2023 is poised to be a transformative year for the pharma industry, even more so than in years past. We may endure a reduction in some corners following years of growth, but also a rapid expansion in burgeoning areas. These 10 key trends will change the direction of our industry.
1. Fat Pharma Seeks Benefits of Leaner Teams
The market has been challenging for most industries, especially tech, where stocks and valuations have dipped significantly, and capital has dried up. Jobs have been cut across the board, and a new realization has emerged that large companies can survive and be effective with a smaller workforce. Other industries have taken notice, with banks, retail, and media following suit. We also saw some examples of this in our industry, with companies laying off employees, restructuring, and consolidating across business units. As company boards focus on employee productivity and an efficient workforce, this theme will percolate across other pharma players as well, especially the large ones. On the other hand, clinical-stage companies that rely on investor money will face their own challenges as capital dries up for them.
2. Commercial Teams Lose 15% of Resources
Economic factors aside, the commercial function remains under the most amount of pressure to adapt and deliver results rapidly. This is driven by many factors, including changes in therapeutic area focus, specialty markets, precision medicine, policy and pricing pressures, speed of innovation and R&D, and digitization. As a result, the commercial function as we know it is not going to survive, and we see two major trends emerging:
- Playing a supporting role for a long time, Medical Affairs is now getting prime-time attention. Ultimately, it is seen as part of the commercial business, but the focus and funding are shifting from traditional commercial roles to Med Affairs roles.
- As technology and science advance to create drugs at a much faster pace, along with the potential of rapidly including indications, it keeps getting harder and more expensive to launch drugs successfully. Smaller companies don’t have the deep pockets to afford failures, however, they are not as willing to sell to a larger company for commercialization because they see a lot more long-term potential in their product than the larger company is willing to pay. Instead, they are looking for non-traditional commercial partners, which might include profit-share or incentive-based partners who specialize in specific therapy areas. This is different from giving away rights to a larger company to commercialize because the nature of these products is very different. Some are platform-based that have the potential to become a much larger play, so giving away IP is not the best route.
3. The Days of Mega-mergers Are Behind Us
In the last 20+ years, pharma has been on a massive acquisition spree. Mergers and acquisitions (M&As) have been a key strategy for expansion and growth. Not anymore. Big mergers are going to dry up for three reasons:
- The acquisition spree has left fewer targets up for grabs.
- The ticket size has gone up significantly for the ones that are acquisition targets, and the risk involved would keep companies on the fence.
- The capital to fund these deals has dried up.
But we will still have some large mergers. This M&A activity will focus on acquiring specialty, rare, AI, and platform-driven therapeutics.
4. Organ-on-a-Chip Revolution Picks Up
Drug development is up for complete disruption as organs-on-chips (OoCs) become closer and closer to mimicking human body parts. It upends traditional animal testing and clinical trials that are lengthy, expensive, and controversial. It is even more relevant for developing small-population therapies where recruitment is a big challenge.
Though extremely complex and expensive, further advancements are already underway to put the whole human body on a chip, also referred to as human-on-a-chip. If successful, it will transform discovery, effectiveness, and speed of drug development. The R&D cost is expected to go down by 10-25%. This, in turn, puts much more pressure on other functional areas such as commercial, which is already playing catch-up with the speed of drug development.
5. HEOR/RWE – The Giant That Is Just Getting Started
It’s not news that health economics and outcomes research (HEOR) and real-world evidence (RWE) continue to gain importance as spending increases every year. Over 90% of all drug approvals in the U.S. had RWE as part of their submission. So far, most companies have implemented point solutions with siloed use cases across functional areas.
These point solutions are required, but just the nature of the beast does not create efficiencies of scale for pharma companies if they are not creating RWE platforms to inform decisions across the product lifecycle. Demand for these platforms will increase rapidly and most of the larger budgets will move toward implementing them. This is the only way all the data and insights can be leveraged across functional silos.
6. Beginning of the End of Traditional Commercial Roles
When a leader in pharma is planning to launch a specialty drug, a common realization is the way they have structured and scaled in the past is the exact opposite of what is required to successfully launch these new drugs.
