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Are we nearing the end of gloom and doom for the pharma industry: Insights from the EGA meeting
I had the pleasure of attending the European Generic Medicines Association (EGA) annual meeting a few days ago and was struck by how little has changed for the industry. Certainly the tone of presentations was very much reminiscent of the 'gloom and doom' scenarios forecasting leaner times ahead for manufacturers of generic medicines that we've been hearing the past few years, but there was also an undertone of pride in the industry's continuing resilience in the face of mounting cost-containment pressures.
A presentation by the OECD's Deputy Director of Employment, Labour and Social Affairs, Mark Pearson, described the current situation and outlook as one of "gloom and doom for the industry." This view is very much based on the OECD's own forecast, made publicly available a few days after the EGA annual meeting. The data show that healthcare spending in OECD countries will increase by 1 percentage point of Gross Domestic Product (GDP) per decade for the next 5-6 decades, according to Pearson. In other words, healthcare spending will grow faster than the general economy. Public spending on healthcare will eventually reach 10% of GDP on average, driven partly by an ageing population, but mainly spearheaded by the rich spending more on healthcare, according to Pearson.
In principle, increased spending should be good news for pharmaceutical companies - originator and generic alike. However, the difficulty is that there may not be much disposable income at the state level to dedicate to healthcare. In Pearson's view, to fund the extra spending governments have three options: 1) cut other types of public spending and use those savings to spend on healthcare; 2) increase taxation and 3) secure more private funding in the healthcare sector.
Pearson was quick to point out that the first option is not really open any longer for developed European economies for the simple reason that among the government's other main spending areas pension spending cannot be reduced, defence spending is not high and has already been reduced to the extent possible and some savings have already been achieved from cuts in government spending on housing and business subsidies.
The second option - increasing taxation - can be done only to a limited extent because an ageing population means there are fewer people in employment and paying tax on their salaries - so unless the tax base is expanded to include pensioners European governments would struggle to raise additional tax.
In terms of the third option, Pearson warned that increasing reliance on private insurance tends to increase overall healthcare spending while at the same time increasing access inequalities for the country's population. One option he suggested is to review the basket of healthcare services provided by the public sector and redefine what constitutes an essential service and what is a 'nice to have' add-on.
Given these constraints, Pearson argued (a view also echoed by several other speakers at the EGA meeting) that generics will help governments balance the budget. Partly it is a question of increasing generic utilisation and partly a question of reviewing clinical practices and removing medicines - especially expensive branded ones - which are not as effective as some of the newer medicines on the market, many of which are already available in generic form.
It remains to be seen what shape future policy will take in developed markets, as some of the policy measures discussed are either risky for the respective government (e.g., tax increases) or likely to face resistance from the medical profession (e.g., reviewing clinical practices and taking a more prescriptive approach to treatment guidelines and prescribing). Whatever the direction and speed of policy reforms, one thing is certain: generics, and increasingly biosimilars, will play a central role in ensuring healthcare system sustainability, so that future generations can enjoy at least some of the universality of healthcare access that most Europeans now take for granted.
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