The health care industry, along with related exchange traded funds, was salivating at the untapped revenue President Obama’s Affordable Care Act would bring in, but potential enrollment problems could lead to a 30% cut in U.S. pharma sales projections.
According to the IMS Institute, U.S. prescription drug sales could fall as low as $320 billion in 2017, or sales could rise $460 billion if bolstered by demand from Obamacare insurance coverage. To put this in perspective, drug spending in 2012 was about $328 billion. [Sturdy Pharma ETF Could Pullback]
The U.S. health-care system now accounts for 18% of GDP, doubling to $2.7 trillion since 1980, and the new health law is expected to add 25 million uninsured Americans into the fold, reports Anna Edney for Bloomberg.
“There’s a lot at stake,” Michael Kleinrock, director of research at the IMS Institute for Healthcare Informatics, said in the article. “This would be a very dramatic decline. We don’t think that that kind of sky-is-falling scenario is most likely, but it is not off the table.”
In October, only 106,185 people enrolled through the insurance exchanges. U.S. health officials anticipated 800,000 enrollments through November and project 7 million to sign up in the first year.
The enrollment into the Affordable Care Act has been hindered by website technical problems, public backlash and political tension. [Help From the Hill Could Add to Pharma ETFs’ Gains]
IMS projects oncology drugs will experience the most spending in developed countries, with sales up to $84 billion in 2017, followed by $39 billion in diabetes drugs. Pain medicines, though, lead in emerging markets with $25 billion in spending.
Pharmaceutical ETFs include:
- SPDR S&P Pharmaceuticals ETF (NYSEArca: XPH): up 55.1% year-to-date
- PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP): up 49.3% year-to-date
- iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE): up 37.2% year-to-date
- Market Vectors Pharmaceutical ETF (NYSEArca: PPH): up 32.0% year-to-date
- RBS Global Big Pharma ETN (NYSEArca: DRGS): up 35.1% year-to-date
For more information on the pharma sector, visit our pharmaceuticals category.
Max Chen contributed to this article.