At the beginning of 2024, we identified several areas we thought would be indicators of progress for the life sciences sector in the year ahead. This perspective was developed coming off challenging years for the industry in 2022 and 2023, including the reduction in early stage biopharma funding, elevated interest rates, resetting of activity levels post the-COVID-19 pandemic, and ongoing access and reimbursement challenges for new drugs affecting commercial returns.  Now we revisit what we thought would be 7 Key Indicators of Progress in the Life Sciences Sector in 2024, and offer an update on where we are as of mid-December.

1. Biotech financing – Will the XBI Biotech Index recover at least 20% in 2024?

What we were looking for:

Look for the XBI Biotech Index to increase by 20% in 2024 as an indicator that investor sentiment and support for innovative life sciences has recovered. This would bring the index to its highest level since December 2021, although still 35% less than the peak level seen in February of that year. It would suggest the 2022/2023 slump for biotech is behind us and that this critical part of the life sciences eco-system has recovered.

What we saw:

The XBI Biotech index increased only 3.5% (as of Dec 13), reflecting a continued challenging environment with high interest rates that persisted longer than expected a year ago, and a market that is generally risk-averse. After showing strong growth in the first two months of the year, the index was up 14% at the end of February, but then fell to its low point two months later as expectations for interest rate cuts receded, and was down 9% as of April 25. For the balance of the year, the Index increased and reached a high just after the election that was 15% higher on November 8 than the beginning of the year. Following the announcement of intended nominees for key positions in the new administration, the index fell sharply, then recovered but fell again in the most recent week as concerns mounted about the interest rate environment in 2025.

The lack of consistent improvement in the XBI Index during 2024 is an indicator of ongoing uncertainty about the innovative life sciences sector and a reminder of how macroeconomic and broader environmental factors can weigh on investor sentiment – despite some remarkable scientific progress made against persistent, and in some cases mounting, areas of unmet need in healthcare.



2. M&A activity – Will the uptick in M&A activity continue and be sustained through 2024 at a 30% higher level?

What we were looking for:

The important success indicator for 2024 is whether the recent rising trend in M&A activity can continue throughout 2024 and result in a further 30% in M&A activity,  bringing total value to about $200 billion.

What we saw:

Despite a burst of M&A activity at the end of 2023 and high expectations for 2024, the total value of M&A deals fell during the year (as of November 30, 2024) to an estimated $80 billion for the full year, less than half the total value in 2023. M&A deal count was down 20% in the first half of the year and 3% in the third quarter. Notably, no deals over $5 billion were announced in 2024, reflecting a concentration of activity among bolt-on or tuck-in acquisitions.

Pressure from higher interest rates, concerns about a potential recession, and sustained scrutiny by the Federal Trade Commission (FTC) all put a damper on M&A and deal-making across many sectors, including life sciences.

This leaves larger pharmaceutical companies with significant cash reserves to deploy and impending portfolio gaps to fill as existing products lose exclusivity, while small companies with Phase II data look for strategic exit opportunities that can deliver adequate returns to their investors. The failure of the M&A market to register increased transaction value in 2024 leaves the life sciences sector with an even larger unrealized opportunity for M&A activity. This remains a vital means to unlock value in the innovation ecosystem.



3. Use of novel gene therapies – Will more than 2% of all U.S. patients with sickle cell disease get access to treatment with new approved cell-based gene therapies?

What we were looking for:

For the life sciences sector, a progress marker in 2024 will be seeing more than 2%, i.e., about 2,000, of the patient population with sickle cell disease in the U.S. being treated and benefiting from cell-based gene therapy.

What we saw:

Patient access to gene therapies to treat sickle cell disease has proven to be a significant challenge. It is estimated that only around 60 people with sickle cell disease globally have started treatment with gene therapy since the approval of the two therapies at the end of 2023. This amounts to less than 0.1% of eligible patients who would potentially benefit from these treatments.

