Healthcare Policy Impact - What the Next Four Years Mean for the Global Pharmaceutical Industry

With the introduction of the Patient Protection and Affordable Care Act and Obama's victory in the 2012 Presidential Elections, Rita Numerof looks at what this will do to the wider healthcare landscape and set a few predictions for the next four years.

After seemingly endless rounds of rhetoric and debate, the 2012 Presidential Electon came to an end in Nov of last year.  Now that the new Congress has been sworn in and we’re ramping up toward the State of the Union next week, the focus has moved from politics to policy.  So what can pharmaceutical manufacturers expect to happen next?

The reality is that for all the hyperbole, the 2012 elections had less impact on what will happen next than several broader trends.  CMS is headed for its own “fiscal cliff.”  Neither the Administration nor public is likely to allow Medicare insolvency, so downward reimbursement pressure is almost certain to continue.  Meanwhile, in the face of declining reimbursement, delivery organizations must rethink their business models to remain viable.  Finally, purchasers at all levels are increasingly focused on transparency in cost and quality, outcomes, and accountability, changing the rules governing market access.  Each of these trends has profound implications for the pharmaceutical industry. 

Downward Pressure on Reimbursement Means Greater Demands for Economic and Clinical Value

The President’s signature healthcare law, the Patient Protection and Affordable Care Act, emerged from the frustration of increasing healthcare costs, inadequate quality, and coverage issues… clearly, inadequate value for each dollar spent.  But the idea of demonstrating value is far from revolutionary for the pharmaceutical industry.  The recent ‘big’ news (and threat) has been comparative effectiveness research (CER) and increasing global pressure to demonstrate economic and clinical value. Whether or not healthcare policy exists in its current form, manufacturers will need to demonstrate value for their products. 

Manufacturers must continue to innovate, as significant unmet medical needs remain.  Patent protection (outside the domain of PPACA) will be key to this, as will more visible engagement with the patient community in the identification of unmet needs and ongoing monitoring of post-market safety and real world evidence (RWE). 

Greater interest in personalized medicine and treatment outside the hospital setting presents both opportunity and threat.  If only 20% of a given population will respond to a drug, this dramatically reduces the potential market of the agent if payers require more specificity in understanding who will benefit.  In the treatment of cancer, for example, insurers will ultimately need to pay for diagnostics to identify which patients will respond to which chemotherapy agents and which ones won’t. 

New Care Models

Downward pressure on reimbursement extends beyond just the pharmaceutical industry, though.  Healthcare delivery organizations also face additional pushback, and as a result, are exploring new care delivery models such as bundled pricing or accountable care organizations.  And as CER makes its way to the delivery sector, providers will find themselves facing new demands for consistency in treatment protocols.  As requirements for predictive care paths emerge alongside downward reimbursement pressure, having branded products “baked in” to these care paths will be essential to future success. 

Downward pressure on reimbursement will accelerate short-term as we see more consolidation in the marketplace and rapid belt-tightening to fund new costs imposed on the industry by PPACA. In this increasingly constrained environment, demonstrating products’ value will be critical. 

Increasing Focus on Transparency and Tighter Regulation

The third major trend impacting the marketplace for pharmaceuticals is growing concern about drug safety.  High profile recalls, some associated with casualty counts, have pushed the global medical products industry toward tighter regulation and increased requirements for evidence to bring products to market… and once in-market, to remain viable.  Drugs continue to be challenged to demonstrate clinical safety… even while they’re being compared to generics and other interventions, including watchful waiting. 

As such, the industry has seen and will continue to see – even without PPACA – a requirement for greater evidence, and thus, fewer me-too products.  The old way of doing things has typically meant pushing products to the market without demonstrating real economic and clinical product value.  But as the market increasingly demands evidence (e.g. consumer exposure, global reference pricing and regulatory harmonization, etc.), pressures for demonstrated value -- including data from real world settings -- will require a shift in companies’ approach.

The Next Four Years

The reality is that the next four years -- and the decades to follow -- will be impacted more directly by the actions of regulatory agencies and payers than by PPACA, despite what both parties may have argued in the run-up to the election in 2012.  Looking forward, the real issue for pharma companies is CMS’ pending insolvency, and the increasing concerns it raises about value in healthcare.

PPACA is just the tip of the iceberg for manufacturers.  The real key to maintaining industry momentum will be focused and continued diligence in collecting data to support strong value arguments.  Manufacturers can ensure product success in this new era by preparing to meet a higher bar for evidence and understand a more complex set of stakeholder agendas than ever before.  At the end of the day, solid products and services that make a meaningful difference in meeting unmet clinical need will always find a market.

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