BMI View: The US healthcare market will continue to offer considerable commercial opportunities that are higher than what the already large economy would indicate. This is due to the decentralised and privatised nature of the operating environment. There are also numerous intermediaries between patients and providers of medical services, with each entity claiming a component of overall expenditure. Healthcare reform is taking place, and efficiencies are being realised, expanding the prospects for new market entrants.
Headline Expenditure Projections
Pharmaceuticals : USD371.2bn in 2014 to USD383.1bn in 2015; +3.2% growth. Market size revised upwards since Q215 due to receipt of new historical data .
Healthcare : USD3,009.9bn in 2014 to USD3,148.4bn in 2015; +4.6% growth. Forecast revised downwards due to receipt of new historical data.
The US has a Pharmaceutical Risk/Reward Index (RRI) score of 82.9 out of 100 for Q315. This is an increase from the 81.7 in Q215 and the 80.5 recorded in Q115.The high RRI score recorded by the US underlines the pharmaceutical market's unassailable status as the most lucrative globally. This is due to unparalleled healthcare access, considerable spending power, a high burden of disease, minimal market access barriers and intense company activity. The key risks to this positive outlook are the increasing influence of pharmacy benefit managers and greater regulation, such as the Branded Prescription Drug Fee.
Key Trends And Developments
Republicans in the US House of Representatives approved a joint House-Senate budget plan, a measure that aids the party's goal of derailing President Barack Obama's signature healthcare reform law in 2015. The Republican-authored plan is looking to remove deficits by 2024 through deep cuts to social programmes while boosting military spending by almost USD40bn in 2016. The budget seeks to cut around USD5,300bn from domestic expenditure in 10 years, with deep cuts to programmes that serve the poor, education and infrastructure. No tax increase is proposed in the budget. With the passage of the budget, Republicans gets a rare opportunity to use a procedural tool that would help to revoke or replace the 'Obamacare'.
The US Department of Health and Human Services' inspector general is to investigate price rises implemented by some generic drug makers. The move has come following a request from members of Congress. It is BMI view that this investigation will be potentially embarrassing for the generic drug industry and particularly those companies that have been accused of not providing information on pricing.
The FDA approved Sandoz (Novartis)' filgrastim biosimilar, Zarxio. The product, a biosimilar version of Amgen's Neupogen, is the first biosimilar to be approved in the US. Sandoz filed its biosimilar application in July 2014, becoming the first company to test the FDA's biosimilar regulatory approval pathway created by the Biologics Price Competition and Innovation Act of 2009.
More than 80% of consumers in the US preferred to more regularly purchase generic medicines than branded ones, while 42% preferred to always buy generic medicines over their branded counterpart, according to a March 2015 survey by Harris Poll. The survey, which involved 2,255 US adults, also revealed that 50% of people were willing to buy generic medicines for up to USD10 for a 30-day drug supply, while 28% said that they would not mind paying between USD10 and USD25. The study found that 32% consumer would go to a pharmacy chain, 17% to a discount pharmacy, 14% would purchase drugs online and 11% preferred supermarket pharmacies.
BMI Economic View
The US economy will grow at a faster pace in 2015 and 2016, with real GDP expanding by 2.9% and 2.6% over those two years respectively, compared to the 2.4% seen in 2014. The main driver of this growth will be the private sector, with household consumption bolstered by lower inflation, improved labour market, and low borrowing costs. Investment will be bolstered by low interest rates, and by government initiatives to expand transport infrastructure. These factors will help to offset the headwinds associated with a strong US dollar, which will weigh on net exports.
BMI Political View
The next US president, who will be elected in November 2016 and take office in January 2017, is likely to adopt a more assertive military posture than President Barack Obama, whom critics argue has been the most hesitant or even 'isolationist' president in decades. Of the most plausible 2016 presidential candidates, former Secretary of State Hillary Clinton from the Democratic Party has solid foreign policy experience and is widely considered to be an interventionist, meaning that we would expect her to be much more engaged with overseas developments. Although the Republican Party frontrunner is less clear cut, the party has traditionally favoured a robust military profile worldwide. The arrival of a more assertive president is likely to concern countries that have become accustomed to Obama's cautious approach, such as Russia and China, and this will lead to geopolitical tensions in Eastern Europe and East Asia, respectively. That said, there will still be considerable limitations on Washington's ability to shape global events, militarily or diplomatically, as the world is becoming increasingly multi-polar.