Article preview from IN VIVO October 2009
The drama of the US health care reform debate is undeniable, but that doesn't mean it's easy to see how it will change the business of drug development. But it will, and we'll give you 10 reasons why. Read on...
Article preview from IN VIVO October 2009
No matter the outcome of the political debate over health care reform in 2009, reform of the US system is inevitable.
These policy changes will affect the value of biopharma development assets and introduce a new set of decision makers to the reimbursement process. Business development goals will get tweaked accordingly.
All assets won't be affected equally, with reform legislation seemingly favoring drugs that address niche markets and difficult-to-treat diseases.
The reform debate underscores the fact that Washington is important to commercial success, and it is time for biopharma companies to build that fact into development programs and business development strategies.
Health care reform is happening in the US.
The legislation wending its way through Congress is the center of the political process, but regardless of the outcome for Obamacare 2009, change is inevitable. The scale and timing will depend heavily on the legislation—and, whatever is enacted, the implications (intended or otherwise) will take years to untangle.
All of which makes for great drama—and terrific business for the army of health care lobbyists and policy support operations in Washington, DC. But the politics, the uncertainty and the spectacle make it hard for those outside Washington to wrap their arms around the implications of the reform debate.
Biopharma business development executives in particular can be forgiven for taking a wait and see attitude. It's not that anyone denies the importance of health care reform, it is just not at all obvious exactly what that importance may be when it comes to questions about valuing development projects.
But there are some clear themes of the reform effort that are apparent today, and which will affect how biopharma companies of all shapes and sizes make investment decisions in the years ahead. The direct impact of reforms, of course, will be on the commercial marketplace for pharmaceuticals. But those changes will inevitably affect the value of assets in development—and ultimately the decisions about which compounds to pursue in the first place.
In other words, there is no need to wait and see how the drama in Washington plays out to anticipate how reform will affect business development. To help you get started, the editors of IN VIVO and The RPM Report offer the following top 10 list of the ways health care reform will change the business of drug development.
(1) US Rights Are Worth More
The largest pharmaceutical market in the world is about to get larger: expanding insurance coverage in the US will expand the market for pharmaceuticals in the US.
The principle is known to policy wonks as induced demand: when people without health insurance get insurance, they buy more health care.
That sounds obvious but it is easy to overlook. For one thing, it is devilishly hard to put good numbers on the exact size of the market expansion under any given reform bill—but all too easy to quantify the potential cost to pharma of proposals like an excise tax, or increased rebates to the government.
And the unique political line-up behind reform means it really isn't in anyone's interest to highlight the gains over the costs. But market expansion is the reason the brand name pharmaceutical industry trade association PhRMA (the Pharmaceutical Research & Manufacturers of America) is pushing reform so hard—even though PhRMA is leading the way in emphasizing the size of the industry's contribution to reform rather than how much bigger the Rx market will get.
True, expansion of insurance coverage under reform will offer only a one-time boost—or, perhaps, a three-year boost as coverage phases in during the middle of the next decade. But once the coverage expands, the induced growth stops.
Still, while it may be premature to say by exactly how much, it is clear that US rights to a future medicine are worth more under reform than they would have been without.
(2) Tax-Free Shopping
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