The reimbursement landscape improved significantly in 2024 for these treatments, with companies reporting that more than half the states have affirmed coverage through a preferred drug list of published coverage criteria, and nearly 50% of Medicaid-insured individuals with sickle cell disease live in a state that has already completed prior authorization approval for use of the therapy in at least one patient. In addition, CMS announced on December 4 that Vertex and Bluebird Bio have entered into agreements to participate in the Cell and Gene Therapy Access Model, which will test outcomes-based agreements for cell and gene therapies with the aim to improve health outcomes, increase access to cell and gene therapies, and lower health care costs.

Other factors, however, contributed to the low use of these therapies. The infrastructure required to deliver this therapy is extremely specialized and currently only available at very few centers, typically bone marrow treatment facilities with sickle cell expertise.¹ Younger patients have also been reluctant to embark on the demanding treatment process that lasts more than one year and requires periodic hospitalization, weighing school schedules, and concern about adding more medical burden to their lives.²  Furthermore, many sickle cell patients are so advanced in their disease that gene therapy is not clinically warranted.

For the life sciences sector that is focused on bringing more gene editing and other advanced therapies through clinical development and regulatory approval, the limited use of the sickle cell therapies to date is an important reminder that approval only marks the beginning of the journey to bring these treatments to patients. Reimbursement, infrastructure, and patient burdens associated with these therapies must all be addressed, and can slow the acceptance and use of these remarkable innovative treatments.



4. Reimbursement of transformative drugs – Will broader reimbursement of new breakthrough drugs for the treatment of obesity bring increased patient access?

What we were looking for:

A revision of the law that prohibits Medicare from paying for weight loss therapies will be an important indicator of progress for the life sciences sector in 2024 as it will open access to obesity care for many seniors and will influence employer-based plans to provide coverage, based on growing amounts of clinical trial and real-world clinical evidence.

What we saw:

Throughout 2024, payers and employers continued to be concerned about the potential for increased costs due to the rising demand for novel obesity treatments. Medicare is prohibited by law to reimburse GLP-1s for the treatment of weight loss and policymakers have not moved to change this restriction, leaving coverage under Medicare limited to the treatment of diabetes and cardiovascular disease risk reduction. Proposed changes to allow coverage for weight loss remain under discussion but resolution is not expected by the end of 2024.

Meanwhile, 13 states allow Medicaid to cover treatment of obesity using GLP-1s, while other states continue to find that the costs of these drugs remain a hurdle to approval under Medicaid.³  In the private sector, only 18% of firms with 200 or more employees, cover GLP-1s when used primarily for weight loss.⁴  Many employers cover these medications with different forms of requirements and restrictions for employees, including requests to meet with a professional, such as a dietician, case worker, psychologist or therapist, before approving a GLP-1 prescription. Some employers require employees to enroll in life style or weight loss programs while taking GLP-1 drugs.

There was also much clinical research activity during 2024 that advanced understanding of the impact of approved therapies in a broadening set of indications, and advancement of a large number of molecules that are expected to reach the market within the next five years.

For the life sciences sector, the lack of progress by Medicare in making approved therapies available through Part D plans for the treatment of weight loss – and in the face of mounting compelling evidence of the health benefits associated with weight loss – signals persistent barriers to commercialization. This resistance to extending coverage despite evidence is a reminder of the magnitude of the challenges in changing existing policy.



5. AI adoption in life sciences innovation – Will at least 30 drug candidates with AI-platforms advance in clinical development?

What we were looking for:

An indicator of progress for the life sciences sector will be seeing at least 30 drug candidates with AI-based platforms in active clinical development programs in 2024.

What we saw:

The excitement about the potential of AI in clinical development continues to build. While there is still no new drug that has been developed and approved based on a fully AI-assisted drug discovery, the pipeline of drugs in development with AI-associated platforms is understood to be growing. In 2023, at least 19 drugs in clinical development were attributed to AI,⁵ and in 2024, 164 investigational drugs used AI, according to a JAMA study.⁶  AI is being deployed for many purposes, most commonly drug molecule discovery, with use ranging from platform screening of drugs, in which AI was used to analyze molecular images of the effects of drugs on a cell, to deep generative modeling to design virtual novel molecules.

