The post-World War II era was a golden age for the pharmaceutical industry. Large pharmaceutical companies such as Merck and Eli Lilly churned out new antibiotics, vaccines and medications at an astonishing rate that radically changed people’s lives for the better. Today, however, innovation in the pharmaceutical industry is very different. Tighter regulations, expiring patents and the growth in genomics have all affected the industry.
The sheer size of the industry makes it important for anyone involved in healthcare to stay abreast of pharmaceutical industry trends. Multinational healthcare firm Iqvia projects that the global pharmaceutical market will grow to $1.6 trillion by 2025. Individuals who are interested in pursuing a Healthcare MBA degree can benefit from gaining an understanding of trends that will shape the future of the industry.
Emerging Markets Will Drive Innovation
With the flattening of growth in pharma sales in developed countries, drug makers are increasingly looking to emerging markets for new sources of growth and revenue. This means pharmaceutical companies will focus on global competencies with strategies tailored for local markets to stay competitive.
Market research firm Imarc projects that the global “pharmerging” market — which includes countries that presently have a low position in the market but are rapidly growing — will experience a compound annual growth rate of 10.4% from 2021 to 2026. Imarc cites the following reasons for growth in the pharmerging market:
- The prevalence of chronic diseases and an increase in consumer awareness about treatment
- Government actions aimed at lowering the cost of treating chronic diseases
- Aging populations that face issues such as cardiac failure and hypertension
- Growth in health insurance in pharmerging countries
Increased Conflict Between Affordability and Access
The trend toward cost containment in healthcare is driving the heated debate about access to costly drug treatments. Healthcare executives are increasingly involved in formulary decisions. Pharmaceutical companies will need to provide more evidence-based data on health outcomes to justify a particular therapy or medication. Value needs to be communicated to all stakeholders: insurers, healthcare providers and patients. Collaboration between bioinformaticists and marketing is necessary to develop marketing materials designed for each audience, focusing on evidence and positive health outcomes.
Mergers and Acquisitions Will Continue to Increase
As one of the most prominent pharmaceutical industry trends, mergers and acquisitions have shaped the pharmaceutical industry more significantly than other industries. This is because the pharma industry is high risk; few products make it to market, and fewer still recoup the cost of R&D. The focus of mergers and acquisitions will change, too, from accumulating a large portfolio of products to concentrating on areas of strength and shedding areas of weakness. An example of this is GlaxoSmithKline’s (GSK) asset swap with Novartis, which strengthened GSK’s vaccine position and reinforced Novartis’s prominence in cancer drugs.
Consulting firm McKinsey & Company reported that, immediately prior to the COVID-19 pandemic, pharma merger and acquisition activity had reached an all-time high, with $414 billion in deals in 2019. Although merger and acquisition activity decreased during the pandemic, McKinsey & Company expects that the excess cash reserves that pharmaceutical companies have accumulated will enable those companies to resume merger and acquisition activity at a pace similar to that prior to the pandemic.
More Tech Innovations/Investment in Manufacturing Processes
The FDA’s Current Good Manufacturing Practices (CGMP) guidelines will require additional investments in technology and IT to reduce costs, increase flexibility, adapt to new regulations and streamline the process from R&D to manufacturing. Process Analytical Technology (PAT), product lifecycle management tools and Quality by Design (QbD) technology help companies prepare for live licensing and reduce business risks and overall development and manufacturing costs. Given the rapidly evolving regulatory framework, these tech investments become even more important for agile responses.
The pharma industry is poised for significant change in the coming decades. For today’s savvy pharma executives, these are the trends to watch.
Increased Prescription Drug Costs
The increase in prescription drug costs is a pharmaceutical industry trend for which there is ample evidence. For example:
- According to the AARP Public Policy Institute, from 2006 through 2020, retail prices for 65 chronic-use, brand name drugs rose cumulatively by an average of 276.8%. That was significantly higher than the cumulative general inflation rate of 32% during that time period.
- Healthcare firm GoodRx reported that, during January 2021, the prices of 832 drugs rose by an average of 4.5% (pharmaceutical companies usually increase prices in July and January).
- The U.S. Centers for Medicare and Medicaid Services has projected that from 2024 to 2028 prescription drug spending will increase by an average of 5.9%, primarily because of increases in drug prices and in the use of drugs.
Employee benefits consulting firm JP Griffin Group cites specialty drugs as a significant driver of increases in drug prices. The number of specialty drugs and their use are both rising, and the prices for specialty drugs are increasing more rapidly than for nonspecialty drugs.
The Peter G. Peterson Foundation offers additional reasons for increases in drug prices, including the following:
- The competition among pharmaceutical companies is limited due to U.S. patent laws and mergers and acquisitions in the industry.
- There is a lack of transparency in the price of drugs.
- The ability of parties such as Medicare to negotiate drug prices is limited.
Use of Artificial Intelligence
The growing use of artificial intelligence is an important trend in the pharmaceutical industry. According to PharmaExec.com, the industry can use artificial intelligence to do things such as:
- Create new approaches for marketing that will attract customers
- Improve drug trials
- Manage large amounts of data rapidly
- Replace old manufacturing processes that relied on humans with automated processes
- Strengthen quality control processes
Research firm MarketsandMarkets projects that the size of the global artificial intelligence healthcare market will grow from $4.9 billion in 2020 to $45.2 billion by 2026, and the primary drivers of that growth will be:
- Pharmaceutical and biotechnology companies increase in the use of artificial intelligence for COVID-19 vaccine or drug development
- The rapidly growing amount of complex healthcare data and the increasing complexities of that data
- Improvements in computing power and decreases in hardware costs
- A growing need to lower the cost of healthcare
- An increase in cross-industry collaborations
- A need for more improvised healthcare services to address an imbalance between the health workforce and patients
Integration of Blockchain Technology
The pharmaceutical industry is also wading into blockchain technology, which creates a transaction ledger to prevent hacking and alterations of data. According to TechHQ, blockchain technology could help the pharmaceutical industry:
- Strengthen supply chains
- Improve the safety of data storage
- Improve the sharing of data with parties such as regulators, pharmacy benefit managers, researchers and doctors
- Expedite clinical trials
- Shorten the time necessary for discovering and developing new drugs
Pursuing a Career as a Leader in Healthcare
Pharmaceutical industry trends will play a big part in the careers of individuals who aspire to become leaders in healthcare. If leading the charge in the challenging world of healthcare interests you, explore George Washington University’s online Healthcare Master of Business Administration program to learn how the program can help you pursue your professional goals. Take the first step toward a rewarding career today.
MarketsandMarkets, “Artificial Intelligence in Healthcare Market with Covid-19 Impact Analysis by Offering (Hardware, Software, Services), Technology (Machine Learning, NLP, Context-Aware Computing, Computer Vision), End-Use Application, End User and Region — Global Forecast to 2026”