2023 is shaping up to be a transformative year for the pharma industry, even more so than in years past. While the industry may endure a reduction in some corners, following years of growth, it will also see rapid expansion in burgeoning areas.
Here are some trends that will change the market this year, and what the pharma industry needs to do to be prepared to help its patients.
Fat pharma seeks benefits of leaner teams
The market has been tough for most industries, especially tech where stocks have dipped significantly, and capital has dried up. Jobs have been cut across the board and there is a new realization 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 saw some examples of this in the pharma industry as well, and expect this to continue be a theme in 2023.
Commercial teams lose resources
Economic factors aside, the commercial function remains under the most pressure. With changes in therapeutic area focus, specialty markets, precision medicine, policy and pricing pressures, speed of innovation and digitization, no functional area within life sciences is under more pressure to rapidly adapt and deliver results. 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.
- There is a growing sense among smaller companies working in the rare and specialty markets to not 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. On the other hand, the success or failure of a drug can mean shutting down the business for these companies. As technology and science advance to create drugs at a much faster pace, and the potential of rapidly including indications, it keeps on getting harder and more expensive to launch them successfully. Smaller companies don’t have the deep pockets to afford failures. They are on the lookout for non-traditional commercial partners, which might include profit-share or incentive-based partners who specialize in specific therapy areas. This is different than giving away rights to a larger company to commercialize because the nature of these products is very different. Some are platforms-based that have the potential to become a much larger play, so giving away IP is not the best route.
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) had been a key strategy for expansion and growth. Not anymore. Big mergers are going to dry up for three reasons:
- The acquisition spree has not left that many targets that are 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 yet, the industry will still see some large mergers. This M&A activity will focus on acquiring specialty, rare, AI and platform-driven therapeutics.
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. This is even more relevant for developing small-population therapies where recruitment is a big challenge.
Though extremely complex and expensive, further evolution into human-on-a-chip is ongoing. 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 a lot of pressure on other functional areas like commercial, which is already playing catch-up with the speed of drug development.
HEOR/RWE: The giant that is just getting started
It’s no news that real-world evidence (RWE) and health economics and outcomes research (HEOR) continues to gain importance with spending increasing every year. At the end of 2020, more than 90% of all drug approvals in the U.S. had RWE as part of their submission. So far, most companies have been implementing point solutions with siloed use cases across functional areas.
The 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 life cycle.
Beginning of the end of traditional commercial roles
When a leader in pharma is planning to launch a specialty drug, there is a common realization that 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. Our customers have started to realize that their commercial teams cannot successfully market products if they:
- Do not understand the end-to-end product life cycle
- Are not actively collaborating with stakeholders across the life cycle to inform them in advance about commercialization.
The need of the hour is that commercial function must inform itself of the end-to-end life cycle and get ready to inform the upstream development of products. A lot of it is also driven by RWE, which is making inroads into transforming the commercial function. From traditional pricing and forecasting use cases, it is rapidly expanding to determine marketing effectiveness and commercial spending.
AI-based drugs and synthetic data gain momentum
In 2022, there were 18 AI-created drugs 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.
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 be successful in commercializing these products.
Digital is important, but not the only way forward
There has been incessant talk (especially since COVID-19) about digital taking over everything and AI replacing human intervention. 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 important if life sciences companies must deliver the customer experience that is expected from them.
A future powered not only for patients but by patients
Pharma companies (finally) are learning to speak the language of patients, who at the end of the day are consumers of health care products and services. Expect the purpose statements to shift from ‘improving patient lives’ to ‘health and wellbeing’ 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 one company, one function, or one leader problem, it is impacting how our industry operates and how various companies across health care sectors come together to deliver on consumer experience and outcomes expectations from health care.
Transformation in preventative health care is inevitable as health data becomes more accessible. Consumers are thinking proactively about their health and well-being with wearables, but 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 leader to ask about patient engagement and experience, and these leaders can be from any functional area. Most patient-focused spending has so far been in the R&D and clinical phases, but it is quickly gaining importance across other functional areas, including commercial, where the current emphasis continues to be on HCP engagement.
As you can see, there are several new factors coming into play in our market this year. Pharma companies must not only stay abreast of these trends, but they have to make earnest efforts to enter these spaces as well. They must be willing to get on board, or they will be left behind at the station.
