Five Drug-Pricing Predictions for 2021

This is the time of year for two kinds of articles: year-in-review pieces that seek to glean lessons from the year about to pass and forward-looking commentaries that look to the months ahead. Given that we have all, collectively, agree not to speak of 2020, here is a look at what’s coming in 2021.

This is an annual effort; we’ve graded last year’s predictions below. Spoiler alert: 2020 didn’t go the way we expected.

Here’s where we’re coming down on 2021. As usual, there are some gimmes here, and some mistakes that we know we’re making. But we’re on the record:

1/ Transparency Will Make a Comeback

We went all-in on “transparency” two years ago, reasoning that a combination of state legislation and DTC-ad policies would make drug prices more apparent to the masses. The topic is back this year, with a twist. In 2021, We’ll be watching for more transparency around net prices. An as-yet-unchallenged Trump administration rule would require insurance companies to disclose net prices starting a year from now. The just-passed stimulus bill also calls for (aggregate) net pricing data to be released, though the horizon for implementation of that is a bit longer. And the rebate-reform rule could also draw more pricing behavior into the light.

2/ Employers Will Throw Their Weight Around (More Visibly, Anyway)

When it comes to “skin in the game,” no one is more invested in watching health care costs generally – and drug costs specifically – than employers. This isn’t a newsflash: billions of pixels were spilled around the moribund Haven effort by Amazon, J.P. Morgan Chase and Berkshire Hathaway to control prices. But we expect less talk and more action in the year to come.

Take gene therapy. Insurance companies and PBMs are increasingly comfortable with new mechanisms to ensure high-cost, one-time therapies don’t swamp the system. Employers, on the other hand, remain nervous, according to the Business Group on Health’s 2021 Plan Design Survey. The most popular cost-control strategy for high-cost treatments? Delay inclusion on formularies.

3/ Medicare Part D Reform Legislation Comes of Age … and Passes

Smart money would bet against any major U.S. health policy legislation in 2021, but we’ll take a flier on this one. Perhaps the only bipartisan, cross-ideological drug-pricing opinion left in America is that the Medicare Part D benefit is broken. Because there are no out-of-pocket caps, a portion of America’s seniors get soaked in a way that would never happen with private insurance.

Seniors need this fixed. The pharmaceutical industry is reportedly willing to back an experiment – and take a hit to revenue – that helps push this along. The media are paying attention, and fixes have been proposed by lawmakers on both sides of the aisle.

4/ The China Experiment Will Mint Winners

Over the past couple of years, the Chinese government has offered biopharmaceutical companies an intriguing deal: access to the largest market in the world through the state-run insurance market in return for mammoth price cuts. The latest group of 119 meds hit the list this week at an average of discount of 50.64% over the existing prices in China. Reuters said inclusion has the potential to lead to “a massive leap in sales.”

It’s the ultimate question of swapping margins for volume. While the implications are myriad (the impact on the domestic pharma industry in China is especially intriguing), the prediction here is that the trade-off will be more than worth it for the companies that engage: we will see at least one pharmaceutical company raise earnings estimates on the strength of low-cost, high-volume China sales.

5/ COVID-19 Prices Come Back to Bite Biopharma

Let us go on the record: there has never been a scientific achievement in our lifetime that matches the COVID-19 vaccine development process, and that includes the completion of the human genome, the GPS system and the iPhone.

But the halo effect will only last so long. In 2021, the biopharmaceutical industry will have to grapple with questions about profiting from a pandemic. Revenue from COVID-19 therapies may raise eyebrows, and the fraught question of how vaccines will be priced once COVID-19 moves from a pandemic threat to an endemic will become part of the environment. Those questions may not be fair, but they will get asked anyway, dominating the latter half of 2021.

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Looking back a year ago, there is a lot about 2020 that didn’t fit anyone’s predictions. Here’s what we got right and – in greater volume – what we got wrong from last year’s effort.

  1. The Most Meaningful New Policies Will Come from Statehouses. States definitely saw more legislative action than Washington did, and a Supreme Court decision further bolstered the argument. GOT IT RIGHT.
  2. ICER Will Get Competition. It’s always felt odd that the Institute for Clinical and Economic Review should have a monopoly on public-facing cost-effectiveness assessments, and we thought that 2020 would be the year we saw other efforts hit the mainstream. If anything, ICER is better established now than they were a year ago. GOT IT WRONG.
  3. Before “Nuclear Winter,” We’ll Get “Silent Spring.” We thought that saber-rattling about price controls would make biotech less attractive to venture capitalists, weakening the industry from the bottom up. But nope: deal activity was up in 2020. GOT IT WRONG.
  4. Drug Prices Will Fall (and People Will Notice). Net drug prices fell by just about every measure. But no one really noticed. HALF-CREDIT
  5. The Defining Battle of 2020 Will be Semantic. Our assumption was that H.R. 3, the Democrats drug-pricing bill, would be an election-year conversation driver, pitting those who support “negotiations” against those warning of “price controls.” But COVID-19 hit, and who wants to debate drug-pricing semantics in a pandemic? GOT IT WRONG.

Generously, that’s 1.5 out of 5, or 30%. That’s a fantastic NHL shooting percentage, but a pretty cloudy crystal ball. Let’s hope for a more predictable 2021.

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These predictions were first published in our weekly Value Report newsletter. If you don’t receive it, you may sign up here.

All of W2O’s Value+Access content — newsletters, analytics, podcasts, videos and more — are available on our value hub at value.w2ogroup.com.

Brian Reid
Brian Reid

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