Is the U.S. Drug Market Becoming Similar to the Consumer Goods Market?
Shifts Toward a Consumer Goods Model
Emerging policy and market developments indicate that certain categories of drugs and therapies may be moving toward a consumer goods model. This evolution has significant implications for commercialization, including the selection of trial endpoints, pricing strategy, patient access, and potentially, approaches to economic modeling.
Rise of Direct-to-Consumer Platforms
Direct-to-Consumer (DTC) platforms—such as Cost Plus Drugs, Ro, and Hims—and manufacturers like PfizerForAll and LillyDirect have recently begun providing both generic and branded medications, as well as custom compounding, across several therapeutic areas such as weight management, hair loss, sexual health, dermatology, and mental health. This shift is disrupting the traditional pharmaceutical value chain by narrowing the gap between patient payments and manufacturer revenues. By eliminating distribution and dispensing fees, as well as intermediary costs from entities like Pharmacy Benefit Managers (PBMs), these transparent, cash-based DTC models appear to be steering the drug market closer to a classic supply-and-demand scenario, where consumer preferences, price sensitivity, and competition play a more prominent role than formulary positioning.
Policy Developments and Pricing Implications
Additionally, the Most Favored Nation (MFN) Executive Order 14297—which aims to align Medicare drug prices with the lowest international benchmarks—signals a notable shift in U.S. drug pricing policy. Also, Section 4 of this order highlights the objective of enabling direct-to-consumer sales at internationally competitive prices. While full implementation is pending, the MFN Executive Order has influenced industry expectations and intensified scrutiny of U.S. pricing practices relative to other developed nations.
Economic and Commercial Considerations in DTC Models
In appropriate therapy areas, the transition to DTC channels presents both commercial and economic considerations. Traditional cost-effectiveness analyses, budget impact assessments, and pricing studies tend to focus on payer perspectives and reimbursement frameworks. However, within the DTC landscape:
Consumer behavior increasingly resembles that of retail markets, placing greater emphasis on attributes valued by patients.
Pricing structures are becoming more transparent and competitive.
It is imperative to demonstrate consumer value based on real-world outcomes and patient reported outcomes, which extend beyond conventional clinical trial efficacy measures and often provide more actionable insights for patients.
The Expanding Role of HEOR
As consumer-driven platforms modify drug pricing and access, Health Economics and Outcomes Research (HEOR) is serving as an important resource in addressing this changing environment. The industry may need to complement traditional payer-focused cost-effectiveness models with approaches utilizing real-world evidence, patient-reported outcomes, and market analytics. In this context, demonstrating value involves evaluating how therapies perform in routine settings across various populations and care pathways. HEOR considers not only payer perspectives but also actual patient impact, helping to inform strategy in a marketplace characterized by transparency, competition, and evolving consumer expectations.
Strategic Considerations for Life Sciences Organizations
Organizations may wish to evaluate their commercialization strategies in light of potential shifts toward DTC models, including adjustments to development and evidence generation plans.
How do these changes affect your commercialization strategy? Have you considered incorporating DTC shifts in your development and evidence generation initiatives?
BlueRidge Life Sciences offers services in HEOR, evidence planning and communication, value demonstration, and real-world evidence. For more information, contact one of our Pharmaceutical Commercialization experts.
