In
the majority of the 12 markets covered by the IMS
Market Prognosis International report,
the major challenge facing governments is balancing resources
with increasing demands for healthcare provision, driven
not only by expanding elderly populations but also patients’ high
expectations for the latest – and more expensive – treatments.
The combined populations of the two largest pharmaceutical
markets, the US and Japan,
account for 50% of the total populations of the 12 markets
covered by the Market Prognosis International report. With
demographic trends reflecting low birth rates and increasing
longevity, further pressure will be placed on healthcare
provision and financing to cater for the growing population
aged over 65 years in all the major markets. Structural
healthcare reform is high on the agenda of a number of
countries.
The proportion of gross domestic
product (GDP) spent on healthcare varies from a low of
7.4% in the UK to a high of 14.7% in the US, although
UK health expenditure is projected to reach 9.4% by 2007,
which is more in line with France, Canada and Australia.
The high level of proportion of GDP expenditure on healthcare
in the US is reflected in its market position as the
leading pharmaceutical market in terms of sales, expected
to reach $350 billion by the end of the prognosis period
(2003-2007).
% GDP spent on healthcare in 2002
Source:
IMS Market Prognosis International, OECD, CMS, and Canadian
Institute of Health Information
Cost-containment measures limit growth
With pharmaceutical spending growth outpacing that of
healthcare in many markets, controlling drug costs has
become a prime target for government cost-containment policies.
Despite the high proportion of GDP spent on healthcare
in Germany (10.6%), cost-containment measures have curbed
pharmaceutical expenditure growth to an estimated 3% in
2001. France regularly overshoots its annual spending growth
ceilings and the 5.3% index set for 2003 is lower than
the actual rise in 2002. Australia aims to bring down its
double-digit growth rate through cost containment measures
that will target the Pharmaceutical Benefits Scheme.
The emphasis
on curbing pharmaceutical costs has largely been on supply
controls, namely pricing and reimbursement
(with the exception of the UK and the US); more countries
are introducing measures to curb demand, largely by influencing
doctors’ prescribing practices. Cost-containment measures
commonly employed amongst the 12 markets include:
- price controls
- restrictions on reimbursements
- increased co-pays
- controls on promotional activity
- new regulations concerning parallel
imports
- establishment of purchasing
groups
- encouragement of generics
usage
- and, increasingly in
some cases, measures to restrict doctors’ prescribing
freedom
The introduction of cost-containment
measures in most countries will create a tougher environment
for the pharmaceutical industry in which to operate,
as lower pharmaceutical expenditure slows market growth.
In Germany and Italy, manufacturers face an increasingly
hostile environment as pharmaceuticals become the focus
of ever-increasing short-term cost-controls. Such measures
have been blamed for reducing the level of competitiveness
of the major markets in the EU for the pharmaceutical
industry.
Switzerland will remain a favourable
environment due to a strong uptake of new products, which
contrasts with other European markets. The UK also stands
out as having one of the more positive operating climates
for the pharmaceutical industry. Despite the
UK government’s efforts in co-operating with industry
to promote the competitiveness of the UK market and providing
a free pricing environment, however, the uptake of new
and innovative products will remain comparably slower
then most countries. This will be further restricted
by the fact that the UK has a high usage of generics
and rapid generic entry when product patents expire.
Despite the cost containment
policies from US healthcare providers and payers, which
will put increased pressure on drug costs, the absence
of direct pricing controls and ongoing support for innovation
will continue to make the largest pharmaceutical market
an attractive environment for brand-name manufacturers.
This
article was written by Thong Van Cao, a Project Manager
for IMS Market Prognosis. For more information on how IMS
can help you deal with pricing and reimbursement issues,
please contact Janice
Haigh from IMS Consulting. |
