Australia - What actions are the Australian government taking to improve the healthcare system and how will this impact the pharmaceutical market?

Prime Minister Kevin Rudd has already implemented an overhaul of the healthcare system and is expected to announce further reforms in the May Budget.

In March 2010, Prime Minister Kevin Rudd announced an A$50 billion (US$46.4 billion) overhaul of the healthcare system, which will free up funds for economic infrastructure over the next decade. The overhaul includes investment to add a record number of medical specialists over the next 10 years, and spending on aged care will also increase.

The government is expected to announce in its May Budget plan to slash US$2 billion in health spending over four years, by paying pharmaceutical companies less for their medicines. The plan will include increasing the use of generic medicines and ensuring that patients pay less for a range of commonly used blood-pressure and cholesterol-lowering drugs. Also under the proposed plan, people could save on the cost of prescription drugs.

Further reading - An in-depth analysis of the Australian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Australia (published May 2010)

UK - How will the aftermath of the economic recession affect the UK pharmaceutical market?

Reductions in health spending and industry job cuts could have an impact on the market, but an ageing population and a health service under pressure will guarantee an increasing demand for pharmaceuticals.

The UK pharmaceutical market is set to experience moderate growth over the coming years, tempered slightly by the effects of the economic recession. Public spending cuts are inevitable, as public debt continues to increase, and health expenditure is set to suffer as a result. In 2010 the NHS budget is £102.3 billion, but this could fall by 2.5 to 3.0 per cent per annum from 2011/12. According to the Budget 2010, the NHS and the Department of Health will be required to make savings of £4.35 billion (US$6.81 billion) by 2012/13. This follows a period of huge growth in health spending under the Labour government, which has seen the NHS budget almost triple. Despite budget constraints, increased pressure on the NHS to cope with the health needs of an ageing population will lead to a rise in demand for pharmaceuticals, and a willingness to invest in new therapies to ensure effective treatments.

Many pharmaceutical companies based in the UK have announced job cuts and site closures in recent months, in an effort to reduce costs. AstraZeneca announced the closure of a number of its R&D sites in March 2010 leading to 3,500 job cuts worldwide, including a site in Charnwood and another in Cambridge. This follows a further 8,000 job cuts within the company worldwide, which were reported in January 2010. In February 2010, GlaxoSmithKline announced in 380 jobs cuts at its R&D site in Essex, following a shift in the company’s research focus. Furthermore, Eli Lilly, Pfizer, GlaxoSmithKline and AstraZeneca all announced job losses worldwide during 2009, affecting positions in the UK. These cuts are to be expected considering the economic climate, as well as upcoming challenges for these companies, including patent expiries, increased generic competition and slowing innovation.

Further reading - An in-depth review of the UK pharmaceutical market is available from Espicom: The Pharmaceutical Market: United Kingdom (published May 2010)

Croatia - How has the prospect of EU accession affected the Croatian pharmaceutical market?

Croatia has boosted investments in healthcare and updated legislation in preparation for EU membership.

Croatia applied for EU membership in February 2003 and has worked hard to align its legislation with the EU acquis. Following a number of political hurdles, Croatia was able to resume talks on EU membership in October 2009, once neighbouring Slovenia had lifted a block on negotiations. When Croatia becomes a member state, most likely in 2011, the pharmaceutical market will benefit from free access to the larger European market. The prospect of EU accession has increased investments into the Croatian healthcare system, as the country has sought to bring it up to European standards. It has also prompted the authorities to align Croatian law with EU legislation. The Medicinal Products Act came into force in July 2007 and a bylaw was adopted in December 2008 to ensure full harmonisation with EU legislation.

Further reading - A detailed review of the Croatian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Croatia (published April 2010)

Denmark - How is the Danish government attempting to reduce healthcare expenditure?

The government is increasing efficiency within the healthcare system, while pharmaceutical prices have been subject to price freezes and caps.

The Danish government is seeking to minimise costs across the healthcare system. The largely successful attempt to convert inpatient operations to outpatient ones has saved both time and money, and is one way in which the Danish hospital service is becoming more efficient. In addition, the local government reform has placed a greater emphasis on the responsibility of the municipalities to provide rehabilitation and nursing home care. This is reinforced by the recent announcement that the Health Minister may raise hospital charges for those patients who are in hospital unnecessarily, and could have been discharged with other appropriate care, to encourage the municipalities to work to get patients discharged from hospital faster. Also, the municipalities are in charge of health promotion and preventative care, and their contribution to the cost of healthcare provides an incentive to do this effectively. The strong growth in hospital prescribing suggests an increase in new therapies being utilised there, while the modest growth in the primary sector is indicative of a steady consumption of pharmaceuticals in general.

