2015 will be an interesting year for the life sciences industries. As I see it, there are four areas that will affect this industry: 1) pursuit for innovation and growth; 2) complying with the ever changing global regulatory and risk environments; 3) protecting and building shareholder value; and 4) planning for the “next wave”.
Few interesting facts:
- According to Deloitte’s 2015 global life sciences sector outlook, global healthcare spend will grow at 5.2% annually at least until 2018. In North America the spend will be 4.9%, 4.6% in Latin America, 2.4% in Western Europe, 8.1% in Asia, and 8.7% in the Middle East and Africa.
- Pharma’s market size is $1.23 trillion, Biotech is $289 billion, and Med tech is $364 billion.
The drivers for increase in healthcare spending and the market sizes are due to the aging population, longer life expectancy, population growth, rising wealth and the growth in chronic diseases.
Companies are continuously looking for ways to increase their new product pipelines, stimulate innovation, and increase revenue streams. Generic drug use is up and loss of revenue from expired patents and R&D has been on the decline, but trends are showing that it is increasing. So, how is the industry handling this? They are managing it through M&A’s, with $700 billion in M&A transactions in just the first half of 2014. That was more than all of 2013 and comes close to totaling the mega merger years of 2008 and 2010.
Industry companies will strategically need to adapt to the ever changing regulatory requirements being handed down. The regulatory and risk environments are very complex and vigorous and are motivated by patient health, safety, and protection. There is a need for transparency in product commercialization, manufacturing processes and clinical trial quality. Drug and device safety standards are tightening due to social media and affiliate marketing programs. Digitization, EMR’s, network medical devices, and cloud and data sharing have increased the risk for cyber-attacks. Companies are struggling to enforce intellectual property (IP) at a global level.
Companies are working hard to protect and build shareholder value. They face challenges with governments, in both developed and emerging markets, that are minimizing pharmaceutical spending growth by implementing pricing and reimbursement legislation. They also deal with other issues in the industry brought on by generic drugs which have 70% of the drug market by volume, tighter price controls, expiring patents, and global competition. And last, but not least, the counterfeit drug business produces a $35-$40 billion a year problem for companies as well.
The life sciences industries need to plan for the “next wave.” There will be more pressure to provide real-world evidence of positive patient outcomes, value pricing, reimbursements, market access, and marketing. There are new stakeholders that will have influence and require a more collaborative customer model that involves all of the critical decision makers. A more personalized method of product development is changing health care decision making and delivery. Health care is becoming more technology enabled with wearables, sensors, digital medicine, etc. As growth slows down in developed markets, companies need to identify the next emerging markets. Life sciences companies will also see a decrease in technical and professional skills for this industry. This will cause these companies to compete for talent at a global level. In a recent survey done by Deloitte, 75% of the participants rated this issue as critical. Only 15% think they are ready to address it.
2015 will be an exciting, yet challenging year for the life sciences industry. As these companies are focused on innovation, they should also pay attention to the positive and potential negative impact of emerging trends to be successful.