by Emily Fielding
There was a time that the pharma industry in the USA was touted to be “recession-proof”. However in 2010, with the country recovering from The Great Recession and the industry facing 2011’s patent cliff, there could be no denying the healthcare system was in need of major reform. When the Affordable Care Act passed that year, it became clear that the drug industry actually had potential to benefit from the increase in government involvement. Also known as Obamacare, the legislation is set to take effect January 1, 2014. With the deadline now looming close, ilS begins a blog series on the US Market, including coverage on those structures and systems that are stable, and those that are on the verge of major change.
The United States maintains its status as most valuable market in the world – it may now come in at third for population size, but with 12% of US GDP spent on pharmaceuticals and a free drug pricing system, developing BRIC markets are yet to overtake this long time leader. Despite such high expenditure, the US falls behind other developed nations on many health metrics, suggestive of inefficiencies and waste in healthcare spending. With the Baby Boomer generation having reached 65 years old, taking an estimated 77 million people to retirement age, the pressure on the healthcare system is set to reach unprecedented levels.
The USA’s most appealing factor, the free drug pricing environment, continues to drive investment due to the belief that drugs can be priced higher here than anywhere else in the world. However, long drug approval times, negotiated discounts and rebates bring true drug prices down. Furthermore, cost containment measures implemented in 2010 in the lead up to Obamacare implementation are projected to decline pharma sales 2.2% annually until 2015. Despite these immediate negative effects on pharma revenues, with the number of insured Americans set to rise by 32 million people, the market is sure to maintain its appeal. The majority of these newly insured are expected to be the older and less healthy, with pre-existing conditions now being removed as grounds for refusal of coverage. This will bring a significant boost to pharmaceutical sales, more so than would be forecasted for a general population increase.
Safety concerns prevent the FDA from allowing drug re-importation, protecting this market from the cost savings available by utilizing cheap manufacture locations, and even potential competitors closer to home – Canadian drug prices are estimated at 40% cheaper than their southern counterparts. As a result, parallel trade does not exist in the US, and is unlikely to be introduced anytime soon, giving branded pharma companies peace of mind. Despite this, there has been a recorded increase in counterfeit drugs.
The value of the USA Biopharma market will continue to grow, with Obamacare touted increase Pharma sales in 2015-2019. This stems from the rise in insured persons, the closure of the “donut hole” that limited Medicare coverage, and some commercially beneficial aspects of the reform in terms of patent protection. In the coming weeks, we will look closer at this market – including the details of pricing and reimbursement, the public and private payers, and updates in FDA policies.
Sinclair, A et al (2010) Strategic Analysis – US Pharmaceutical Market Overview, Reference number: DMHC2621, Datamonitor
Pallarito, K (2013) Is US Health-Care Reform on Track for 2014?, WebMD, Available from: http://www.webmd.com/health-insurance/20130711/is-us-health-care-reform-on-track-for-2014, Retrieved 01/08/13