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The calendar says its wrap-up time, not just for gifts but for some of the trends that shaped the industry-for good or bad-in 2012.
Drug budgets are being crushed. Pharma depends heavily on the fiscal balance sheet of governments. When the public share of health spending rises beyond 50 percent—as is now the case in all the major OECD countries, including the United States—any necessary surgery starts with the drug budget. The reason is it's a product with a virtually invisible social footprint. Of course, we can be optimistic and hope that economic adversity in places like Europe will spawn a serious debate about government priorities. For example, is it prudent to be spending only €230 million a year on the European Medicines Agency (EMA), responsible for protecting the health of 500 million patients, and most of whose budget is already paid for indirectly by industry? That €230 million represents about four tenths of one percent of the €55 billion the region lays out for its Common Agricultural Policy of subsidies to a dwindling, statistically irrelevant community of gentlemen farmers.
Biologics move forward. The peak tide of patent expirations this year took its toll on small molecules, with the BMS blockbuster Plavix, AZ's Seroquel, and Merck's Singulair going generic on the heels of global top seller Lipitor's November 2011 LOE. Symbolic of the biologic transition is the rise of monoclonal antibody Humira to the top of the US sales charts, at an estimated $9 billion in sales this year, pumped by significant gains from multiple new indications and a burgeoning therapy base in rheumatoid arthritis. Though they are tough to manufacture, biologics tend to be target-specific and thus in synch with payer and patient demands for personalized medicine. So the stage is set: If it didn't happen this year, biologics will likely outnumber the traditional small molecule in the list of top 15 drugs by the end of 2013.
Testing time for Obamacare. The legality of the 2010 Affordable Care Act (ACA) was upheld by the Supreme Court and then reaffirmed last month by the outcome of an extremely partisan presidential election. This means the United States may be first to provide a definitive answer to a central—and unresolved—question of global health economics: Is rationing of care the inevitable outcome of universal coverage? An early sign comes from the ACA's smaller mirror image in Massachusetts, which this year enacted what amounts to a fixed global budget for healthcare, through caps on spending for the most common treatments and procedures. Physicians already seem to be voting with their feet, leaving their patients behind and the state with a mounting crisis in primary care.
That red line separating drug registration from reimbursement is turning...pink. Regulators on both sides of the Atlantic are bowing to the reality that a market license for a new drug means little if payers won't make it accessible to patients. Payers already have a seat at the approval table in Europe, while even the FDA is talking up "performance" as a euphemism for products that will appeal to a "show-me-the-money" world. More important, the concept of a fixed permanent license is morphing into a moveable object: once proffered, that license can be revised—and even withdrawn—if the market talks back to regulators. In our cover story on the EMA, Executive Director Dr. Guido Rasi put it this way: Scientific advice must run in parallel to the larger forces in society, not opposite. Obtaining access is all. That's why the red is bleeding pink.
Pharma to the rescue. Despite its status of a universal good, someone still has to pay for healthcare. And when budgets are tight and costs high, it's not a good position to be a silo purchase, disaggregated and not part of the "solution." Roche leaped a critical barrier in repositioning itself as a provider and a player by joining reinsurance giant Swiss Re to sell plans with drug coverage to a potential market of millions of Chinese patients. It represents a final break with the longstanding industry position that, since we don't know health insurance, we don't do it—stick to selling drugs. It's also a good reputational bet on the future of the middle class in emerging markets, where unanticipated medical costs are a key source of downward mobility.
Follow Bill on Twitter: @BillPharmExec