What to expect from a Trump White House
A return to big blockbuster drug introductions. A renewed focus on innovation. A more favorable climate for merger-and-acquisition activity. Those are some examples of what a Donald Trump White House could mean for the pharmaceutical industry, according to EP Vantage, the editorial arm of healthcare market intelligence firm Evaluate.
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“On the commercial front, many expect that the industry’s cautious stance adopted in 2016 amid wider political uncertainties will become more aggressive heading into 2017. That ought to translate into more corporate activity and bring investor cash into the sector,” a 2017 preview report from EP Vantage said. “With many companies remaining well-capitalized after the boom of 2014 and 2015, and financing easy to come by for the larger players, there is certainly the potential for pharma and biotech to experience something of a bounce next year.”
At the same time, one of the issues that EP Vantage noted is that “drug price scrutiny is not going away, and the pressure from payers across the globe is unlikely to abate.” Indeed, the question of drug prices is one that is top-of-mind for the heads of biopharmaceutical companies — and potentially the 45th president of the United States — as the Trump administration begins its work.
Though biotech stocks initially saw gains after Election Day, Allergan CEO Brent Saunders has been vocally less bullish, noting at the 2016 Forbes Healthcare Summit in December, “I worry today that the pharmaceutical industry has a very false sense of security because of the Trump administration and a Republican-controlled Congress.”
This is to say that, though Trump and congressional leaders have pledged to repeal and replace the Affordable Care Act, the issue of drug prices is something Trump has interest in taking up, telling Time less than a week after Saunders’s comments, “I’m going to bring down drug prices.”
While the ways the new administration will address these issues have yet to be laid out, legislative efforts championed by the industry are expected to be taken up again. Among them are provider status for pharmacists and legislation focused on the speed of generic approvals. The QuintilesIMS Institute points out that generics will come to make up 92% of all prescriptions in the coming five years and reiterated that the average generic price is 60% to 70% below the bran price when introduced, eventually realizing an 80% to 90% difference in two to three years.
The Generic Pharmaceutical Association is focused — in particular — on the Creating and Restoring Equal Access to Equivalent Samples Act, which has potential to allow sample sharing to facilitate faster generic development and which Sen. Chuck Grassley and others unsuccessfully tried to include as an amendment to the recenlty signed 21st Century Cures Act, and the Fair Access for Safe and Timely Generics Act, which would keep drug makers from restricting medication availability for testing by generics makers through Risk Evaluation and Mitigation Strategies.
As the 21st Century Cures Act worked its way through Congress, the GPhA laid out its focus on the CREATES and FAST Generics Acts, stating, “We will continue working with Congress to find solutions to rising drug costs that bring safe and effective generic drugs to market more quickly and ensure more patients and payers have access to them.”
New year to bring period of massive change
As is typical of an industry tied so closely to legislation and the markets, the state of retail pharmacy is typically one in flux, and with 2016 in the rearview mirror and both 2017 and a new presidential administration ahead, the question facing the industry is not whether there will be changes, but rather what the biggest changes will be and how they will impact its current trajectory. The year to come and those that follow will bring changes in the focus of drug development, a slowing of spending growth and also the potential for new money and mergers to reinvigorate the industry.
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Among 2016’s memorable qualities from a healthcare perspective is its place as something of a dividing line between the boom in drug spending seen in 2014 and 2015, and a new direction for spending trends. Where 2015 saw a 12% growth in overall spending from an invoice price basis, according to the QuintilesIMS Institute for Healthcare Informatics’s December outlook, 2016’s spending growth was half of that seen in 2015, coming in at an estimated 6% to 7%.
And the trend of moderation in the drug market is expected to continue, with expected averages of 6% to 9% in spending growth through 2021. This is due largely to the recent drop-off in the development of hepatitis C treatments — which accounted for 3% of spending growth in 2015 — as well as the fewer patent expirations seen in 2014 and 2015, according to the QuintilesIMS Institute.
But just as the slowed growth in 2016 hints at changes in what will drive the industry in 2017, there also are suggestions that in the coming years companies will see patent expiries having a bigger impact on their bottom lines than they have in the past five year. According to the QuintilesIMS Institute, while patent expiries caused $91.1 billion in fewer brand salesfrom 2012 to 2016, that number is expected to grow to $143.5 billion between 2017 and 2021.
