Standard & Poor’s Ratings Services is concerned that Big Pharma’s American pricing flexibility may diminish increasingly over the next few years because of the rapidly mounting costs of Medicare and Social Security with the aging of the U.S. population, and public and private sector health care payors looking to control their burgeoning medical expenses.
While there will be a material increase of sales of medicines in the U.S. as the population ages and The Affordable Care Act (ACA) expands insurance coverage to a broader percentage of the population, we expect that falling prices will more than offset this rise in volume.
In our view, this could well cause significant erosion in drug makers’ currently high operating margins and lead to rating downgrades if these companies cannot boost margins in other ways.
Growing competition from low-cost generic manufacturers, which are becoming stronger with consolidation in the subsector, will also likely hamper the big pharmaceutical companies’ ability to offset the potential revenue and margin deterioration.
For details, buy the full S&P report U.S. Aging Creates A Long-Term Challenge For Global Big Pharma Ratings