We fielded a survey using ZS’s PayerLive platform with payers in the United States, Europe and Canada as a follow-up to a similar survey conducted in March 2020. Four months into the COVID-19 pandemic, the impact on access approval timelines and longer-term impact on drug budgets has become clearer.

 

Across countries, payers are anticipating steep drug budget cuts from the pre-COVID era. These budget cuts are larger than what payers expected in our March survey: Payers in the U.S., Canada and Italy expect a 20 to 25% drug budget cut; other European countries range from 10 to 13%. These findings may be counterintuitive to what some in the biopharma industry expected. Payers benefited from healthcare system savings from a lack of elective surgeries and fewer general healthcare interventions due to the pandemic-related lockdowns in most countries. These savings were higher than the costs of managing the COVID pandemic in the short term and, hence, the biopharma industry will be surprised with the findings on payers’ anticipated drug budget cuts. 

While the magnitude of the budget cuts can be debated, there’s truth to the fact that drug budgets will be scrutinized closely. The global economy is battered as a result of the pandemic, with high unemployment levels and businesses shutting down. This has impacted tax revenues, and in the U.S. employers will have tighter purse strings and fewer dollars to spend on employee health benefits (read: lower budget for health insurance premiums). Apart from this, there are expectations regarding what portions of health budgets across the world will be dedicated to: According to our survey, 92% of payers think that funds will be required to improve the deteriorating healthcare infrastructure that the pandemic exposed; 88% think that money will go to COVID testing and vaccinations, and 65% think it will go to the purchase of protective equipment. 

Even if the economy continues to revive quickly, the fiscal pressures are likely to be high for years to come, adding to the existing pressures of managing healthcare costs and drug costs, which are perceived to be out of control. Government and private payers are further empowered to act tough on drug prices, negotiations will likely become tougher, and price increases will be scrutinized heavily. In this atmosphere, it will be all the more imperative to ensure that the value of a new drug is evidenced and communicated in the most impactful manner. According to our survey, 62% of payers stated that the budget reallocation will result in an increased focus on biosimilars and generic options. Moreover, 35% think that budget reallocation will result in less funding for chronic disease programs and 27% think it will mean less funding for high-cost innovations.

 

Although payers were pessimistic about the healthcare budgets and recovery of the systems, they highlighted some positives in the survey, too. Payers are generally viewing the industry’s response to COVID-19 as positive and seem more open to collaboration with the drug industry. Areas that they emphasized in particular include vaccines, real-world evidence, and digital and connected care. The United States, the U.K. and Germany are at close to normal operating capacity in their reimbursement review processes. France, Italy and Canada are on the road to normalcy with some significant delays remaining. While much in the pharma landscape remains to be seen, it’s clear that payers expect COVID-related drug budget cuts to be on the horizon.