Healthcare Cash Crisis Will Hit Drugmakers -Report
LONDON -(Dow Jones)- A looming cash crisis in global healthcare systems threatens to seriously disrupt drug companies' research into new drugs, pipelines, and pricing, a new report will warn this month.
At the end of May, global management consultancy AT Kearney is to publish a paper, Healthcare Out Of Balance, warning healthcare systems in developed nations, including the U.S., U.K. and Europe, are simply not sustainable as it is becoming increasingly hard to fund expensive treatments for aging populations.
Healthcare is a $4.5 trillion a year industry and consumes 10% of global gross domestic product. Spending on healthcare is forecast to rise at 4% a year, but as the populations of developed nations get older there will be fewer people of working age to pay for it through taxes or insurance premiums, the report will say.
AT Kearney U.K. health practice leader and author of the report Jonathan Anscombe told a London seminar Monday that today's healthcare systems were designed for the postwar "baby-boomer" generation, when there where typically six or seven working people for everyone in retirement. That will have dwindled to about three by 2020, he said.
Anscombe said in response future healthcare spending is likely to focus on a few "core services", like prevention and managing chronic illnesses. Expensive, biologic drugs that extend the lives of cancer patients - which dominate drug makers' current pipelines - will not be included, potentially harming future sales.
As healthcare spending in developing nations like Brazil, Russia, India and China rises, drug companies will shift their focus to the diseases of the developing world like malaria, tuberculosis and HIV, Anscombe said. GlaxoSmithKline PLC (GSK.LN) has already started down this road, he said.
He added differential pricing -where drugs cost less in poorer countries - will become the norm and health systems will demand more "risk-sharing" deals like that struck between the U.K.'s NHS and Johnson & Johnson (JNJ), which has agreed to reimburse the NHS for every patient who fails to respond to the cancer drug Velcade, he said.
And Anscombe said the big risk is that if revenue from the U.S. market starts to fall it won't be made up for by sales in developing markets - potentially disrupting the "innovation cycle" that depends on this cash for the development of new drugs.
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-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@ dowjones.com