, biologics will account for one in every five drugs. Biosimilars will be a small part of that. Biosimilars are based on traditional drugs but unlike generics they use live biologics or are derived from live biologics using recombinant DNA. Monoclonal antibodies and human insulin biologics will drive growth. The value of the global biologics is projected to grow to $221 billion by 2017.
[Photo from flickr user Bill]