Pharma Reform

Most pharmaceutical companies are probably going through an endless series of meetings trying to figure out the potential impact of healthcare reform on their revenue forecasts.  Much of the public press has focused on the industry’s potential windfall and revenue upside from:

• Prescription drug coverage expanded to include an additional 45 million currently uninsured patients.
• Growing, aging population with the potential to treat more chronic diseases over a longer period of time
• Prescription drugs will be seen as cost saving alternatives with the potential to reduce the chances for more costly medical complications and avoid costly hospitalizations
• Cutting the $80 billion over 10 years deal to pay 50% of drug costs for seniors in the “doughnut hole” of Medicare coverage will make those drugs more affordable,  increasing the probability that patients will continue to take their branded medicines and reduce the chance that they might switch to cheaper generics during that time.
• Heightened prospects for establishing programs to enhance adherence and compliance (keep patients taking their medicines as prescribed)

These upsides, however, will come with new market expectations and realities that could have perhaps an even more dramatic downside impact on revenue forecasts.

• A strong preference for generic drugs supported by insurer driven prescribing influence (think compliance through e-prescribing technology) and an intense focus on controlling costs
• An expectation for proprietary brand products to meet “best practice treatment of choice” clinical proof before they are considered therapeutic options to generic drugs
• An expectation for treatment “guarantees”, cost sharing, risk sharing and other, yet to be created, tactics to offset the financial impact of high cost treatments
• Increased pricing transparency will increase market pressure to gravitate to the lowest negotiated price for a therapeutic class
• The potential for government price negotiations.  Private insurance plans will be challenged to do better than they are currently doing in price negotiations.  If they fail, prescription drug prices appear out of control, and  regardless of whether there was a deal struck between the industry and the Obama administration, the government will end up negotiating prices, at least for government sponsored coverage.
• Formularies will leverage their negotiating power and realize the financial feasibility of having no more than 2-3 therapeutic options (e.g., no need for 10 cholesterol lowering agents or anti-hypertensives) on their formulary.
• Formularies will collectively structure to the lowest cost options for drug treatment, reducing the market opportunity for more costly or less preferred branded products in a therapeutic class
• There will be less opportunity to directly influence physician prescribing or patient preference through traditional sales and marketing tactics

So how do your products fit this new world picture?   What do your forecasts look like? In the next post we’ll show you how to pressure test your product portfolio against the evolving new healthcare market.

mike@pharmareform.com