Biopharmaceutical Spending Increasing but at Slower Annual Growth Rate
The pharmaceutical market is set to reach $1.5 trillion globally by the year 2023, according to a new report by the IQVIA Institute for Human Data Science and entitled The Global Use of Medicine in 2019 and Outlook to 2023: Forecasts and Areas to Watch. This valuable resource provides detailed information on the changes we can expect in the pharmaceutical field and the most likely outcomes for the U.S. and nations around the globe.
The IQVIA report indicates that spending on biopharmaceuticals will continue to rise in the next four years. Slower growth will be the rule more than the exception on a global basis:
- The United States is expected to see compound annual growth of five to eight percent through 2023. Pharmaceutical manufacturers will continue to experience growth in the three to six percent range, which is significantly slower than in the five years just previous.
- Europe’s growth in the pharmaceutical sector is also expected to slow down to between one and four percent, which is likely to be significantly less than its 3.8 percent growth rate in the past five years.
- China is an emerging market in the pharmaceuticals field with $137 billion in spending during 2018. Some of this increase in spending is the result of reforms at the central government level and expanded coverage for residents across the country.
- Thanks to its aggressive approach to generic medicines and favorable exchange rates, Japan will actually see spending go down in the pharmaceutical field between now and 2023.
Developed markets are likely to be primarily responsible for the continued financial growth in the pharmaceutical sector. Emerging markets in this field are likely to see slower top-line growth in the next five years.
Other Factors Likely to Play a Role in Growth of Drugs and Biologics
The primary elements in play in the pharmaceutical industry vary considerably depending on the area of the world under consideration. For instance, the pharmaceutical industry in the United States will be affected by the expiration of patents and the emergence of cheaper generic alternatives, which will cut into the profitability possible for manufacturers and distributors within the U.S.
Losses of exclusivity and the arrival of lower-priced generics will also reduce revenues for some pharma companies, with an expected aggregate loss of $95 billion in the U.S. alone. Newer products on the road to release, however, will offset some of these losses and will help to promote ongoing profitability for established firms.
The release of biosimilar products is expected to slow down in the next five years, with Europe outstripping the U.S. during this time period. By 2023, however, changes in U.S. approval policies will likely spur increases in biosimilar applications and potential savings for consumers.
Spending on specialty medicines will continue to increase, going from $336 billion in 2018 to a predicted $475 billion to $505 billion by 2023 across developed markets. Most of this growth will be driven by five areas of the specialty marketplace:
- HIV treatments
- Treatments for multiple sclerosis
- Medications for autoimmune disorders
- Immunology pharmaceuticals, including immunoglobulins, immunosuppressants and interferons
Spending in these five classes is expected to account for 74 percent of the growth in specialty medications over the next five years. Specialty medications, however, only represent about 13 to 14 percent of the overall pharmaceutical marketplace.
The global pharmaceutical market will exceed $1.5 trillion by 2023 growing at a 3%−6% compound annual growth rate over the next five years.
Expansion of Next-Generation Biotherapeutics Approvals
Gene therapies, regenerative medications, cell-based therapies, and other next-generation biotherapeutics (NGBs) have not made a major impact on the pharmaceutical industry over the past few years, with only nine of these medications currently on the market globally. This is expected to change over the next five years because of increased buy-in on the part of government agencies and improved reimbursement mechanisms for companies who invest in these products.
- It is expected that between five and eight new NGBs will receive approval from the U.S. Food and Drug Administration (FDA) and other regulatory agencies around the globe.
- The ethics of gene editing therapies will continue to be hashed out both in the court of public opinion and in the regulatory environment. The recent use of CRISPR technologies to modify the DNA of two children born in China has already sparked controversy. The results of these alterations will be monitored closely both by local researchers and the global medical community.
- One of the most important barriers to NGBs in the general medical marketplace is the high price of developing, testing, and releasing these products compared with the relatively small number of people who can benefit from the treatment regimens.
- Another issue with NGBs is that some do the job too well. When patients can be cured or their conditions remedied with a very short course of treatment, the ability of pharmaceutical firms to profit from these medications is limited.
- Larger pharmaceutical firms are generally the only companies capable of absorbing the costs of development for NGBs and are expected to continue to dominate this sector of the pharmaceutical industry.
While NGBs show a great deal of potential in treating a range of diseases, the high costs associated with these treatments is likely to suppress growth and reduce new developments in this field.
Prescription Digital Therapeutics Hitting the Market
Mobile applications that monitor health and provide reminders and alerts to patients have been around for a number of years and number in the thousands. When combined with prescription medication devices, however, these apps constitute prescription digital therapeutics that can be used to combat a number of different conditions and illnesses. The first prescription digital therapeutics treatment to be approved, reSET, got the go-ahead in November 2018 and is designed to treat substance abuse disorder. Other digital therapeutics are expected to seek approval in upcoming years, including treatments for Alzheimer’s disease, ADHD in children, schizophrenia, and major depressive disorder in adult patients.
