IMS on Health Care Trends

IMS has a research group called the IMS Institute for Healthcare Informatics, which issues useful information, often focussing on drugs as you might expect.  A recent report gives its interpretation of health care trends and what they might mean for the pharmaceutical industry.  (IMS Report)   The report identifies ten “harbingers” of change; events that may later be seen as major turning points relating to the use of drugs and the state of the drug industry.  The first is the involvement of large technology companies, Apple, Google, Samsung, in bringing new technologies to health care.  While smartphone use is becoming ubiquitous, and many people are fascinated with apps and data, and there is an obvious potential to improve the convenience and timeliness of health care, it is far too early, in my judgment, to suggest that this technology will have any meaningful effect of health outcomes or spending.  See, i.e., all the HIT spending in the last two decades.  The second is the lesson of the new hep C drugs, with their high up-front costs, but immense improvement in outcomes.  This is the usual health system quandary–will the payers who bear the short-term expense all reap the longer-term benefits?  The third harbinger is new vaccines, for deadly diseases, including malaria.  Collaborations between drug companies and non-profit institutions like the Gates Foundation can ensure that these products are developed and used in markets which are usually poor and unable to afford the cost without help.  The fourth is biologics coming to the less-developed world.  These products, often in the specialty category, are very expensive and are the new source of growth and high profits for manufacturers.  Identifying a model to bring them to a larger total market, but at affordable prices is a challenge for the drug companies.

The fifth is more release and use of detailed health data.  Notwithstanding privacy concerns, governments are trying to make their own and private sources of data available for analysis to improve the functioning of the health system.  CMS, for example, has made data available on physician practice patterns within Medicare.  The availability of this data can affect perceptions of treatment options, including drugs.  The sixth trend is more drug spending in developed countries, which they likely don’t welcome, since the shift to generics has been a factor in lower overall health costs.  Unfortunately, generics, along with specialty compounds, seem to be a primary source of the resurgence in drug spending growth.  Manufacturers can anticipate renewed blowback on their pricing practices and more demands for proof of real improvements in health outcomes.  The seventh is the overall shift to “value” payment systems in the United States, which likely will affect drug companies along with other providers of medical care and goods. The notion that these payment mechanisms alone will limit cost growth is likely flawed, as providers will eventually demand, and be in a position to obtain, higher unit pricing, whether it is fee-for-service or value-based.  The eighth is the increased expectation that doctors consider and discuss with patients the costs of various treatment options.  This again can impact drug manufacturers and impose upon them a need to supply physicians with easy-to-understand explanations of why their higher-priced products are beneficial to a patient’s care.  The ninth harbinger is the loosening by China of drug price caps, which may encourage both the domestic Chinese drug industry and patient demand in that very large country and market.  And last, the emergence of new consolidated drug supply chain groupings, such as the Walgreens Boots alliance or the McKesson/Celesion tie up.  These very large purchasers will have enhanced leverage vis-a-vis manufacturers and pose new challenges for them.   All in all, an interesting report.