W2O’s Value + Access team shared 2021 predictions for drug pricing, value, and access. Check out the team’s estimates below, and see how they tracked against last year’s predictions here.
1. Transparency Will Make a Comeback
We went all-in on “transparency” two years ago, reasoning that a combination of state legislation and DTC-ad policies would make drug prices more apparent to the masses. The topic is back this year, with a twist. In 2021, we’ll be watching for more transparency around net prices. An as-yet-unchallenged Trump administration rule would require insurance companies to disclose net prices starting a year from now. The just-passed stimulus bill also calls for (aggregate) net pricing data to be released, though the horizon for implementation of that is a bit longer. And the rebate-reform rule could also draw more pricing behavior into the light.
2. Employers Will Throw Their Weight Around (More Visibly, Anyway)
When it comes to “skin in the game,” no one is more invested in watching health care costs generally — and drug costs specifically — than employers. This isn’t a news flash — billions of pixels were spilled around the moribund Haven effort by Amazon, J.P. Morgan Chase, and Berkshire Hathaway to control prices. But we expect less talk and more action in the year to come.
Take gene therapy. Insurance companies and PBMs are increasingly comfortable with new mechanisms to ensure that high-cost, one-time therapies don’t swamp the system. Employers, on the other hand, remain nervous, according to the Business Group on Health’s 2021 Plan Design Survey. The most popular cost-control strategy for high-cost treatments? Delay inclusion on formularies.
3. Medicare Part D Reform Legislation Comes of Age … and Passes
Smart money would bet against any major U.S. health policy legislation in 2021, but we’ll take a flier on this one. Perhaps the only bipartisan, cross-ideological drug-pricing opinion left in America is that the Medicare Part D benefit is broken. Because there are no out-of-pocket caps, a portion of America’s seniors get soaked in a way that would never happen with private insurance.
Seniors need this fixed. The pharmaceutical industry is reportedly willing to back an experiment — and take a hit to revenue — that helps push this along. The media are paying attention, and fixes have been proposed by lawmakers on both sides of the aisle.
4. The China Experiment Will Mint Winners
Over the past couple of years, the Chinese government has offered biopharmaceutical companies an intriguing deal: access to the largest market in the world through the state-run insurance market in return for mammoth price cuts. The latest group of 119 meds hit the list this week at an average discount of 50.64% over the existing prices in China. Reuters said inclusion has the potential to lead to “a massive leap in sales.”
It’s the ultimate question of swapping margins for volume. While the implications are myriad (the impact on the domestic pharma industry in China is especially intriguing), the prediction here is that the trade-off will be more than worth it for the companies that engage: We will see at least one pharmaceutical company raise earnings estimates on the strength of low-cost, high-volume China sales.
5. COVID-19 Prices Come Back to Bite Biopharma
Let us go on the record: There has never been a scientific achievement in our lifetime that matches the COVID-19 vaccine development process, and that includes the completion of the human genome, the GPS system, and the iPhone.
But the halo effect will only last so long. In 2021, the biopharmaceutical industry will have to grapple with questions about profiting from a pandemic. Revenue from COVID-19 therapies may raise eyebrows, and the fraught question of how vaccines will be priced once COVID-19 moves from a pandemic threat to an endemic will become part of the environment. Those questions may not be fair, but they will get asked anyway, dominating the latter half of 2021.
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