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Health care reform and life sciences: Threat, opportunity or both?

Changing innovation processes and sales models crucial for companies to get ahead


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Frequent reform is a fact of life in health care, but life sciences companies worldwide have had a difficult time adapting to recent changes. One reason is that policy changes are predominantly shaped by specific national contexts. For example, the debates surrounding legislation such as the United States’ Affordable Care Act (ACA), Britain’s Health and Social Care Act and the laws arising from China’s Guidelines on Deepening the Reform of the Healthcare System, have many elements that are unique to their national systems.

That said, reforms over the past few years in both developed and developing markets include some common themes with significant implications for life sciences companies. Certain broad goals of health care reforms – specifically, reducing costs, spurring innovation and improving market access – can pose both opportunities and risks for this sector.

With stagnant economic growth and increasing health care spending in developed countries, and limited resources in emerging markets that are seeking to expand health care coverage to a growing population, cost containment has become a universal concern.

Strategies to address these costs vary. Most national health care systems have been encouraging greater use of generic drugs. In the U.S., the proportion of prescriptions filled by such products has risen from around half to 80% over the last decade. More recently, several countries, such as Germany, have turned to value-based pricing to address the cost of new drugs. This involves allowing a price differential from existing offerings – including generics – based on the demonstrated superiority of a new product. The focus on value is also making detailed economic analysis a more important part of pricing negotiations. Meanwhile, other countries are increasingly mandating prices: India, Brazil and China, for example, have created national lists of essential drugs with set prices.

Regardless of the approach, it is evident that the objective is to rein in spending. In fact, the industry perceives reform in some of these countries to involve little else. Tjeenk Willink, recently retired board member responsible for marketing worldwide at Boehringer Ingelheim, says of recent changes to the German system, “They are not really focused on value for money but are a tool to arrive at the lowest price.”

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