Pharma’s Priorities in 2016: Affordability and Public Health
Many pharmaceutical and biotech companies have been busy striking merger and acquisition (M&A) deals in 2015. According to Ernst & Young Global Limited, the volume of deals grew by 21.5% from 2014, the total value of all deals being estimated at $462.2 billion. Acquisition of new businesses demonstrates growth to stakeholders and is expected to continue in 2016.
M&As allow pharma companies to either invest in or divest from certain specialties and focus on particular conditions or patient populations, and at the same time delve much deeper into specific patient needs. In other words, M&As enable pharma to ease into precision medicine. Precise and targeted medicines rely on Big Data and genome technologies to better understand and address specific types of diseases.
On the not-so bright side, addressing needs more specifically means that R&D costs for new drugs aren’t spread out much. Drugs that can bring more promising outcomes may come at a price that patients or payers aren’t willing or able to shoulder. With the promises of innovative and precise medication in the coming year, pharma’s priorities in 2016 should ideally lie on making those medications more affordable.
The Uphill Battle for Health Prices
Traditionally, patents are thought to be the tool to encourage innovation in drug and treatment development. With the protection of patents, there is a level of assurance that competitors won’t get in the way – or at least not for a few years – and this has contributed to an atmosphere where some pharma companies create a somewhat monopolistic behaviour for their product.
The kind of innovation encouraged and protected by the patenting system can typically be an increment from the performance of the current top product in the market in a sort of value proposition that says: “Slightly better than the current number one drug.”
However, this kind of incremental innovation is easily being outperformed by the kind of innovation that modern technological developments promise. Since healthcare costs are also on a steady rise, payers and patients are also seeking the kind of efficiency and innovation that technology is offering. Technological development is one driver for cross-sector deal-making in pharma.
The changing health customer is another major driver. Patients and payers aren’t reluctant to say no anymore to products that don’t meet their requirements. In the UK, for example, the NHS dropped coverage for 17 cancer-related medicines in September of 2015 since their costs were too high.
With technological innovations and a mindset change among patients and payers, there is competition with the changing times. Furthermore, protection from patents is no longer a security that the market’s acceptance won’t be an uphill battle.
One need only look at how the market negatively responded when the Hepatitis C drug manufactured by Gilead Sciences Inc., Sovaldi, was launched. For a 12-week program, it was priced at $84,000. With exorbitant prices like this, new drugs will fail to make a difference in the lives of patients since only a very select and financially capable few can have access to them. In response, many governments are already imposing pricing transparency reports and price mark-ups, making the battle for prices even more challenging for pharma.
Survival of the most Efficient
With limited budgets for healthcare spending and an increasing demand for medications that come with evidence-based outcomes, pharma is being pushed to the wall. The time to be creative and efficient is now. Pharma may soon have no choice but to figure out a way to make health care more accessible – which is possible with technology – and more affordable. The question is: How can pharma achieve affordability?
Ironically, to help make precise medication more affordable, pharma companies need to address public health, specifically focusing on the prevention of diseases. As the old saying goes, “An ounce of prevention is worth a pound of cure.” Disease prevention can help lower, or at least make more efficient, the use of available healthcare spending. The US alone spends over $3 trillion annually on healthcare. With rising health-related costs, those patient populations in disadvantaged parts of the world also have poorer access to medications.
With M&As between information and technology firms, pharma is primed to focus on population health. Many problems with public health are preventable and addressable with the right information accessed at the right time and in the most convenient way. The rising costs related to precision medicine are not an excuse for pharma to avoid embracing technological advancements or continue depending on the protection of patents. Instead, it is a push to be more efficient at addressing specific patient and public health needs, as well as making healthcare more affordable.