Drug costs out of control? Annual global spending growth on medicines will increase from $30Bn in 2012 up to $70Bn in 2016, driven by volume growth in emerging markets and higher spending in developed markets according to a report from ths IMS (Institute for Healthcare Informatics). Spending on medicines globally is expected to exceed $1 trillion in 2013 and to reach nearly $1.2 trillion by 2016. Wow, a whopping amount. The biggest recipient of these drugs will be the US – take a look at the thumbnail chart. And yet the US ranks 37th in the word by WHO (World Health Organization), in terms of health-care outcomes.
Further more, most of these costs are coming from people over the age of 70 – take a look at this chart – click here. But believe it or not, the growth rates in medicine sales are actually slowing, relative to their past rapid rates. Why? The market has reached saturation, in terms of people’s ability to pay. Governments in developed economies are reducing the growth of the spend, due to government austerity plans and emerging economies have yet to develop social programmes for their people and hence must be self funded.
The IMS said that it appears patients in the US are still rationing their health care, due to the recent economic crisis, with visits to doctors down 4.7% and hospital admissions down 0.1%. However, emergency room visits jumped 7.4%, a sign some people aren’t seeking care until they are very sick. Fewer visits to doctors and other health-care providers results in fewer prescriptions, which holds down spending in the short term. But that doesn’t bode well for future health care costs, because many of the medicines people are doing without are taken for years to prevent heart attacks and other expensive complications of chronic conditions such as heart disease and diabetes. The ultimate result, is that we will have more sick people driving health care costs up, down the road.
For government policy makers, one can not look at the current budget deficits with out first looking at our the overall health-care delivery strategy – as stated before here. For sure the current 18% of US GDP on health care spend is not sustainable. For the markets the pharmaceutical sector will see limited growth in total going forward, as well not adding much to overall positive growth to the economy over the next few years, as the US and other developed economies try to get a handle on these drug/health-care costs.
Daily Market View: (click here for the video)