Estudios Económicos
Pharmaceuticals

Pharmaceuticals

Pharmaceuticals
Latin America
Northern America
Western Europe
Emerging Asia
Central & Eastern Europe
Middle-East & Turkey
Change sector

Strengths

  • Development of health insurance systems
  • Robustness of US demand
  • Demographic and lifestyle changes
  • Pressure for access to innovation 

Weaknesses

  • Slowdown in emerging countries
  • Quality problems in India and China
  • Payers increasingly demanding in terms of costs and the real efficacy of new therapies

Risk assessment

Highlights
Percentage of US adults with no healthcare insurance

Percentage of US adults with no healthcare insurance

Agencies in charge of health care provision (particularly the reimbursement of drug costs) are faced with the arrival on the market of high-cost treatments, while having to keep deficits prompted by demographic changes and the economic situation under control.

In Western Europe (France, Italy, Spain, Germany and the UK) spending on prescription drugs have been constantly rising.  As such, deficits have widened such as that of the NHS in the UK and Wales (£2.45bn vs. £822m a year earlier). In France, the French Social Security health branch deficit has narrowed slightly but nevertheless remains substantial (€5.8m in 2015 vs. €6.5m in 2014).

In the US, drug prices are increasing steadily, notably specialty drugs. As a result pharma groups saw their profits bloated by 3.8% according to the Census Bureau. The authorities have made numerous proposals to help curb this inflationary spiral before the presidential election. The ramp-up of the Affordable Care Act (Obamacare) has prompted an increase in healthcare spending, as the rate of uninsured adults has constantly been on the decline since the enactment of this act.

The transformation of the Chinese growth regime, now giving priority to domestic consumption, places an increased focus on meeting households' healthcare needs. However, the development of coverage of healthcare costs (although still partial) means the authorities need to keep a lid on costs, particularly those linked to drugs.

Demand

The cost of new therapies is obliging payers to keep a lid on spending. In 2017, the price control measures in force in Western Europe will still apply, despite growing demand linked to population ageing and lifestyle changes. For example in France, the measures taken to reduce spending (set at +2.1% for 2017) should continue to affect pharmaceutical companies, via price cuts, and favour the emphasis placed on generics. The arrival of expensive speciality drugs that concern smaller populations, mean regulators need to make difficult decisions concerning reimbursement levels. As such, in the UK, the example of Repatha by Amgen is a good one: the National Institute for Healthcare Excellence (NICE) managed to benefit from an unveiled price discount for the drug in order for it to be reimbursed by the NHS.

In the US, sharp increases in insurance premiums for 2017 (+100% for certain plans) highlight the need to offer US citizens drugs at affordable prices. Indeed, after the numerous scandals that marked 2015 (e.g. the Daraprim/Turing affair), the ramp-up of Obamacare, combined with the need to control healthcare spending (close to 17% of GDP, versus 9-11% in Western Europe), explains the attempts aimed at regulating drug prices. These can be up to three times more expensive in the US than in the UK. According to the Milliman consulting firm, the average annual cost of healthcare spending for a US household was $25,826 in 2016. Its projection for 2017 exceeds $26,900. Close to 42% of this amount is covered by the household versus only 58% by the sponsor (whether a private company, the federal state, or a local authority). The arrival on the market of a number of speciality drugs in 2016 contributes to increasing the average annual cost of drugs per family. Moreover, the election of Donald J. Trump who wants to repel the ACA could impose a heavy burden on households as they benefitted from subsidized premia. With an Administration and a Congress dominated by the Republican Party, prices won’t be capped, as was promised by H. Clinton, resulting in their increase over the next several years.  

In China, since the end of the first half of 2015, drug prices are no longer determined by public authorities, leaving it up to "market forces" to set the price levels. Nevertheless, this opening masks a public determination (which is also enshrined in law) to force the actors in this sector to offer a reasonable price, the result of negotiations with the regulators. The major changes rocking the sector will continue in 2017, i.e.: tidying up the producers' price setting methodology, regulating prices in order to control the increase in healthcare spending (estimated at more than USD 640 billion in 2014), offering quality products and improving the general health of the population which is rapidly ageing, and which is therefore faced with the same ailments as western populations. Note, however, that public coverage does not include the most serious diseases, and fundamentally those most expensive to treat. We should also mention that the public healthcare plan doesn’t cover critical illness, which are the most expensive to treat.

Supply

R&D spending rose by 2,6% on a global level in 2016 and should continue on this trend in coming years, especially in 2017 (3.4%) according to Evaluate Pharma.

The European Medicine Agency (EMA) issued around 60 positive opinions in  2016, vs. 54 over the full-year in 2015 and 43 in 2014. In 2017, based on information provided by Evaluate Pharma, Coface estimates that spending on prescription drugs is set to grow by 5% for the top five EU countries (Germany, France, the UK, Italy and Spain), reaching almost €104.8m. This is explained by the increasing presence of specialty drugs (more than a third of total sales), even though payers are reluctant to pay the pharmaceutical companies' list prices.

In the US, the Federal Drug Agency (FDA, in charge of approving new drug registrations among others) is thought to have approved almost 20 new molecular entities (NME) at end-October 2016 compared with 32 in the year-earlier period. The majority of these entities belong to the fields of oncology and orphan diseases, not forgetting treatment of cardiovascular diseases. Coface estimates that drugs sales, whether associated or not with these new entities, should total $533bn in 2017, i.e. a 10% rise compared with 2016 ($430bn). Express Scripts, one of the largest Pharmacy Benefit Managers (PBM, which manage claim forms but also negotiate drug prices and volumes on behalf of health insurance companies), estimates that the growth rate for specialty drugs will be 22% in 2016 (the same as in 2015). As in Western Europe, this class accounts for a third of sales and its share is set to increase in coming years as innovative molecules and therapies are adopted for diseases affecting few people.

In relation to the size of its population, Chinese spending on drugs as measured by IMS Health stood at around $115bn in 2015. Coface estimates that sales should grow by 6% in 2016 and 5% in 2017 to reach $127bn. However, two major risks should be pointed out, i.e. the lack of transparency during public tenders and measures to control health spending in China. Indeed, the health authorities would like to limit prices of imported drugs (which are generally the most innovative), especially in oncology. Although 96% of the population has public health insurance, this regime does not cover the most expensive treatments very well. In addition, public authorities have heightened their vigilance concerning the practices of pharmaceuticals companies, especially foreign ones.

 

Last update : December 2016

Parte superior
  • Spanish