Meanwhile, the increasing pharmaceutical expenditure has led to price freezes and caps in recent years. A price ceiling, which has fixed pharmaceutical prices at the level they were in 2006, has been extended to remain in place until the end of 2011. This extension is a sign of the government’s determination to keep the price of pharmaceuticals down, and so this form of price restriction is likely to continue beyond 2011. However, despite the positive results from cost containment measures, efforts to reduce the cost of pharmaceuticals have proved unsuccessful. The savings made have been more than counterbalanced by the wider use of new and expensive pharmaceuticals, which are required to ensure the most effective treatment. This is especially true in areas such as hypertension, high cholesterol and so on, where many new therapies have become available recently.

Further reading - An in-depth analysis of the Danish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Denmark (published April 2010)

USA - What are the US healthcare reform options after the Democrats have lost the supermajority in the Congress?

Options exist but it is not clear that a stripped-down healthcare reform bill can be approved soon.

A key aspect of President Obama’s policies has been to overhaul the healthcare system. In January 2010, the Democrats lost the Senate’s seat in Massachusetts to the Republican candidate Scott Brown. For decades, this seat had been held by Ted Kennedy who had pushed the healthcare reform bill. The loss brought an end to the Democrats’ 60-seat supermajority in the Senate. This is a blow to Barack Obama’s agenda and the healthcare reform is now in doubt. Mr Brown has already expressed his opposition to the healthcare reform bill. Ironically, he has supported a similar bill in Massachusetts.

There are several options left for passing the healthcare reform bill, but none of them are clear. One option would be for Democrats to press the House to pass the Senate’s version of the healthcare reform; the Senate’s version was approved on 24th December 2009, without any support from the Republicans, whilst the House bill was approved on 7th November 2009 with one Republican’s backing. However, House Speaker Nancy Pelosi has said that she does not think that this version could pass the House without changes, particularly regarding the tax on high-insurance plans and the less-restrictive use of federal funds to cover abortions.

Another option would be to put together a scaled-back healthcare bill and take it through the reconciliation process, but such a move seems unlikely too. This would require a 51-vote majority in the Senate but is limited to issues with a budgetary impact. Both options would require more time just when Democrats need to address other major issues, especially the overhaul of banking regulations, an energy bill for limiting emissions of greenhouse gases and the immigration reform that would regularise the status of illegal immigrants. President Obama has indicated that he might be willing to scale back his proposed healthcare overhaul in order to attract bipartisan support but it is not clear that a stripped-down bill can be approved soon.

Further reading - A detailed analysis of the US pharmaceutical market is available from Espicom: The Pharmaceutical Market: USA (published January 2010)

UK - Report Forecasts Future for NHS Funding

A report into the possible future of NHS funding was published in July 2009. The report, How cold will it be? Prospects for NHS Funding: 2011-17, by The King’s Fund and Institute for Fiscal Studies, analyses how much of an impact the economic recession could have on NHS funding. Public spending will be inevitably hit by the financial crisis, and the report analyses the different outcomes this could have on the NHS in England between 2011/12 to 2016/17.

There are three possible funding outcomes over the next two spending review periods:

• ‘Tepid’ – annual real increases of 2% for the first three years, increasing to 3% for the final three years;
• ‘Cold’ – zero real change; and
• ‘Arctic’ – annual real reductions of 2% for the first three years, falling to 1% for the final three years.

The financial future of the NHS remains uncertain, and depends on the extent of tax increases and productivity levels. The report notes that over the next spending review period (2011/12-2013/14) the budget could reduce for all government areas, including the NHS, by an average of 2.3% per year. If the NHS were to be protected by a greater or lesser degree, this could result in greater cuts for other departments, although this could be lessened by an increase in taxes.

The changes to the budget could have implications on taxation. Even the ‘tepid’ scenario would require an increase in taxation (or reduction in spending on social security benefits and tax credits) of £6.9 billion, which would be equivalent to £220 extra per family, or raised through a 1.6% increase in the level of VAT.

The report notes that demographic pressures, including a rising and ageing population, are likely to cost the NHS around £1.0-1.4 billion extra each year at 2010/11 prices, and would require funding increases of around 1.1% to maintain quality. Only the ‘tepid’ scenario would provide enough money to cover this. These pressures are also adding to the demands placed on the healthcare system, and the report argues that productivity gains are essential, regardless of the future funding of the NHS.

The report notes that the NHS could fill this gap in funding with increased productivity levels. However, these would need to be significant if they were to make an impact. The report states that over the period between 2011 and 2017, the NHS would need to make gains of between £21.6 billion and £47.0 billion, equivalent to improvements of 3.4% to 7.4% per year, or £3.6 billion to £7.8 billion per year.

The report argues that the NHS in England is in some ways better prepared than ever to deal with the downturn. Current funding levels mean that it has employed more professionals, there have been huge improvements in the infrastructure and waiting times have been dramatically reduced.

Further reading - An in-depth analysis of the UK pharmaceutical market, including some background information on NHS funding, is available from Espicom: The Pharmaceutical Market: United Kingdom (published June 2009)

USA - Hospitals to Contribute US$155 billion to Healthcare Reform

Three major hospital associations have agreed to contribute US$155 billion over ten years to the healthcare reform, it was announced on 8th July 2009.

