The pharmaceutical industry is one of the key components of the American economy. According to a report released by IMS Health, by 2017, the US is likely to capture the highest share (31%) of the global market for medicines, which will reach between $1.135 trillion and $1.235 trillion.
This vital sector of the world’s largest economy has been undergoing a paradigm shift in the last few years, and Accenture has attributed the transformation to 3 major developments. Let us see what they are.
1. Emergence of value-based reimbursement models
Traditionally, the American healthcare reimbursement model was based on the volume of services provided. However, the Affordable Care Act (ACA) heralded a major change in the reimbursement system, linking payments to patient outcomes. The article, The Affordable Care Act’s Payment and Delivery System Reforms: A Progress Report at Five Years, states the ACA lowered annual increases in Medicare payment rates for hospitals and other facilities and explicitly set an expectation for providers to become more efficient over time. The report Obamacare 2.0: the White House’s radical new plan to change how doctors get paid reveals that 85% of Medicare payments will be linked to the quality of patient outcomes by 2016. This is expected to rise to 90%, by 2018. The message is loud and clear – pharmaceutical firms need to re-orient their business models to deliver the best value.
2. Growth in the significance of Integrated Delivery Networks (IDNs)
The role of individual physicians in prescribing drugs for patients has reduced considerably over the last few years. The paper Integrated Delivery Networks: A Detour On The Road To Integrated Health Care? points out that many healthcare organizations have acquired physician practices and placed several doctors on their payroll. The paper also states the trend of doctor-hospital alliances is increasing and several hospitals are coming up with their HMOs. Staying on with the reimbursement of healthcare expenditure, the ACA provides for the doctor, hospital, or post-acute service provider to be covered under a single payment, which incentivizes the various providers involved in a given patient’s care to work better together. This has resulted in many healthcare service organizations coming up with protocols for the usage of medicines, and the business models of drug manufacturing companies need to be geared up to meet these protocols.
3. Digitization of medication information
The advent of the information age has profoundly affected the way doctors and other healthcare service providers access information. The report The Rebirth Of The Pharmaceutical Sales Force states physicians now access the medication information previously controlled by sales reps through a variety of sources, including medical conferences and conversations with their peers. Digitization has enabled healthcare professionals obtain information in a quick and convenient manner. The report further states 25% of medical rep interactions have been replaced with digital interactions. Pharmaceutical companies need to ensure their sales and business activities are digital-friendly to maximize revenues.
The American pharmaceutical industry is undergoing a sea change in recent times due to the following three developments.
- Development of reimbursement systems based on patient outcomes
- Increase in the significance of IDNs
- Growth in the digitization of healthcare service related information
These changes are compelling pharmaceutical firms to come up with new, innovative business models. Hope you liked this post. Do share your views.