It’s that time of year again. New Year’s resolutions and predictions for the coming year. As a health economist writing on the Forbes platform, my so-called swimming lanes are healthcare and public health. But given the impact the economy has on the health sector, I also closely follow developments in the US and the global economy. We will start with predictions about the economy.
Last year, the biggest risks to the global economy came from a number of geopolitical shocks, the biggest of which was the Russian invasion of Ukraine. Russia’s defeat in Ukraine in 2023 will not usher in a new era in which dictatorships and land grabs will disappear. But in the short term it will prevent China from attacking Taiwan.
The impact of war on the Russian economy—through sanctions, diversion of resources, loss of labor and human capital—will be devastating. Russia’s insignificant economic growth on the global stage will be exacerbated by a sustained decline in oil prices.
Around the world, economies will continue to be affected by the conflict in Ukraine and the ongoing Covid-19 pandemic. While an end to China’s strict lockdowns frees up its economy in some ways, it will also lead to high levels of shortages and accompanying production constraints. Actually, I see the current The rise of Covid-19 in China as the most critical threat to the global economy in the first quarter of 2023. The crisis in China could not only cripple parts of its healthcare system, it could have economic effects beyond its borders, including supply chain issues that would reignite inflation worldwide.
In 2023, inflation, rising interest rates, recession in many countries, declining international trade and supply chain issues will feature prominently, especially during the first two quarters of the year. However, by the end of the year we will see a gradual improvement in most of the main economic indicators.
Amazingly, the US will avoid a recession, one of the only rich industrialized nations to do so. However, this does not mean that there will be strong economic growth. It is likely to stay below 1.5% throughout the year, with little fluctuation from quarter to quarter.
Interest rates will continue to rise in the first half as the Federal Reserve moves forward with its anti-inflationary policy, albeit in smaller increments. The Fed rate will reach around 5.5% in May. That means typical 30-year home mortgage rates can approach 8.5%.
In 2023, inflation will finally moderate, but not to pre-2021 levels. Instead, a new normal of roughly 5% will be established for the foreseeable future; so not only in 2023 but long after the year ends.
Unemployment will hover between 3.7% and 5%.
The US dollar will remain strong against foreign currencies; perhaps too much from the perspective of American exporters.
After last month’s close, stock prices are set to rise in 2023. The Dow and S&P 500 could rise as much as 20% overall, while the Nasdaq, led by biotech, could rise 25%.
China’s abandonment of its long-standing Zero Covid policy, coupled with relatively poor vaccination uptake among the elderly, is leading to an acute health care crisis in China. A subvariant of Omicron, BF.7, which has both a high R0 and immunity properties, is driving the rise in Covid-19 infections.
However, throughout 2023, Covid-19 will continue its step-by-step and gradual retreat across the globe. That doesn’t mean it will disappear. Periodic waves of subvariants will appear. But their amplitude will be less pronounced.
In the US, other public health issues will intensify, including continued infant and maternal mortality, a worsening fentanyl crisis, and the uniquely American problem—at least if we compare among peer nations—of increase in road casualties.
Republicans now have a majority in the House of Representatives. Members will pursue formal investigations into the origins of the coronavirus — the Wuhan lab leak hypothesis, for example — and the benefit of research into function. In December, House Republicans announced their intentions by stating that they would begin subpoenaing Biden administration officials.
Republicans in Congress and state legislatures will also continue to block public health funding, all while promoting an alleged “parents’ rights” agenda.
Apparently, parental rights it means giving them more say in decisions about their children’s education and health care. More than a third of parents object to requiring children to receive routine immunizations to attend school, according to a new poll released in December by the Kaiser Family Foundation. This group constitutes a vocal base within the Republican Party.
All 50 states and the District of Columbia currently mandate that children be vaccinated against measles, mumps, rubella, and other highly contagious, deadly childhood diseases. That will begin to change in 2023, with a number of Republican-led states dropping vaccine requirements.
Throughout the Covid-19 pandemic, most Republicans have been opposed to mandatory preventive measures such as masking and vaccination mandates, and public health policies in general. And Republican lawmakers in more than half of US states have already passed laws to drastically curb the powers of public health authorities, including the use of non-pharmaceutical interventions to prevent the spread of viruses or other contagions. Formally limiting the powers of public health authorities will accelerate in 2023 in GOP-led states.
New drug approvals will increase slightly in 2023 to between 40 and 45, from a decline in 2022 when there were 36 approval. Furthermore, 2023 will be another banner year for cell and gene therapies.
The big story with gene therapies will be price and the difficulties associated with commercialization. In December, it was announced that gene therapy Hemgenix, indicated for certain patients with hemophilia B, would cost $3.5 million per single dose. Well, we probably won’t see such high-priced therapies in 2023. But newly approved products in the space will command prices between $2 million and $3 million. Due to commercialization barriers, uptake, however, will be below expectations.
Expect to see record high launch prices in 2023 of newly approved drugs and biologics. This is partly an unintended consequence of Provisions of the Drug Price Inflation Reduction Act. In 2023, the law will begin to put downward pressure on existing drug prices through rebates for drugs with list prices that exceed inflation. Additionally, pending a restructuring of Medicare Part D and price negotiations for a limited set of drugs, firms will raise the launch prices of newly approved drugs over and above what they would have done in the absence of the legislation. After all, the law does not contain limits or ceilings on release prices.
In 2023, there will be significant downward pressure on existing drug prices. The market will continue to develop in ways that hold back net drug prices. Payers in both the commercial and public spaces will increasingly use clinical effectiveness and cost-effectiveness to determine the price and reimbursement of prescription drugs.
Ultimately, the most consequential change in the net price of drugs, as well as out-of-pocket costs for patients, is rebate reform*. This was not included in the law on reducing inflation. But the Federal Trade Commission is conducting an investigation into possible anti-competitive practices related to rebates, with the potential for legislative action if such practices are proven. This can lead to pharmacy benefit managers suffering significant punitive fines.
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