(Bloomberg View) — As lawmakers in Washington continue their debate over how to modify the U.S. health insurance market, health care investors and business leaders around the world need to see past the political drama and run their businesses with a view toward improving value in health care. If they succeed, it will make a bigger difference for the cost and quality of care — globally and for most Americans — than whatever action is taken by Congress.
We've just finished a study involving 300 senior health care executives from leading companies in health care services, pharmaceuticals, biotechnology and medical devices, along with top investors in the field. And it's clear that they see big changes in the years ahead, driven largely by pricing pressure across the industry.
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The pricing pressures, in turn, are expected to drive innovation. Interestingly, in the coming years, changes in how health care payments are made are expected to be the most important form of innovation, though scientific breakthroughs will also play a critical role. What's more, these leaders expect health care companies to engage in new partnerships and collaborations — including with nontraditional competitors in the technology world, such as Google, IBM, Apple and Fitbit.
Most surprisingly, we found strong expectations that value-based payments for medical care will displace the traditional fee-for-service model, transforming the industry over the next five to 10 years. Despite doubts after the recent presidential election that the movement away from fee-for-service would continue, more than half of American executives and four-fifths of American investors who responded to the survey after Nov. 8 said they believe the majority of U.S. health care payments will be value-based before 2020 — that is, in less than three years, a stunning shift. And the industry still expects the government to lead the way; most respondents said the U.S. Centers for Medicare and Medicaid Services will drive the payment change, though many also see private health insurers playing an important role.
To be sure, there were differences among subsets of the industry. Pharmaceutical and biotech executives, for example, tended to be more skeptical about value-based payments, with more than 70% doubting they would prevail before 2020. These leaders clearly had other issues on their minds; they were the most worried about pricing pressure and political risks, especially in the U.S. Almost three-quarters of American pharma and biotech executives listed the "political environment" as one of the top three drivers of drug pricing pressure, for example, whereas only about 40% of European pharma/biotech executives did.