Vice President Joe Biden did not provide specific details, but said the savings would come from delivery system reforms and trimming the annual inflationary adjustments to hospital reimbursement payments from two government health programmes.

It is expected that around US$100 billion will come from lower Medicare and Medicaid payments to hospitals, while a further US$40 billion will be saved by reducing the subsidies paid to hospitals to care for the uninsured.

The three hospital associations participating in the deal are the American Hospital Association, the Hospital Corporation of America and the Catholic Health Association of the United States.

The deal is similar to the agreement made with the pharmaceutical industry in June 2009, under which drug companies agreed to contribute US$80 billion over ten years towards the costs of the healthcare reform. However, both deals are contingent on the healthcare reform legislation being passed.

Further reading - An in-depth review of the US pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: USA (published March 2009)

USA - US$80 billion Deal Reached Between the US Government and Drug Companies

Drug companies have pledged to save the US healthcare system US$80 billion over the next decade, primarily in the form of discounts on branded pharmaceuticals, in a deal agreed on 20th June 2009.

The agreement has been welcomed by President Obama, who called it a “significant breakthrough on the road to healthcare reform”.

The pharmaceutical companies have agreed to a provide a discount of at least 50 per cent to elderly and disabled patients, who face a gap in Medicare insurance coverage when their drug costs reach a certain level, known as the ‘doughnut hole’; no reimbursement is provided for payments between US$2,700 and US$6,154.

The manufacturers’ aim is to fill the ‘doughnut hole’ while subsequently boosting incremental sales. According to a study by the Kaiser Foundation in 2008, about 500,000 Medicare beneficiaries, or 15 per cent, stop using their prescription drugs when in the ‘doughnut hole’. Therefore, the discounts will encourage patients to continue to take their medicines and could, in effect, generate additional sales volume.

The figure of US$80 billion reflects the total projected savings to the healthcare system, from the drug discounts in the Medicare coverage gap, in addition to other concessions which are yet to be specified. There is speculation that there could be additional savings for those on low incomes, but discussions are still taking place between industry officials before the precise details are finalised. The US$80 billion figure translates into around 2 to 3 per cent of US drug spending, according to Deutsche Bank, and the savings will go towards funding President Obama’s proposed overhaul of the healthcare system.

The agreement was made between the Pharmaceutical Research and Manufacturers of the America Industry Association and the Senate Finance Committee Chairman, Max Baucus. Assuming that the drug overhaul legislation becomes law, the agreement is likely to take effect in July 2010.

Further reading - An in-depth review of the US pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: USA (published March 2009)

USA - Public Health Insurance Bill Unveiled, June 2009

President Obama has indicated that he views major reform of the US healthcare system as a priority, arguing in February 2009 that it ‘…cannot wait, it must not wait, and it will not wait another year’. Details are slow in emerging, although a number of basic principles have been laid down:

• Reduce long-term growth of health care costs for businesses and government
• Protect families from bankruptcy or debt because of health care costs
• Guarantee choice of doctors and health plans
• Invest in prevention and wellness
• Improve patient safety and quality of care
• Assure affordable, quality health coverage for all Americans
• Maintain coverage when you change or lose your job
• End barriers to coverage for people with pre-existing medical conditions

Reducing the number of uninsured Americans is a key, and contentious, component of this. One element became a little clearer in June 2009, with the introduction into the House of Bill H.R. 2668, the Choice in Health Options Insures Care for Everyone (CHOICE) Act. This is being sponsored by Chris Murphy (D-Conn.), and co-sponsored by Peter Welch (D-Vermont) and Bruce Braley (D-Iowa).

The bill would create a Federal public health insurance plan for the first time in the USA. It would not be compulsory, but would compete with private health plans for members. It was introduced in the House on June 2nd 2009 and referred to the House Committee on Energy and Commerce, which has jurisdiction over healthcare legislation, and also the House Ways and Means Committee. It will probably form part of a wider health reform plan currently being prepared in Congress by the Democrats.

The proposed public plan (the American Trust Health Plan) would be operated by the DHHS and would be self-financing. Anyone eligible to purchase private health insurance would be able to enroll. All healthcare providers providing services under Medicare would be required to participate. Premiums would be set by the DHHS. Regional variations in premiums will be allowed, as will other variations in accordance with existing norms.

The bill’s sponsors hope that the public plan will give private providers an incentive to reduce costs and make health insurance more affordable. Critics see it as a first step on the road to a compulsory public system, similar to that proposed by President Clinton in 1993. That effort failed as a result of a concerted lobbying effort by the healthcare industry. The current bill may face a more benign Congress, but pressure from the private insurance industry and its allies is sure to be strong, and will test the resolve of Democrats to present a united front.

Further reading - An in-depth review of the US pharmaceutical market, including some background information on the healthcare system, is available from Espicom: The Pharmaceutical Market: USA (published March 2009)