Drug pricing reform

The cost of drugs in the U.S. has long been a controversial topic, as out-of-pocket expenses for consumers have risen sharply for patients in recent years. Nearly 8 in 10 Americans say the cost of prescription drugs is unreasonable, with voters from both parties agreeing that reducing the cost of prescription drugs should be one of Congress’ top priorities, according to a recent poll by the Kaiser Family Foundation.

“Patients are increasingly aware and exposed to the cost of medication and I think the industry was a little bit late in embracing this idea of not just developing a drug, but making the drug affordable to patients. We're seeing them really start to address this, with more constructive dialogue as pharma companies engage with payers to ensure drugs are not just approved, but also affordable and accessible for patients,” said U.S. Major and Specialty Pharmaceuticals Senior Analyst at J.P. Morgan, Chris Schott.

2020 election

Health care is always a major topic of debate in every election year and 2020 will likely be no exception. All of the remaining Democratic candidates vying to be the party’s 2020 presidential nominee are pushing for further reform to the system, to varying degrees. The direction the eventual nominee takes could determine whether the future White House pushes to completely overhaul the system or just tweak the existing one.

Both Vermont Senator Bernie Sanders and Senator Elizabeth Warren of Massachusetts are pushing for a “Medicare for All” plan with slight differences. Sanders is pushing for a payroll tax model for Medicare for All, while Warren would have employers pay a per-employee fee to the government, but both are pushing for a system that would eliminate private insurance in favor of tax-financed government coverage for every American. More moderate candidates, such as former Vice President Joe Biden, are leaning toward more incremental alternatives.

“There's a lot of different proposals on the table today as we think about the Democratic candidates, one of them being Medicare for All. We'll have to wait and see what happens with the election in 2020. But running up to the election, generally speaking, health care does underperform, with certain subsectors within health care outperforming—such as labs—where there is less political focus than areas like pharmaceuticals or managed care,” added Gill.

Technology and the role of the consumer

Consumers pay more for their health care than they ever have before, with out-of-pocket costs north of $2,000 on average. This has led to more discerning generation of consumers, who think a lot more about where they spend those dollars, shopping for their health care like they shop for other retail items. Patients are looking for the best service and the best locations, at the lowest cost. This demand for convenience has created an opportunity for traditional drug retailers, such as CVS, to make the most of their existing footprint through telemedicine, using telecommunications and virtual technology to deliver health care.

“We've always thought the consumer would be at the forefront of changes in health care. We said that last year and we continue to believe it will be the case for 2020, as we drive towards things like telemedicine,” said Gill.

This is especially true for millennials and Generation Xers, who increasingly do not have a primary care doctor, instead using their phone to search for health care service or nearest clinic on an ad hoc basis.

“Millennials are used to having everything delivered to them. I think in the future we'll see pharmaceuticals delivered by drones. We'll see more home delivery than we've ever seen before because of the way people want to consume health care and where they want to consume that health care,” added Gill.

Innovation

The last few years have been banner years for pharmaceutical innovation, with brand new drugs coming to market at a much faster pace. There has been continued, near-record levels of drug approvals from the U.S. Food and Drug Administration (FDA) this year, with 58 new drug approvals so far, following a record high year in 2018, with 71 approvals. These approvals are spread across a range of indications, including a number of breakthrough therapies such as gene therapy, as well as treatments for cancer and a variety of rare genetic diseases with high unmet need.

“So as I think about biopharma innovation heading into 2020, we see a continuation of some very positive trends that we've seen for the last few years—record numbers of new drugs coming out of FDA and the industry harnessing new technologies, whether that's gene therapy, cell therapy or bispecific antibodies, to meet unmet need in the industry. So we see that combination of factors translating as very robust new product flow across the sector,” said Schott.