Overall, there is also sustained excitement in the life sciences industry for using advanced AI-technologies in drug discovery, such as DeepMInd’s AlphaFold that maps intricate 3D protein structures to understand how molecules interact, Meta’s Evolutionary Scale Modelling that helps predict metagenomic protein structures, and RoseTTAFold, a software tool that uses deep learning to quickly and accurately predict protein structures based on limited information.⁷

While the emphasis of AI-assisted drug discovery and drug design currently is on the early stages of clinical development, the use of AI and machine learning is advancing steadily through the clinical development stages raising expectations for a wave of AI-assisted new drug approvals within a few years. For the life sciences sector, this progress is strengthening and brings promise of transformative approaches to increasing R&D productivity at an accelerated pace.



6. Bipartisan legislation – Will the average patient out-of-pocket drug cost per retail prescription be lowered by more than 10%?

What we were looking for:

Look for a reduction in the average final cost per retail prescription of at least 10% as a sign of progress for the life sciences sector in bringing necessary medicines to patients at a lower out-of-pocket cost.

What we saw:

Average patient out-of-pocket costs for branded drugs (original brands and branded generics) filled through retail pharmacies have increased in 2024 (through October 31, 2024) by 11%, down from the 14% increase in 2023 but far from the 10% reduction which would have been a marker of progress for the life sciences sector. The growing number of GLP-1 prescriptions not covered by insurance contributes to this increase, which would be 5% in 2024, down from 9% in 2023 when these medicines are excluded from the out-of-pocket calculation.

Efforts to reduce patient ouf-of-pocket costs have included measures in the Inflation Reduction Act to cap Medicare beneficiary cost-sharing for insulin prescriptions at $35, and to limit coinsurance at approximately $3,250 in 2024, and $2,000 from 2025. In addition, the CMS Drug Price Negotiation Program has the potential to impact out-of-pocket costs for some beneficiaries, but it is unlikely to lead to consistent reductions in patient cost sharing, with many patients experiencing negligible savings or even potentially higher out-of-pocket costs⁸.

Despite bipartisan agreement about the urgency to reform and ensure transparency about pharmacy benefits managemers (PBMs) to lower drug prices and out-of-pocket costs for patients, no legislation has been enacted. The momentum for PBM reform was growing in Congress following a report by the Federal Trade Commission and several committee hearings, but Congress was not able to move forward with a legislative initiative.⁹ Other bipartisan health legislation did advance in 2024. Bipartisan bills included an extension of telehealth flexibility that originated from the COVID-19 pandemic¹⁰, and a range of health legislations regarding Medicare, poision control, and Alzheimer’s disease.¹¹

Patient out-of-pocket costs remain a flashpoint in the U.S. healthcare system and underpin much of the political discussion about drug pricing. The lack of bipartisan support for legislation in 2024 that would reduce costs by 10% reflects the ongoing tensions and competing interests among stakeholders, including life sciences companies, for whom addressing these costs is essential for long-term sustainability.



7. Disruptors in the delivery of primary care – Will more than 30% of primary care physicians be employed by corporate entities by the end of 2024?

What we were looking for:

Will the number of primary care physicians that are employed by health insurers and corporate entities and their impact on medicine use grow to more than 30% in 2024?

What we saw:

Disruptive models for the delivery of primary care are able to bring preventative care – including vaccinations – to more patients, and treat chronic diseases more effectively than traditional care delivery. The provision of multi-disease care and achievement of higher adherence rates can be a positive force for the delivery of “the right medicine to the right patient at the right time.”

During 2024, we saw efforts by health insurers and other large corporations, such as drug pharmacy chains, to expand into home care services, aided by advances in digital health and logistics technology, as the centerpiece for transforming the delivery of care. By combining home health, pharmacy, and primary care services, the companies embrace the home as a more convenient setting for individuals, which potentially can lower costs and provide a powerful touchpoint to understand and manage the holistic health of an individual. This also reflects a general belief that home health can be the next frontier in the evolution of value-based medicine.

Overall, the percentage of physicians employed by hospitals and corporate entities continued to grow in 2024. Continuing a decade-long trend away from private practice, nearly four of five physicians (77.6%) of physicians are now employees of hospitals/health systems and other corporate entities. The recent growth in physician employment is attributable to hospitals, not other types of corporate owners.¹²

For the life sciences sector, the transformation of primary care can be an important indicator of change in the approach to managing wellness, disease prevention, early disease interception, and appropriate use of medicines. However, to date in 2024 (through October 31), the number of new brand prescriptions dispensed to patients increased 1.5% over the prior year, a marked slow-down from the 4.0% and 5.6% growth in 2023 and 2022, respectively. This suggests that while there is disruption in primary care, it is not resulting in more patients beginning treatment with a new medicine and therefore not expanding the market for drug manufacturers.

