IHS Healthcare and Pharma

Key Industry Drivers for 2014

Gustav Ando
Director
Healthcare and Pharma

1. The foundations for economic recovery

continue to be in place

The global economy is expected to see

a recovery in 2014 and 2015. However,
there is a marked shift in dynamics over
where the growth is expected. Average
growth in emerging markets has fallen
1. The foundations for economic
steadily to 4.7% in 2013, while the
recovery continue to be in place
outlook for advanced markets is stronger
than it has been for many years.

Add to this the scarring experience several pharmaceutical companies had in Chinaamid a
clampdown on marketing practicesand we see several significant players deciding to reset
their agenda in emerging markets.

While much attention is focused on the detrimental impact of healthcare reform in general,
the impact will be felt hardest in key European markets especially Germany, France, UK,
Southern Europe and the Nordics. Interestingly, the global pharmaceutical industry continues
to be heavy dependant and focused on these regions.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

2. The United States first full year of ACA

The focus has been on the stuttering implementation of Medicaid
expansion amid continued political resistance. Midterm elections will
be critical in deciding how fast or slow implementation will happen.
1. The foundations
economic
The bulk of the patent
cliff is over, for
meaning
that the market will return to
recoveryincreases
continue in
to pharmaceutical
be in place
being driven significant
prices
Health spend will grew 5% in 2013 and is expecting to rise above 6% in
2014 our assumptions are based on a more gradualistic impact of
Medicaid expansion than for example CMS (which subsequently revised
its estimations).
Pharmaceutical prices declined dramatically in September 2013 and
there is more pushback from payers on pricing.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

3. Europe/Eurozone instability will continue to suppress

public health expenditure
Greece and Italy will experience negative and lower growth
(respectively), with Italy implementing its spending review. Spain is also
declining significantly due to co-payments and procurement.
Health spend will
significantlyforineconomic
France with newly implemented
1. grow
The foundations
recoverycontrols,
continueand
to be
in place
price cuts, prescription
a focus
on home care. The
transition to ITR is having a significant impact.
Germany has abandoned the retroactive benefit assessments, but looks
to prolong price freezes, and there may be other non-AMNOG-related
reforms.
UKs VBP pushed towards the end of the year

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

4. Secondary emerging markets

are expanding healthcare insurance
The Philippines continues to be a fast-growing market, and a law
introducing universal health was enacted by President Aquino in June
2013.
Indonesia's universal
coverage
was launched on 1 January
1. Thehealthcare
foundations
for economic
in place
2014 with a goalrecovery
of 100%continue
coveragetoinbefive
years for the world's fourth
most populous country. The universal healthcare system, Jaminan
Kesehatan Nasional (JKN), will transform Indonesia from a primarily selfpaid market to an insurance-driven healthcare market.
Markets such as Nigeria, UAE and Qatar are also expanding their
insurance coverage.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

5. Reimbursement continues to offer a mixed picture

1. The foundations for economic

recovery continue to be in place

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

6. Patent expirations continue to be a significant driver,

but it is a comparatively quiet year
2014 will be a comparatively quiet year among patent expirations
following the turbulent 2011-2013 period.
The patents to expire include drugs such as Temodar, Evista, Avelox,
Nasonex, and Nexium.
1. The foundations for economic
recovery continue to be in place
In the biosimilars
space, there are more potential negative drivers with
challenges to Herceptin, Lantus and Rituxan in Europe.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

7. IRP baskets continue to evolve

Portugal has already changed its basket and there could be changes in
Turkey.
Increasing fears that prices in New Zealand and South Korea could trickle
into much more1.important
markets.
The foundations
for economic
recovery continue to be in place
Price harmonisation
efforts in GCC (collective procurement starting 2014)
and Baltics.
Colombia is launching its new reference pricing system which will target
patented and generic drugs, whilst Mexico is looking at international
reference pricing in 2014 during next round of negotiations.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

8. Drug shortages will continue, but clampdowns

on parallel exports are seen in many countries
Drug shortages will increase due to parallel exportwith several
countries (Greece, Czech Republic, Slovakia and Romania, among others)
banning exports of certain drugs.
Italy and Bulgaria
looking to
parallel exports. Poland has
1. are
Thealso
foundations
forcurb
economic
recovery
continue
be in place
highlighted the issue
as an
area oftogrowing
concern.
Whilst parallel trade continues to be a significant negative driver,
governments are beginning to realize the negative consequences on a
stable supply of essential pharmaceuticals

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

9. Price cuts in Japan but some incentives for innovation

The government has concluded that the average price cut rate in April
2014 will be 5.7%excluding the impact of a sales tax hike.
However, Japan remains one of the few major markets where there are
constructive discussions
around increasing
the reward for innovation.
1. The foundations
for economic
recovery continue to be in place
The country is continuing
its pilot programme of exempting innovative
products which fulfil certain criteria from the price cuts although it
backed down from its December 2013 proposal to turn the pilot
programme into a permanent fixture on the market.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

10. New technology developments

At the tail-end of 2013, the FDA approved Gileads Sovaldi (sofosbuvir),
the first approval of an all-oral, interferon-free combination therapy in
hepatitis C. Whilst J&Js NS3/4A protease inhibitor Olysio was approved
the month before,
Sovaldis
approval
much sets the tone for the
1. The
foundations
for very
economic
new drug catalysts
in 2014,
and it to
is the
recovery
continue
be inbiggest
place new drug launch that the
industry has seen for some time.
2014 is generally felt to be a transformational year for immunotherapies
and drugs targeting PD-1. Two therapies are in the final stages of
development here: Bristol-Myers Squibbs (BMS, US) nivolumab and
Merck & Cos MK-3475.

IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

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IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright 2014 IHS

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1. The foundations for economic
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recovery continue to be in place

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IHS Healthcare and Pharma

Contact us
Gustav Ando
Director
Healthcare and Pharma
Gustav.Ando@IHS.com