As the global market for drugs surpasses $1 trillion this year, growing payer scrutiny of value for money is just one of the factors that will drive disruptive change in the use of medicines over the next decade. The ten harbingers of change identified by the IMS Institute reflect the deep and rapid changes in the global health sector that are upending business models and forcing all stakeholders to re-evaluate their approaches to bringing healthcare to patients.
They point to a future of evidence-based and integrated decision-making powered by information and technology, improved patient outcomes with millions of lives saved through transformational disease treatments, and expanded use of medicines in more efficient, connected health systems. The dynamics will affect existing business models and healthcare systems, bringing opportunities to those leaders who understand, embrace and adapt to the new landscape.
The 2014 Harbingers of Change are:
1. Consumer Technology Companies Rush to Healthcare to Transform Patient Engagement. Three technology juggernauts – Google, Apple and Samsung – have announced major investments and initiatives that will bring mobile, cloud and wearable technology to healthcare. Their entry into the healthcare space also will encourage other players – small and large software developers and device manufacturers, as well as payers and life sciences companies – to create patient-focused apps and mobile-compatible sensors that can positively impact health. Rapid adoption of these technologies, including Patient Digital Health Platforms, will lead to more patients embracing healthy behaviors, as well as increased and earlier diagnosis, improved treatment of disease, and more appropriate use of medicines. These technologies also will generate new streams of information that can be used to increase the understanding of drug use, effectiveness and risks.
2. Hepatitis C Cluster of Innovation Triggers New Thinking on Financing Cures. A wave of innovation in Hepatitis C drug development is challenging the way health systems respond to new therapies. Although these drugs represent a breakthrough opportunity to cure a potentially fatal disease, they carry high upfront costs with the potential for long-term savings for health systems. As a result – and with other breakthrough medicines in development – new approaches by payers that consider total disease costs when setting budgets or introducing new financing mechanisms will be implemented.
3. Breakthrough Vaccines Foreshadow New Era of Improved Public Health for Low- and Middle-Income Countries. New vaccines for malaria and dengue fever are under regulatory review or in the final stages of clinical development – marking breakthrough progress toward eradication of these devastating tropical diseases. The medical advances are the result of philanthropy-driven efforts, together with public and private sector collaboration. As greater numbers of these medicines are similarly developed and launched, they will accelerate efforts to improve distribution infrastructure, strengthen procurement and supply chain management systems, and increase demand forecasting capabilities, especially in Africa.
4. Biologics Bring New Treatment Options and Expanded Markets in Pharmerging Countries. In 2013, the use of biologic medicines in pharmerging countries reached 51 percent of the per-capita volume used in developed nations. This is up from just 10 percent a decade ago, and is being fueled by non-original biologics and biosimilars that are bringing advanced treatment options for patients suffering from cancer, diabetes and auto-immune disorders. Greater demand for biologics in these countries will expand market opportunities for life sciences companies, drive changes in standards of care for patient treatment, and compel health systems to provide the infrastructure and training needed for healthcare professionals to administer biologics safely and effectively.
5. Governments Unshackle Data to Aid Research and Spark Medical Innovation. In the past year, the U.S. and Korea governments have advanced healthcare data availability by publicly releasing granular health utilization and cost data in a way that protects patient privacy. They join the U.K., which previously provided broad access to prescriber-level information. This represents a paradigm shift as governments acknowledge that data saves lives, and as restrictions on data use are being eased through robust methods that protect patient privacy, including de-identification. More participants will access and apply this patient-anonymous information in creative ways – including linking it with patient-anonymous private-sector data, and breaking down traditional silos to yield new insights and innovations in disease treatments and medicine use.
6. Medicine Spending Growth Returns to Developed Countries, Signaling New Phase in Life Sciences Innovation Cycle. After seven years of medicine spending growth of 5 percent or less – including a decline in some of those years – spending in developed countries is now increasing at higher rates. While much of the lower growth was due to patent expiries, fewer innovative medicines launched and macroeconomic conditions, a new phase in the life sciences innovation cycle has begun – yielding lower savings from patent losses and higher spending levels on innovative medicines as country economies improve. As this new phase takes hold, payers will be planning for increased spending levels, rebalancing drug and non-drug budgets, and seeking new approaches to control costs. At the same time, life sciences companies will intensify efforts to demonstrate clinical differentiation for their medicines based on real-world and clinical trial evidence, as well as the economic value of the medicines.
7. U.S. Payment and Delivery Models Shift Focus to Outcomes and Performance.Accountable Care Organizations (ACOs) and ACO-like payment and delivery models now cover 10 percent of the U.S. population, representing a fundamental shift toward a value-focused healthcare system. These models target improved coordination of care, fewer medical errors, lower costs and improved patient outcomes. They will increase demand for cost-effective and preventive medicines while reducing overuse or misuse.
8. U.S. Clinicians Consider Costs in Clinical Treatment Decisions. The American Society of Clinical Oncology has announced an initiative to make available an online tool and mobile app for oncologists that will enable them to incorporate cost considerations into clinical decision making. The goal is to help inform physicians about the relative value of drugs and to facilitate cost discussions with their patients around medicine use. This marks a significant shift in the U.S. healthcare model and will result in changes to physician prescribing patterns and a sharper focus on defining and implementing relevant measures of treatment costs and outcomes – as well as ensuring their appropriate use by patients and providers in decision making.
9. In Loosening Price Caps to Ensure Supply, China Acknowledges Reality of Market Mechanisms. After a series of high-profile drug shortages in recent years, the Chinese government relaxed price caps on 530 low-cost “essential” drugs. This unprecedented action has allowed prices to rise to a level that provides sufficient incentive for companies to continue offering those medicines at acceptable quality standards. Payers will adopt a sharper focus on understanding market mechanisms as they seek an appropriate balance between minimizing costs and ensuring the reliable supply of essential drugs.
10. Purchasing Groups Consolidate Across a Fragmented Landscape. The formation of three mega-supply chain purchasing groups for finished pharmaceuticals has radically shifted the balance of power among wholesalers, retail pharmacy chains, and generic and branded pharmaceutical companies, particularly in the U.S. and Europe. While these purchasing groups have been forming, other sectors involved in the manufacture and delivery of medicines remain fragmented, leading to an increase in negotiating power among these buyers. The consolidation of purchasing groups will encourage generic manufacturers to differentiate their products through proprietary formulations, delivery mechanisms or services, and may result in consolidation of the highly fragmented generic industry.
The full version of the report is available at www.theimsinstitute.org. It can also be downloaded as an app via iTunes at https://itunes.apple.com/app/ims-institute/id625347542.The study was produced independently as a public service, without industry or government funding.