A 2017 preview report from EP Vantage, the editorial arm of healthcare market intelligence firm Evaluate, highlights five drugs that collectively have some $6 billion in sales that are expected to go off patent. They are Eli Lilly’s Cialis, which makes up 16% of the company’s U.S. sales; Pfizer’s Viagra, which is 6% of its U.S. sales; Takeda’s Velcade, making up 24% of its U.S. sales; Eli Lilly’s Alimta, bringing in 12% of its U.S. sales; and Johnson and Johnson’s Prezizta, which brings in 6% of its U.S. sales.
Alongside EP Vantage highlighting these big sellers as an indicator of the market size of drugs losing patent protection soon, the QuintilesIMS Institute expects more reduced spending as a result of patent expiries in the next five years than the preceding five. While patent expiry brought some $91.1 billion less in brand spending between 2012 and 2016, from 2017–2021, QuintilesIMS projects that brand spending will be reduced by $143.5 billion, with $27.4 billion in reduced brand spending expected in 2017. This projection includes the expected impact of biosimilars, which will see an increase in numbers in the coming years, but also face such hurdles to adoption.
And slowed spending growth on branded drugs is taking place at the same time as a reduction in the number of new molecular entities and biologics approved by the Food and Drug Administration. Whereas 2015 saw the agency approve a record 45 novel NME and biologics license applications approved, as of mid-December, the agency had only given its approval to 19 NMEs and BLAs.
Despite the potential slowdown in new drugs and the reduced spending on brands that will come as the result of patent expiries, this doesn’t mean there isn’t ground for innovation. One of the last pieces of legislation that President Barack Obama signed was the 21st Century Cures Act, which in addition to funding to fight the epidemic of prescription drug abuse, provides funds and resources to foster drug research and innovation. And with funding for the “cancer moonshot” included in the 21st Century Cures Act, one of the biggest growth drivers in the coming years is expected to be oncology, including immune checkpoint inhibitors, cell therapies, combinations of immune-oncology drugs and molecular targeted agents, among others, identified by the QuintilesIMS Institute as principal drivers of growth.
The QunitilesIMS Institute noted that treatments for central nervous system disorders make up roughly 12% of the global pipeline, and also it expects that in the next five years therapies in the antiviral category — for illnesses ranging from HIV and anthrax to the arthritis and pain category — will be coming to market in the coming years. By October 2016, there were 2,440 global medicines in development, and 2017 is looking promising for several blockbuster treatments, among them Roche’s MS therapy Ocrevus and Sanofi’s novel dermatology therapy dupilumab, both of which are awaiting approval.
Pokémon? Go figure … Gamifying engagement
It probably won’t surprise anyone that I was NOT one of the hundreds of millions of people who got swept away in the whole Pokémon Go thing last summer. If you would have told me a year ago that you were looking for Pikachu, I probably would have said, “God bless you.… Now what are you looking for?”
But with some 600 million downloads in all, and roughly 25 million active daily users at its peak, Pokémon Go might as well be a Harvard Business School case study of how augmented reality, virtual reality and game-ification are changing the way brands engage with consumers. If retailers and CPG companies pay close attention, Pokémon Go offers some fresh ideas on how to drive consumers to their stores and to their brands, including:
- Retail-tainment. As brick and mortar continues to struggle to find its place in a post-omnichannel world, the experience of shopping the store has to change. Retailers must find a way to make it fun. Hunting for Pikachu could drive an awful lot of traffic into an awful lot of stores — particularly, millennials who tend to favor online and mobile over in-store.
- Health-and-wellness engagement. According to Mashable, Pokémon Go players had, collectively, walked 5.4 billion miles by December — that’s roughly 200,000 trips around the world. During the first week of Pokémon Go usage, “activity increase was significant — a boost of 955 steps, or an estimated 11 minutes of additional walking a day,” according to a December 13 Scientific American article, citing a recent study published in the British Medical Journal. While that study concluded that the increased activity was short-lived, it is important to note that although the game requires users to physically move around to collect points, fitness was not necessarily the endgame — but it could have been.
On a completely separate note, this issue of DSN features a fresh new look for 2017, designed to be easier to read and navigate, and to deliver more insight in every page. New features include The Takeaway — a candid, one-on-one discussion each month with an executive in our industry.
Why? We often say retailing is a “people business,” but what do we really know about the people in it?
The Takeaway is NOT about business; it’s about the people behind the business. It’s about life, leadership and the people, places and things that inspire the very best in all of us everyday.
This month, we feature NACDS president and CEO Steve Anderson — just one month shy of his 10th anniversary in chain pharmacy.
Got someone we should feature? Drop me an email at [email protected] — I want to know what you think.