Home > Healthcare Reform, Pharma company reforms > Healthcare Reform Impact on Prescription Drugs

Healthcare Reform Impact on Prescription Drugs

March 22nd, 2010 Leave a comment Go to comments

Healthcare reform and the mandate for insurance coverage for all US citizens would appear to represent new growth opportunities for the pharmaceutical industry.  This can be true for pharmaceutical companies that begin to adapt to the realities of this evolving new healthcare market.  Nothing in the current legislation seems to be dramatically different than what has been discussed and debated now for months….no surprises.  Also, keep in mind, the plan will take years to unfold and become a reality.  That doesn’t mean pharmaceutical companies can or should wait.  In fact, the evolving new market will mean significant  changes will be necessary to the traditional pharmaceutical business model which will also take time for companies to implement and execute.

Despite the upsides of potentially more than 30 million new prescription drug customers and the closing of the doughnut hole for seniors, here are some implications the industry must prepare for:

  • The market for prescription drugs will progressively change from healthcare providers and patients to payers, insurers, and managed plans
  • Payers (insurance companies and government/CMS programs) will have to become increasingly cost conscious to ensure sustainable affordability of the reform
  • Generic drugs will become the workhorse for prescription drug plans, including being used in place of branded products that fail to demonstrate meaningful clinical benefits over generic drug options
  • There will be tremendous cost saving incentives for the market to push for and demand a  clear regulatory path for generic biologics/biosimilar drugs
  • To secure premium pricing, newly launched branded pharmaceuticals will have to meet an even higher standard for proving their value over other therapeutic options, including generic drugs
  • Information technology, including e-prescribing, will be employed to a much greater extent to help manage compliance with drug formularies and control costs.
  • Traditional sales and marketing will have less influence on product availability at the prescription drug plan level and even less influence on physician prescribing practices

Pharmaceutical companies that anticipate these new dynamics can make the necessary adjustments and determine what they need to do to remain competitive in this evolving new healthcare market. More on what to do in the next posting.

mike@pharmareform.com

Categories: Healthcare Reform, Pharma company reforms Tags: , , , , , ,
  • Elona Kogan

    It seems that if we needed legistlation to become aware of the ever growing important of payors within our health care system – we were not paying much attention to the industry.

    Payors have been increasing and improving their ability to influence the prescription drug market decision making for some time now. This “influence” and its impact on health care decision making, prescription writing, and companys’ revenue should not be surprsing.

  • http://www.pharmareform.com Mike Wokasch

    Elona,
    I agree entirely that this has been evolving for some time and should not be surprising. I do however believe that the need to control costs will increase well beyond anything the healthcare market or pharmaceutical industry has ever seen before and this will put even more pressure on plans to control the cost of prescription drug. I also don’t believe the government or Congress is done making sure prescription drug prices remain affordable. From my perspective, and I’m not just being negative here, I think we are very early on in this process and it is only going to get more challenging. I really appreciate your comment. Mike@pharmareform.com

  • http://www.pharmareform.com Mike Wokasch

    physician assistant. I appreciate the feedback. Thank you. Mike

  • http://munzoor.wordpress.com Munzoor Shaikh

    Mike, this is a nice post and nice summary of things. I think to your point, there is no way of knowing how much of an actual effect Payors and pharma companies will have and how their dynamic will play out. I think the growing health awareness among the general public will also play a key role in how things will turn out.

    Anyways, nice post, thanks for summarizing.

  • http://www.pharmareform.com Mike Wokasch

    Munzoor,
    Thank you. I agree with you. In fact, the increasing, wide-spread availability of health information is probably one of the biggest factors that has already affected the pharmaceutical industry more than anything. Pharma companies no longer control drug information, the market can easily and quickly evaluate treatment options and patients can find out more about their diseases and drug treatment options than ever before. Thank you for the contribution.
    mike@pharmareform.com

  • Dick Bergman

    Mike, Forbes’ article on LLY is chilling. This comission has FINAL, non questionable authority to reduce costs by $4B/yr??? Also, the gov’t Rx rebates perscentage will climb probably anually and more and more people will qualify for the gov’t Rx programs (i.e. more and more rebates to gov’t). LLY said rebates could even exceed their cost!

    Long term, could big pharma just disappear?

  • http://www.pharmareform.com Mike Wokasch

    Dick,
    Thanks for the question.
    The financial impact of healthcare reform are not surprising. As far back as one of my first post in July 2009 and then again in December, while not putting numbers to the implications of reform, the basic underlying drivers for financial impact are outlined. Will Big Pharma disappear? Big Pharma as we have known it probably will not exist. At the same time, there are too many unmet medical needs to resolve and too many talented researchers who have the potential for finding solutions to these medical challenges for pharma to go away. If you take out the unnecessary infrastructure expenses (overhead) and Big Pharma waste and inefficiencies, there is more than sufficient monetary incentive for these opportunities to be pursued.

    I believe there will be three surviving business models for the pharmaceutical industry as this all shakes out.
    1) Big Pharma with business models driven by market presence, product line clout, and channel management expertise (payer and managed markets). These companies will be few and dependent on acquiring products and technologies from smaller more innovative companies.
    2) Mid-sized companies that look a lot like mid-tier companies today that focus on discovering and developing products in a narrower range of therapeutic areas. These companies however will have very lean infrastructures compared with today and have the managed market expertise (replacing traditional sales and marketing) to go it alone if they choose but will keep their options open to partner with one of the larger companies or companies of similar size.
    3) Smaller companies with therapeutic area or technology platform expertise (much like many of the smaller biotechs today) with little or not additional infrastructure. Their model is science driven with a laser-like focus on finding treatments and cures in specific therapeutic areas or applications around specific technology platforms.

    You also have to remember…the generic market of the future will be severely limited without innovative new products today.
    mike@pharmareform.com

  • Pingback: Pharma Reform » Healthcare Reform and a world without Big Pharma

  • Daniel

    Dear Mike,

    I am a recent Emory graduate who is preparing for consulting interviews with topics related to the Healthcare industry. As a learner and a young person interested in learning about the future of healthcare in general, I fould your article extremely insightful.

    I do have one question that I would like to better understand: You comment that, “Traditional sales and marketing will have less influence on product availability at the prescription drug plan level and even less influence on physician prescribing practices.” What actions, then, can drug producers take to ensure their products get into the prescribed available streams of medications by doctors (becoming competitive for the future), given that non-performers will be phased out and traditional marketing by drug companies may be less relevant in the treatment selection process.

    Many thanks!

  • http://www.pharmareform.com Mike Wokasch

    Daniel,
    I have written a number of blog posts addressing how pharma companies can market and sell in this evolving new healthcare market (just click on the marketing or sales tags). The biggest changes that have affected the traditional sales and marketing tactics are access to physicians (reps and pharma marketing are no longer considered important/credible/reliable sources of product information), more rigorous critical reviews for managed market formularies and subsequent diminishing role of physicians in product choice, healthcare reform, and regulatory/legal constraints. Any new strategies or tactics have to take these into consideration and should start by developing better clinical and cost benefit data to support any claims you intend to make about a product. mike@pharmareform.com