Big Pharma will soon see the payoff from Obamacare. Citing a new GlobalData study, Forbes says the industry stands to reap an additional $35 billion in profits as the benefits of healthcare reform kick in. And the swelling ranks of insured patients will add an estimated $115 billion to sales over 10 years, the study concludes.
Over the past few years, drug executives have been complaining about the costs of healthcare reform, including fees and newly mandated Medicare rebates. And it's true that the amounts aren't insignificant; as the costs kicked in, drugmakers from Eli Lilly ($LLY) to Gilead Sciences ($GILD) to Biogen Idec ($BIIB) blamed Obamacare for multimillion-dollar charges against earnings and hundreds of millions in cuts to revenue forecasts.
But the costs of reform were frontloaded and the benefits postponed. The infamous individual mandate doesn't come into effect until January, and health insurance exchanges are only now taking shape in various states. Finally, those promised new patients will be joining the ranks of the insured, which means more people should be able to pay for drugmakers' products.
According to GlobalData, Medicaid enrollment alone is expected to grow by about 19.5 million people. And as insurance rolls grow, pharma's revenues will multiply by one-third by the end of the decade. That, in turn, will add 33% to the industry's market value, taking it to $476 million in 2020 from $359 billion in 2012.
GlobalData says healthcare reform will cost the industry, to be sure. But as the firm's head of industry dynamics tells Forbes, the benefits will outweigh those costs. "[W]hile a number of the changes will negatively impact pharma's fortunes, the overall balance could be positive, thanks to an additional 32 million formerly uninsured citizens becoming potential customers, resulting in up to $115 billion of new business over a period of 10 years," GlobalData's Joshua Owide said (as quoted by the magazine).
- read the Forbes piece