U.S. healthcare poised for ‘disruptive’ change in drug pricing
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U.S. healthcare poised for ‘disruptive’ change in drug pricing

Health and human services secretary Alex Azar has told the press that the Trump administration is planning “disruptive” changes to drug pricing that will bring down the costs of medication for patients in the U.S. Azar said he was working on a total overhaul of the system, and that “part of that is going to be some fairly large, disruptive changing of the rules of the road.”

Drug maker GlaxoSmithKline has seen its share price appreciate by 10% so far this year

graph 1809 us healthcare

SOURCE: Yahoo Finance

Big Pharma is sensitive to the noises coming out of the White House, and in some cases, companies have recently made a show of walking back on proposed price hikes. Drug makers are also keen to highlight the role that middlemen like pharmacy-benefit managers have when it comes to pushing prices upwards. Azar, whose background includes a stint as a pharmaceutical industry executive, has a simpler view: “Pharma companies set their price. They may be doing so within an economic system that has various incentives, and my job is to change the system.”

Azar said that a major goal was to make the pricing process more transparent – but he highlighted the fact that this wasn’t an attack on the pharmaceutical industry’s big players: “There will be margins, there will be businesses. They will reorient their business models and the channel will reorient around any changes we make to the rules of the road.”

While Azar was light on details, he did say that he wanted to forge the same kind of “robust” market for biosimilars (often called “copycat” drugs as they mimic the active effects of other medications on the market) that there is for generic medicines (medicines for which the patent has expired and which can, therefore, be made by anybody [think aspirin]). That would go a long way to increasing competition over pricing, and would no doubt be beneficial to patients around the country – as well as competitive drug makers who felt they could outdo their rivals on similar medicines.

Disclosure

Dominion holds GlaxoSmithKline and a number of other pharmaceutical companies in its Global Trends Managed Fund.


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