Last week Moody's downgraded its outlook for the pharmaceutical industry from stable to negative, citing loss of exclusivity, regulatory and political headwinds and potential liability issues. That mostly covers it but pulling back to look at the industry in context, the last few years - excluding the historic development of mRNA vaccines - have been marked by a dependency on the regulatory system that so disrupted market forces, the inevitable negative response was triggered.
Drug rebates, led to favorable formulary placement, which led to higher utilization and lower insurance premiums. The FDA waved through drugs and indications on the accelerated pathway without follow-on reviews until last year. The approval of Aduhelm landed squarely in the drug price debate, forcing CMS to rein in reimbursement - something they could have done all along. NIH funding, slowing on a rate of change basis, is now risk adverse, concentrating research among a relatively small number of institutions and disease categories. Their aversion to risk will not be rewarded as they are on the short list for oversight and investigations come 2023.
While the SCOTUS decision, West Virginia v. EPA, reduces the threat of regulatory interference in drug prices, the cost of care, generally, is rising, forcing insurers to be more restrained in their spending. That will be especially true if Medicare Part D is reformed. As drugs lose their exclusivity, that downward pressure becomes particularly acute.
It is not a pretty picture and it will get worse before it gets better.
Emily Evans
Managing Director – Health Policy
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