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Pharma outlook: pricing and market access

We’ve remarked previously that the general outlook for the life sciences industry in the coming period is positive, and the below forecast from a Deloitte report supports that view.

This outlook is based partly on the observation that:

“…improving R&D productivity, recent increases in NME approvals, and expanding product pipelines - combined with ongoing cost containment - suggest that the fundamentals are aligning to increase shareholder value.”

As is to be expected in an industry of this size - with more than $1.2 trillion in annual sales - there’s great variation across regions and therapeutic areas, and the global trend hides regional deviations and pressure points.

Pricing controls and market access challenges

Despite an improving economic outlook for national economies, the industry analysts note that:

“A primary focus for governments in both developed and emerging markets is to minimize pharmaceutical spending growth by enacting pricing and reimbursement legislation.”

The introduction of reference pricing systems in many countries have hampered efforts to build shareholder value. The U.K. and Sweden in particular have gone further and secured additional pricing deals with manufacturers.

Focus on Asia

Key pricing and market access challenges are present in several of the emergent and established Asian markets.

China’s ‘Essential Drug List’ has been continued and is expanding as part of a two-pronged attempt to control prices. The second part of the strategy is a series of experiments at the local and hospital level aimed at controlling the total amount of therapeutics prescribed.

There are also limits on the number of brands that can be listed within a given area. This raises the stakes as certain province-wide tenders can have a major impact on the ability of brands to access the market.

India’s ‘Drug Price Control Order’ initially brought 348 medicines under price control and has recently been expanded to include an additional 50 treatments in the cardiovascular and anti-diabetic area.

While Japan has offered price incentives for innovative medicines, it has simultaneously lowered incentives for generically substitutable products. This has had the effect of encouraging breakthrough therapies for unmet need and less invasive diagnostic tests. Across therapeutic areas, manufacturers are forced to demonstrate real clinical and economic value to support market access and justify the desired pricing level.

The report’s authors note in conclusion that:

“…life sciences companies need the capability to model the global margin impacts of reference pricing when responding to regional tender offers. There can be ripple effects of not knowing the global margin impacts of regional pricing decisions.”