Healthcare Reform’s Impact on Pharma Will Be Larger than Expected

Oliver Wyman analysis estimates U.S. revenue impact of 20 percent once fully implemented

NEW YORK--(BUSINESS WIRE)-- Oliver Wyman has released a report that estimates the post-2016 U.S. pharmaceutical industry revenue impact of the Affordable Care Act (ACA) to be 20 percent, which is in dramatic contrast to the 3 percent estimates that were widely circulated when the ACA was signed into law. The report is online at

The authors of the report, Oliver Wyman Life Sciences Partners Jerry Cacciotti and Mark Mozeson, cite five transformational forces of the ACA that will impact the healthcare system and directly impact pharma. Theses forces include: the shift to fee-for-value from fee-for-service and the role of providers; diminished economic viability of payers; the impact of the retailization of healthcare; increasing influence of the states vis-à-vis exchanges; and the increased liquidity of health information. Providers’ larger role and the shift to value-based payment will put at risk 10 percent of total revenue. The other transformational forces will each put at risk between 2 and 3 percent of total revenue—roughly equivalent to the industry’s initial estimates of ACA’s impact on U.S. revenue.

"These forces will reshape healthcare in the U.S. as we know it. Pharma needs to be prepared, and while these trends present opportunity for the industry, ignoring these trends will put up to 20 percent of revenue at risk. Preference will be given to products that are better positioned to serve the healthcare marketplace more effectively from a cost and outcomes perspective," explains Cacciotti.

"While some of the ACA provisions that directly impact pharma have been implemented, many of the provisions that impact the entire healthcare system inclusive of pharma will not be fully implemented until 2014. As those provisions take effect, there will be attenuated focus on managing costs and outcomes in ways that are very different from today. Pharma has no choice but to be prepared to respond," comments Mozeson.

The authors further emphasize that ACA has been crafted with investments at the federal level to enable the market to further focus on reducing the cost of delivery of care. Investments in electronic medical records, information collaboration and connectivity, and comparative effectiveness research are all focused on helping the private market address cost-of-care issues in the U.S. The cost per capita of healthcare delivery in the U.S. was $8,086 in 2009, as cited by the U.S. Department of Health and Human Services—40 percent higher than any other country in the world.

About Oliver Wyman

Oliver Wyman’s Health & Life Sciences practice serves clients in the pharmaceutical, biotechnology, medical devices, provider, and payer sectors with strategic, operational, and organizational advice. Deep healthcare knowledge and capabilities allow the practice to deliver fact-based solutions.

With offices in 50+ cities across 25 countries, Oliver Wyman is an international management consulting firm that combines deep industry knowledge with specialized expertise in strategy, operations, risk management, organizational transformation, and leadership development. The firm’s 3,000 professionals help clients optimize their businesses, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is part of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit


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