Health care’s move to outcomes and value is transforming the industry, and payers are leading the charge. This makes payers an increasingly influential customer for pharma. Yet navigating the complex and fragmented payer landscape at a time when health care is dramatically changing — both in how it is delivered and in how it is paid for — has been challenging for pharma and raised many questions about what payers want, their attitudes and how best to engage with them.
To address some of these questions, we recently surveyed 30 US payers, 30 European payers and 18 pharmaceutical company representatives from functions such as market access and managed markets. We asked payers about their business challenges and attitudes as well as the kind of trial data they regarded as most important. Then, to determine how well pharma companies understood payers’ needs and attitudes, we asked pharma companies to identify payers’ needs and attitudes and compared their answers to those provided by payers.
As precision medicine becomes an increasingly important organizing principle of patient care, it’s obvious that pharmaceutical companies and test developers must work together to enable global access to drug-diagnostic combinations. What is less obvious is how these partnerships should be structured and whether additional expertise (for instance, from payers, health IT companies or contract research organizations) might be required.
To be successful precision medicine partners, diagnostic companies must understand what technologies and know-how to bring to the table — and when to deliver it. In the meantime, pharmaceutical companies must understand how the rapidly changing commercial climate affects the financial health of their potential testing partners and strive for partnership structures that fairly balance risk and reward.
It’s tricky to get this balance right. In a 7 October panel at the 2014 AdvaMed Medtech conference in Chicago, I discussed best practices with a diverse group of industry executives representing companies that have created multiple precision medicine partnerships.
Mojo. The life sciences industry has got it back. Not just the biotech sector — they’ve had mojo for some time. And yes, specialty pharma is showing its mojo as well. But now, the old guard — pharma — has it too. After three years of declining revenues, most big pharmas reported top-line growth in Q2. While aggregate annual big pharma sales are projected to decline yet again in 2014, the outlook over the next few years for most big pharmas is much brighter than any time in recent memory, thanks to an increasingly visible renaissance of new product approvals and portfolio rationalization efforts. While big pharma growth was essentially flat through the first half of 2014 (adjusting for the net impact of exchange rates), top-line growth is now projected to accelerate to 3% in 2015. Despite modest revenue growth, the industry has provided a total return to shareholders in excess of the performance of most major stock indices in 2014.
What’s driving new growth? A number of factors over the past few years: accelerating organic growth from major new product launches, exceptional pricing power (for which the Affordable Care Act has provided some new muscle), solid specialty pharma and generic growth, and a healthy measure of inorganic growth as the industry transforms itself. After several years of painful retrenchment, the pharmaceutical industry is now firing on all cylinders and the outlook is good.
The most recent Capital IQ projection shows an overall 5% industry growth in 2015, driven by big pharma’s projected 3% growth, while biotech, specialty pharma and generics maintain strong growth. Some are catching up after falling behind; others are already in the fast lane and racing ahead. Buoyed by rising firepower and management confidence, as well as something not quantifiable — call it mojo — bolder aspirations are altering the competitive landscape and ushering in a new era of transformational M&A.
Can China become a global leader in health care innovation? It may require a leap of imagination, but according to a roundtable discussion among industry leaders who participated in the Future of Health iLab at EY’s recent Strategic Growth Forum (SGF) in Shanghai, imagination is an asset in plentiful supply.
Participants in the iLab — an informal roundtable chaired by EY’s Global Life Sciences Leader, Glen Giovannetti — included leaders from global and Chinese pharmaceutical and health care companies, medical technology and IT firms, food companies, and agrifood businesses.
The iLab session was timely. The Chinese Government has launched a health care reform process that makes other countries’ efforts appear unambitious. More than US$350 billion has already been spent on establishing a basic health insurance system and improving infrastructure, access to care and medicine, with more government investments to come in the next four years. But as we heard from iLab delegates, the reforms take place against big challenges: chronic disease, an aging population, massive urbanization, inefficient infrastructure and imbalanced allocation of resources. The question is, then: where can, and should, the private sector expect to play a greater role in helping to expedite growth and contribute to the sustainability of Chinese health care?