The life sciences sector brought hundreds of new molecules into clinical development programs, passed dozens through regulatory reviews, and provided positive outcomes for millions of patients globally in 2024.  Across the 7 indicators of progress for the sector that we laid out at the beginning of the year, we largely saw sideways movement at best in 2024, and the indicators of positive momentum were not realized.  This reflects the complexity of the healthcare system in which the sector operates, and the uncertainty that affects the macro-environment, industry-level performance, and company-specific results. We ended our blog at the beginning of the year with the advice to “fasten your seat belt” – wise counsel in retrospect.

We will release our indicators of progress for the life sciences sector in 2025 at the beginning of January. Click here to be the first to find out what they are: https://www.iqvia.com/insights/the-iqvia-institute#InstituteSubscription

¹ Issue Brief: Medicaid Barriers to Accessing Cell & Gene Therapies. The Alliance for Regenerative Medicine. Accessed Nov 2023. Available from: https://alliancerm.org/medicaid-barriers-to-accessing-cell-gene-therapies/

² Deena Beasley. Why gene therapy for sickle cell is slow to catch on with patients. Sep 28, 2024. Reuters. Available from: https://www.reuters.com/business/healthcare-pharmaceuticals/why-gene-therapy-sickle-cell-is-slow-catch-with-patients-2024-09-28/

³ KFF. Medicaid Coverage and Spending on GLP-1s. Nov 4, 2024. Available from: https://www.kff.org/medicaid/issue-brief/medicaid-coverage-of-and-spending-on-glp-1s/

⁴ KFF. Employer Health Benefits. 2024 Summary of Findings. Available from: https://files.kff.org/attachment/Employer-Health-Benefits-Survey-2024-Annual-Survey-Summary-of-Findings.pdf

⁵ IQVIA Institute. Global Trends in R&D 2023. Feb 2023. Available from: https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/global-trends-in-r-and-d-2023/iqvia-institute-global-trends-in-rd-2023-forweb.pdf

⁶ Louise Druedahl et al. JAMA Network. Use of Artificial Intelligence in Drug Development. May 31, 2024. Available from: https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2819343#:~:text=AI%20was%20used%20for%2012,to%20design%20virtual%20novel%20molecules.

⁷ Minkyung Baek et al. Science. Accurate prediction of protein structures and interactions using a three-track neural network. Aug 19, 2021. Available from: https://www.science.org/doi/10.1126/science.abj8754

⁸ IQVIA Institute. Key Context for CMS Prescription Drug Negotiations. Oct 2024. Available from: https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/key-context-for-cms-prescription-drug-negotiations

⁹ Joshua P. Chohen. Pharmacy Benefits Managers Under Pressure To Reform For Years, But It Hasn’t Yet Mattered. Aug 4, 2024. Forbes. Available from: https://www.forbes.com/sites/joshuacohen/2024/08/04/pharmacy-benefit-managers-under-pressure-to-reform-for-years-but-it-hasnt-yet-mattered/

¹⁰ JAMA Network. Bill to extend telehealth flexibilities clears House committee. Aug 15, 2024. Available from: https://www.ama-assn.org/practice-management/digital/bill-extend-telehealth-flexibilities-clears-house-committee

¹¹ Energy & Commerce Committee Chair. Chair Rodgers Celebrates House Passage of Bipartisan Health Legislation. Sep 18, 2024. Available from: https://energycommerce.house.gov/posts/chair-rodgers-celebrates-house-passage-of-bipartisan-health-legislation

¹² PAI-Avalere Report on Physician Employment Trends and Acquisitions of Medical Practices: 2019-2023. Available from: https://www.physiciansadvocacyinstitute.org/PAI-Research/PAI-Avalere-Study-on-Physician-Employment-Practice-Ownership-Trends-2019-2023