Healthcare reform in the United States and China: pharmaceutical market implications

Healthcare reform in the United States and China: pharmaceutical market implications Daemmrich, Arthur; Mohanty, Ansuman Objectives The United States and China are broadening health insurance coverage and increasing spending on pharmaceuticals, in contrast to other major economies that are reducing health spending and implementing a variety of drug price controls. This article analyzes the implications of health system reforms in the United States and China for national pharmaceutical markets. It follows a historical institutionalist approach that identifies path dependency in the design and operation of national health systems. On that basis, we estimate prescription sales for 2015 and 2020, analyze the sustainability of free-market pricing for drugs in the two countries, and assess future competitive dynamics in the pharmaceutical sector. Methods The institutional trajectories of health system reform and insurance coverage were studied for the United States and China. Next, data were collected from government, industry, and analyst reports on total healthcare spending and prescription drug expenditure by insurance status (in the United States) and by site of care (in China). Simple quantitative models were developed to estimate future drug spending based on insurance coverage, treatment locations, and health spending as a percentage of GDP. Results Both countries will see rising total pharmaceutical spending and will be the two largest country markets for prescription drugs through at least 2020. In dollar terms, the U.S. pharmaceutical market will be over $440 billion in 2015 and $700 billion in 2020; China’s prescription market will be over $155 billion in 2015 and grow further to $260 billion in 2020. In both countries, generics will increase their share of all prescriptions, but economic and structural incentives for new drug invention and brand-name prescribing by physicians will keep the share of patented drug sales high compared to countries with more direct government control over the pharmaceutical market. Conclusions Expanding private insurance contributes to spending on branded drugs, since insurers compete for market share rather than cost savings. Health system reforms presently being enacted in the United States and China align to historical institutional trajectories in each country, but leave unresolved a core tension between incentives for new drug invention and universal access to affordable medicines. Copyright © Daemmrich and Mohanty; licensee BioMed Central Ltd. 2014 This article is published under license to BioMed Central Ltd. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated. A grant from the One-University Open Access Fund at the University of Kansas was used to defray the author’s publication fees in this Open Access journal. The Open Access Fund, administered by librarians from the KU, KU Law, and KUMC libraries, is made possible by contributions from the offices of the Provost, Dr. Jeffrey Vitter; Vice Chancellor for Research & Graduate Studies, Dr. Steve Warren; Acting KUMC Executive Vice Chancellor, Dr. Steve Stites; and Dr. Paul Terranova, KUMC Vice Chancellor for Research. For more information about the Open Access Fund, please see http://library.kumc.edu/authors-fund.xml.