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A Time of Transformation: Life Sciences in the 2020s
Keynote, Switzerland Strategy Conference 2024
Mar 15, 2024
KEY POINTS
- Annualised growth rate will halve amongst top15 pharma companies between 2022-27
- The US is grappling with declining profitability, raising questions about future sources of growth.
- New active substance launches are still off, tracking at -17% of pre-pandemic averages.
- Higher burden of evidence requirements across all of healthcare from clinical to RWE.
- AI will empower healthcare systems that can mobilise their vast amounts of data.
CONTENT
Over the past two decades of specialty therapeutics, the pharmaceutical industry has witnessed remarkable scientific advancements. In doing so, it has faced rising costs and complexity, which have challenged access to these medicines. Recently, healthcare systems have been further pressured by the backlog created by the pandemic, and newer therapies look set to continue rapidly expanding patient populations.
Moreover, the annualised growth rate of net sales is projected to take a significant hit among the top 15 pharmaceutical giants as shown in Figure 1. Between 2022 and 2027, it's expected to be just half of what it was in the preceding five years, signalling a potential productivity crisis. The US, in particular, is grappling with declining profitability, raising questions about future sources of growth. The stagnation in growth is evident in the US net price, with most companies giving away approximately 50% of their list price value.
Figure 1. Global Pharma market net sales forecast (US$ Trillions*)
*Currency at constant exchange rate
Source: IQVIA Analytics Link, Market consensus forecast, September 2023
Despite these challenges the US and Europe will continue to be the primary drivers of overall growth. Japan's market will remain low on average spending and volume growth, while China shows very high-volume growth potential, but will continue to manage spending levels through assertive price negotiations as part of the National Reimbursement Drug List (NRDL) and Volume-Based Procurement (VBP) processes. Africa, on the other hand, underwent a significant healthcare transition and has become a crucial hub for clinical research, with IQVIA being the largest clinical research provider on the continent.
In terms of therapy areas, oncology will continue to be the largest with regards to spending as demonstrated in Figure 2, while obesity is expected to rise through the ranks, owing to recent strong launches. However, the overall new active substance launch trajectory since the pandemic is still off, currently tracking at -17% of pre-pandemic averages.
Figure 2. Projected Global Expenditure by TA, 2028 (US$ Billions)
Source: IQVIA Forecast Link, IQVIA Institute, Dec 2023.
Notes: Oncology includes therapeutic oncology only and not supportive care. Immunology includes small molecule and biologic treatments for a range of diseases as noted. Neurology includes central nervous system disorder treatments and mental health treatments but does not include pain management or anesthesia. Pain includes narcotic and non-narcotic analgesics, muscle relaxants and migraine treatments. Cardiovascular includes hypertension and other cardiovascular treatments with the exception of lipid regulators which are shown separately.
Report: Global Use of Medicines 2024: Outlook to 2028. IQVIA Institute for Human Data Science, January 2024
The crowded launch environment has brought additional challenges; recently clinical data failed to provide the necessary evidence to fulfil immunotherapy candidate the first-in-class status it sought. Conversely, GLP-1 drugs have demonstrated transformational evidence in weight-loss and cardiovascular benefit, but the challenge now lies in the overlapping indications and serving these patients effectively. With 90 million patients potentially eligible for GLP-1 therapies, the US healthcare system cannot afford the scale. The question is how to position this within the healthcare system to maximise patient access.
Policy-wise, the Inflation Reduction Act (IRA) has long-term implications for return on investment due to its impact on a product’s time-in-market and gross-to-net pricing. Additionally, since the pandemic, the amount of money in rebates that must be given to Pharmacy Benefit Managers has surged and shows no signs of declining, making it challenging to get products onto formularies without high-grade evidence.
The EU HTA Regulation and the New EU Pharma Regulation are significant as they increase the reliance on real-world evidence (RWE), and the incentives for launching in all markets are modified. For example, in Germany, the orphan threshold decreased from €50 million to only €30, meaning that high-priced products for rare conditions are now subjected to the same rigorous evaluations as other products, and much earlier in the lifecycle. The demographic shift in the profession is also factor pharma should consider, for example, in Switzerland, one third of physicians will retire by the end of the decade. With this, the traditional male physician in private practice is being replaced by a woman in institutional settings. This change in prescriber preference from "traditionalists" to "seekers" who prefer on-demand information, combined with data-driven decision-making, is changing the biopharma go-to-market model.
Pharmaceutical companies must adapt their customer models as AI algorithms transform care decisions and empower healthcare systems with vast data ownership. As an example, in Moorfields eye hospital, DeepMind's classification algorithms were used to process retinal scans and through that prioritise patients, which led to reduced backlogs and a better patient experience. However, to capitalise on this, the industry must also address its perceived distance from technology-related use cases and find ways to be front-of-mind when healthcare systems reach out for partners.
Another example of the power of AI is one where a recent study revealed that a panel of physicians preferred answers from Large Language Models (LLMs), trained on a forum of physicians, over real physician responses. The LLM was perceived to be not only more reliable in its answers, but also more empathetic, which is beneficial in situations with overburdened and stressed medical staff.
Strong science is only a small part of the primary driver of access and growth. Instead, the focus is on whether pharma is providing relative benefits for the patient. As the market continues to crowd, and the timeframe to gain a return-on-investment decreases, customer models must adapt and prioritisation of stakeholders will change in the coming years as shown in Figure 3. AI algorithms will transform care decisions, empowering healthcare systems who can put their vast amounts of data to use.
Figure 3. IQVIA anticipates a re-prioritisation of stakeholders, With Data-rich markets leading the way
NOTES
This article has been adapted from a presentation given by Tom Baker, SVP EMEA Technology and GM Switzerland and Israel, IQVIA at the Switzerland Strategy Conference held in Basel on 7 February 2024