2016 Pharmaceutical Industry Outlook

In recent years, the pharmaceutical industry has been faced with the message of “do more with less.” Companies in the industry are used to arguing with insurers over the coverage of a particular drug, searching for cures for seemingly untreatable diseases, or facing public backlash from the high prices of currently sold drugs. Overall, this underlying message is not expected to go away in 2016, and significant challenges are predicted ahead.

The pharmaceutical industry generates 44.5% of its revenue each year from North America, and companies in the continent are being criticized for the skyrocketing prices of existing medicines. This issue, in particular, has generated a great deal of outrage in the United States over the past 6 months, so much so that it is a key issue in the upcoming presidential election. In order to stay alert in regards to these issues, the Department of Health and Human Services is required to compile a report on prescription drug spending by government agencies and health insurance programs. According to Deloitte, global pharmaceutical sales were projected to drop 2.7% in 2015, but they are expected to grow at about 4.3% annually from 2015 to 2019, suggesting hope. Greg Reh, the life sciences leader for Deloitte believes that a lot of the pressures are also drivers to optimize performance, whether it’s cost cutting or optimizing research and development and manufacturing, those are going to have longer-term benefits.

Aside from patients and politicians criticizing the high prices set by drug companies, other challenges faced by the industry include mature markets pushing companies to seek out more deals, public and private insurers demanding better outcomes for new medicines, and biotech and pharmaceutical companies pursuing targeted and specialized therapies. Pharmaceutical giants are struggling to generate additional revenue at the rate that investors expect, which is leading to executives to enhance strategies to acquire fast-growing businesses to show growth. In 2015, pharmaceutical and biotech companies set a new record for the value of deals they made in a single calendar year at $462.2 billion, so this suggests that seeking out new deals can increasingly generate revenues for these companies in the future.

When it comes to covering more types of medicines, it is expected that insurance companies will focus on a few core areas rather than spreading themselves thin, so a particular type of drug may not be covered. Precision and personalized medicine relies on the advances in genomics and big data to target specific strains of cancer or small diseases. Millions have been invested already, and it is expected that this number will only grow. However, a recent study found that a one year prescription for these types of drugs costs on average $53,384, a cost higher than the nation’s median income.

The pharmaceutical industry is unique in that it is one industry that directly affects the well-being of consumers. Not all consumers will be consistently happy with the results given by these companies and insurance providers, given that there is no “one fits all solution” for every patient. However these issues prove to be pressing, and will only become more prevalent in the coming year.