One of the most interesting developments in recent years has been the emergence of commercial roles that require an understanding of the science and tech behind the products being commercialized. Pharma leadership has started to realize that their commercial teams cannot successfully market products if they:
- Do not understand the end-to-end product lifecycle, and
- They are not actively collaborating with stakeholders across the lifecycle to inform them in advance about commercialization needs.
The need of the hour is for the commercial function to inform itself of the end-to-end lifecycle and get ready to inform the upstream development of products. Much of it is also driven by RWE, which continues to make rapid inroads into transforming commercial thinking. From traditional pricing and forecasting use cases, it is rapidly expanding to determine marketing effectiveness and commercial spending.
7. AI-based Drugs and Synthetic Data Gain Momentum
In 2022, 18 AI-created drugs were in the clinical phase, up from zero in 2020. According to Gartner, by 2026, AI-based discovery will overtake traditional bench-based research. On the other hand, digital therapeutics, apps, and smart devices are being launched in rapid succession. Synthetic data is further accelerating this with the ability to rapidly generate patient data that is statistically similar to original patient data. This can be done while complying with all privacy regulations and helping pharma companies protect sensitive patient information.
The direction is clear—we will see an exponential number of drugs and devices in the market in the next 10 years. No matter how much you plan for it, this will completely disrupt the current life sciences model. Our customers are not prepared to deal with the volume, and they don’t have the skills or the risk appetite to successfully commercialize these products.
8. Keeping a Close Watch on the Likes of CVS, But Tech Is Not Behind
Many of the non-traditional players such as CVS, Amazon, and Walgreens are moving into the primary/chronic care management space, but CVS stands out. The conglomerate now cuts across all the healthcare stakeholders that pharma deals with—it is a payer, provider, and pharmacy. But it is not the only one that pharma should pay attention to. Many others are following the same route, and the end goal is to get closer to the consumer to improve the care experience and get data in return.
Google is a case in point. With offerings such as Verily, DeepMind, Onduo, OneFifteen, and Apigee, among others, Google has all the required ingredients to become the next-gen healthcare provider and insurer. Tech companies have very high-profit margins, and the only industry they have not breached that has similar margin levels is the healthcare industry. So, expect a lot more tech players to enter the space. The question is: With all the consumer health data that it is now able to track, will Apple become an insurer or a provider?
9. Digital Is Important, But Not the Only Way Forward
Talk about digital taking over everything and AI replacing human intervention has been incessant, especially since COVID-19. While digital and AI will be critical in developing and delivering future therapies, the mindset that digital is the only way forward is flawed.
Whether it is clinical trials, medical teams helping patients, or commercial teams talking to providers, the human touch will become even more critical if life sciences companies must deliver the customer experience that is expected from them. So, digital is not the only way forward!
10. A Future Powered Not Only for Patients But by Patients
Life sciences companies (finally) are learning to speak the language of patients, who, at the end of the day, are consumers of healthcare products and services. Expect the purpose statements to shift from “improving patient lives” to “health and well-being” of consumers with more focus on prevention.
This might seem like a simple change in company purpose statements, but it brings profound changes in the way these drugs and devices are developed, marketed, and delivered. This is not a problem for one company, one function, or one leader to solve. It will impact how our industry operates and how various companies across the healthcare sector need to come together to deliver on the consumer experience and outcomes that patients expect from us.
Transformation in preventative healthcare is inevitable as health data becomes more accessible. Consumers are thinking proactively about their health and well-being with wearables. Still, the next stage of transformation involves empowering them with insights, so they make the right decisions about their health. This won’t happen until the players in the industry collaborate, so it improves drug and device development.
Expect every senior pharma leader to ask about patient engagement and experience, and these leaders can be from any and all functional areas. Most patient-focused spending has so far been in the R&D and clinical phases, but this theme is quickly gaining importance across other functional areas, including commercial, where the current emphasis continues to be on HCP engagement.
It might seem like our industry has evolved rapidly over the past many decades, but it still has a long way to go. In terms of evolution, it is still a very young industry with significant transformations and evolutionary waves coming our way. Many of these will require us to unlearn what we know and adopt new ways of working. 2023 will be an important year for us as the industry tries to reset and rebuild. This will be primarily driven by the trends listed above, along with some new ones we’ll discover along the way.
Pharma must not only stay abreast of these trends, but they must make earnest efforts to stay ahead and change. Pharma leaders need to get on board or be left behind at the station!