Eurasia Group | Healthcare politics in 2019

Healthcare politics in 2019

8 January 2019
The politics of healthcare don't hew closely to the calendar—or to any structured principles, some might argue—but for those engaged in 2019 planning cycles, let's explore the weightiest politically-mediated developments the year ahead might bring.

Realignment of the global pricing regime

If there's a point of cohesion among developed and emerging markets, between “right” and “left,” it's the sense that medicines are too expensive. 2018 was marked by a spate of global initiatives that sought to address this issue—from the ongoing maturation of pricing transparency in Western Europe and pooled procurement in Latin America, to the metastasis of a centralized procurement pilot in China, to the US administration's proposed international reference pricing trial balloon. The latter will be a key driver of pricing dynamics in 2019 and beyond; lower prices in the US market would reorient the de facto global pricing regime that has always existed, perhaps compelling firms to demand higher reimbursements from European payors who are also disinclined from paying full freight. How drugmakers and patients will fare remains an open question.

The challenges for firms are painfully apparent—there is bipartisan support in the US to lower drug prices, a pervasive sense that traditional advocacy methods are failing in today's political climate, and most importantly, the absence of a collective view among industry on the suitability of the reference pricing model. The potential silver lining? A (still shuttered) US government that is paralyzed by discord; inertia in the newly Democratic House appears to be galvanized behind countering President Trump (eg, over border wall funding, his tax returns, the Mueller investigation) rather than finding common ground. This may delay bipartisan activity on drug pricing, but it is unlikely to derail it. Over the coming weeks, firms will implement what is likely to be the first of several rounds of price increases in the new year. The administration's reaction (or lack thereof) will be instructive.

Emerging markets on thin ice

Consensus forecasts predict another consecutive year of global growth, but the IMF's recent downward revision and market turbulence highlight the fragility of the situation. Monetary policy in the US and Europe is tightening alongside high levels of debt in key emerging markets, as well as several unresolved geopolitical issues—chief among them Brexit and US-China trade tensions—all of which could lead to a bumpier 2019, with two direct consequences for emerging markets healthcare systems. First, past economic crises have negatively affected public healthcare spending (although one might argue that tighter fiscal constraints may increase the leverage private companies have). Second, currency depreciation and devaluation can seriously cripple countries' ability to import therapeutics, as well as payors' (patients and insurers) ability to pay for them.

Geographic watchpoints: India and Indonesia head to the polls

The number of elections in 2019 will pale in comparison to 2018, but they'll occur in some of the world's most populated countries, and in areas where healthcare reform is occurring in earnest—particularly India and Indonesia.

India's Prime Minister Narendra Modi and his ruling Bhartiya Janata Party (BJP) are most likely to return to power in the 2019 parliamentary election that should be concluded by mid-May. The BJP is most likely to win fewer seats than in its 2014 landslide victory, falling short of an outright majority and necessitating greater reliance on previously-neglected National Democratic Alliance coalition allies. While Modi will need to contend with coalition politics in a way he has not had to before, healthcare will be resurgent as a political issue, particularly as he and his allies seek to highlight progress on his ambitious Ayushman Bharat initiative, and his opponents undermine its feasibility and propose alternative models. The perennial challenge in India—a simplistic and ad hoc focus on drug prices rather than on public investment in areas like the healthcare workforce—shows little sign of abating, particularly as campaign season heats up. A nascent protectionist agenda in healthcare, as the government looks to formalize local content considerations during medicine procurement, presents an added challenge.

Indonesia, too, enters an election cycle, but with different healthcare dynamics. President Joko Widodo's (Jokowi) coalition is likely to increase its majority in next April's elections, although vested interests obviate step changes in economic reforms. In terms of healthcare, India is the “before” to Indonesia's “after” picture, with the last five years having wrought a transformative implementation of the country's universal health coverage program. Recent independent audits of the program point to considerable gains (this is now the largest single payer scheme in the world) and the government's focus is likely to be on tweaks to the program and ensuring its sustainability. One subtle difference for private players is that Jokowi will be free from the constraints of seeking re-election, and thus might set a slightly less protectionist tone in his second term.

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