Pharma Space Facing Challenges Due to Uncertain Policies

Pharmaceutical Investing
Pharmaceutical Investing

Fitch pharma and healthcare analyst Beau Noafshar said decision making will be supported by a robust global economy in 2020.

Drugmakers are gearing up for a difficult 2020, which may be fraught with international regulatory challenges, including a struggle for drug pricing changes in the US and the looming uncertainties surrounding Brexit.

Beau Noafshar, senior industry analyst of pharmaceuticals and healthcare at international business research firm Fitch Solutions, said decision making will be supported by a robust global economy in 2020.

“We expect emerging markets growth to accelerate versus 2019, whilst developed markets will decelerate slightly,” Noafshar noted during a webinar that took place on Tuesday (February 25).

One of the most crucial factors in the ongoing health of the global healthcare sectors rests on the US pricing reform. “(This critical event could) prove to be the biggest major shock to multinational drugmakers revenues,” Noafshar said, especially as the US market makes up a third of global medicine spending.

While there’s bipartisan agreement to lower the price of pharmaceuticals from both sides of the aisle, Democrats and Republicans are at odds with how to best roll out a nation-wide pricing policy, according to the expert.

In an attempt to stem the tide of quickly increasing prices for medicines, several plans have emerged as possible solutions since affordability is a key topic for patients in the US, with rising drug costs continuing to be a point of contention.

The first plan — a non-starter in Fitch’s view, Noafshar said — is US President Donald Trump’s proposed arrangement to import drugs from Canada. However, the country’s large demand would possibly draw too much supply away from the Canadian market, resulting in shortages.

More likely plans come from both the Democratic and Republican parties. Noafshar said the Democrats’ H.R.3 Bill that was passed by the House of Representatives in December would allow the Department of Health and Human Services to negotiate the price of 250 medicines without competition and high costs.

Noafshar explained the Congressional Budget Office estimated that if passed and applied to the private market, the bill would save a whopping US$456 billion over a decade.

There’s only a slim chance of the bill passing through due to the Republican hold on the Senate, however.

The Republicans have also come up with a solution to the drug pricing issues, Bill H.R.19. The legislation comes with a maximum out-of-pocket cost for patients of about US$3,000 and a stipulation for manufacturers to give an explanation for price hikes of more than 10 percent over a single year.

Despite the support from both political parties, Noafshar said the government will likely be locked in a stalemate leading up to the 2020 presidential election in the US later this year, preventing any form of drug pricing regulation to be enacted.

Pharma at the center stage of Brexit negotiations

Another challenge for the industry at the moment remains the potential impact of Brexit. Noafshar said the firm’s Brexit views are dependent on the future of negotiations.

Talks for a free trade agreement between the European Union (EU) and the recently defected United Kingdom (UK) are said to start in March, he said, and pharma is expected to be a key point of discussion.

A pivotal point in the negotiations includes the fate of the UK’s relationship with the European Medicines Agency (EMA). The federal agency promotes the protection of human and animal health through the evaluation of medicines for human and veterinary use.

“This is of utmost importance to drug makers as regulatory divergence poses a serious risk in terms of additional barriers of entry into the UK market,” he said.

Fitch remains bullish on its outlook for the UK moving forward despite the political struggles, Noafshar said. The firm expects the UK to retain membership to the EMA, helping to maintain regulatory alignment.

He warned, though, that the chance for a downside risk is still present.

A “No-deal Brexit” could come about if the EU and the UK can’t find common ground on divisive issues like fishing waters and labor laws.

Firms have already been taking action to protect themselves against a possible no-deal, which has already caused a decline in pharmaceutical exports from the UK into the EU, Noafshar said.

While political uncertainty still shrouds the healthcare market in the UK in 2020, the analyst said Fitch is looking toward a positive conclusion to the Brexit conversations.

Don’t forget to follow @INN_LifeScience for real-time updates!

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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