The perfect storm on pharmaceuticals

Although pharmaceutical market is by definition anti-cyclical, meaning little influenced by economic cycles given the nature of the good and the needs it satisfies, it nevertheless risks being heavily affected by the contingent economic dynamics dictated by Covid first and by the war in Ukraine later, converging to penalize drugs and Co.

Inflation which has rocketed to unprecedented levels for over 20 years is generating a significant increase in costs (COGS) for Companies. At the same time, public spending, as well as limited by reduced economic growth (i.e.: reduced tax revenue), is necessarily diverted elsewhere, towards energy and related public subsidies, as well as restricted by having to deal with the dizzying post-Covid debt

All in a scenario in which a restrictive trend in public pharmaceutical spending is already underway, especially through drug reimbursement prices (Germany, France, UK, Spain, in its own way also the USA, etc.)

Just as new and more expensive therapies (ATMPs, combinations, extension to earlier lines of treatment) arrive to put pressure on the system

So: increase in costs (COGS) due to inflation but reduction of NHS resources for pharma because public spending, already under restrictions, is needed for something else, while new, more expensive therapies are knocking. The perfect storm.

The inflationary pressure that will increase costs will not turn into an increase in the prices of pharmaceuticals, as instead foreseen by the canonical economic doctrine, because the payer is public, quasi-monopsonist, which, for the reasons set out above, will significantly reduce the willingness-to-pay towards drugs

Therefore, compared to the past and today, there will be a growing significant difficulty in obtaining the same prices and reimbursement for the same demonstrated value, or, in order to obtain a premium price, it will be necessary to demonstrate a high added therapeutic and economic value much more than as required in the past.

Not only for new drugs, the persistence of a double-digit inflation rate, or almost, will impact on the price of drugs already on the market, now pretty stable over time, but on which the companies will pressure for a periodic upward adjustment in alignment with real value otherwise eroded by inflation

An overall scenario, therefore, on new and old drugs, as challenging as never before for HTA and market access, on which future competitiveness between companies will be played out, but which for the entire sector represents a serious risk of slowing down their innovation and patient access to new therapies.