Addressing Tropical Diseases
Tropical diseases have long been overlooked in the pharmaceutical industry. Today, charitable organizations and international health agencies are making a concerted effort to address these issues. This focused approach to diseases that primarily affect individuals in Latin America, Africa, and Asia will likely lead to the development and approval of as many as 10 treatment options for neglected tropical diseases like Dengue, malaria, tuberculosis, leishmaniasis, and even rabies. Distribution of these medications will continue to be an issue, especially in areas ravaged by poverty or subject to military conflicts.
Artificial Intelligence in the Medical Marketplace
Machine learning and artificial intelligence (AI) applications are expected to continue to influence the ways in which patients are diagnosed and treated in the modern medical marketplace. Some of the most important developments are expected to include the following:
- Predictive analysis of patient groups will allow the subdivision of patients into categories conducive to better care.
- Big data mining techniques will continue to be perfected and will offer new insights into the pharmaceutical needs of patients across a wider range of populations. This will drive research and development over the next few years.
- Personalized treatment regimens based on AI are unlikely to see widespread use during the next 10 years. Development of these applications, however, is expected to continue for the foreseeable future.
- The protection of personal data and private information will pose challenges for pharmaceutical and technological firms tasked with creating this next generation of medical AI and machine learning.
As AI becomes more robust and more integrated with other phases of medical research and treatment, it will play an increasingly dominant role in allowing researchers and caregivers to provide the most effective treatments for patients in the future.
Increasing Roles for Real-World Evidence
Real-world evidence (RWE) is taking its place alongside randomized controlled trials (RCTs) as a source of information for researchers in the medical field. In December 2018, the FDA approved and released a strategic framework that expands the use of RWE in evaluating biologic and small-molecule cures. By taking real-world data and RWE into account, it may be possible to speed the testing and approval process for drugs, especially those intended to treat rare diseases.
Patient Advocacy and Engagement
Pharmaceutical firms will also be adding patient care advocates to their roster of employees. These staff members will take on a number of responsibilities in hospitals and research laboratories:
- Building partnerships with patient advocates and organizations to determine the right approaches for clinical trials and other activities
- Designing and presenting patient-centric research and development practices
- Establishing frameworks for building RWE platforms and accessing big data from a variety of sources
- Engaging with patients about digital technologies and applications
- Investing time and effort in interactions with patients and patient groups to determine priorities and needs among these constituencies
This is a positive move that will promote the best care and treatment solutions for patients and improved engagement on the part of pharmaceutical firms.
Drug Pricing Policy Reforms on the Way
Thanks to a run of bad publicity about pharmaceutical firms, “excessive” profits, the overpricing of drugs, and pharmacy benefit managers (PBMs), most analysts expect major reforms in the way in which drug prices are set, rebates and PBM deals structured, and the reimbursements available to pharma firms and PBMs from government programs and health insurance companies. This could reduce out-of-pocket costs for patients and may even spur increased competition among pharmaceutical firms in the next five years.
The Role of Emerging Biopharmaceutical Firms in Driving Research and Development
Emerging biopharma (EBP) companies are defined as those firms that spend less than $200 million annually on research and development or that earn less than $500 million annually in revenue. These companies are responsible for 72 percent of all research and development in the pharmaceutical industry. The IQVIA report predicts that over one-third of the drugs brought to market in the next five years will be launched by EBP firms.
Innovation in the Pharmaceutical Industry
As mobile applications and cloud-based technologies increase in popularity among patients, they will also provide added methods of communication and increased options for research and development of profitable medications among the major players in the pharmaceutical industry. This may also lead to reduced operational costs and increased partnerships between large life sciences companies and EBP companies to mitigate financial risks for both parties.
Opioid Prescriptions Continue to Decline
Existing federal and state policies on prescribing and administering opioid-based medications are already reducing the number of patients who rely on these drugs to combat pain. Different states in the U.S. have experienced significantly different rates of success in reducing the per-capita morphine milligram equivalent (MME) for patients within their borders. The goal of current regulations and proposed legislation is to reduce the MME to under half of the record high levels reported in 2011. This will require a concerted effort on the part of physicians and caregivers, especially in states that lack the legal framework for limiting the use of these drugs as therapeutic solutions for pain.
Ten Key Trends to Watch Over the Next Five Years
In the fascinating, fact-filled report, the exceptional team at the IQVIA Institute for Human Data Science identify and explain ten trends to watch over the next five years. In summary:
- Patient Engagement: Pharma companies will continue hiring patient care and patient advocacy specialists as they expand health advocacy capabilities and bring these in house. By the end of this year, most of the top 20 pharma companies will have a senior level position in charge of patient advocacy.
- Digital Therapeutics (DTx): New prescription digital therapeutics (DTx) will enter the market. With indications and disease-specific treatment effectiveness claims in their software labels, mobile apps are increasingly submitted to the FDA for regulatory clearance.
- Artificial Intelligence and Machine Learning: Life sciences firms will increase their investment in artificial intelligence, machine learning, and deep learning programs. Expect these advances to lead to new breakthroughs in the discovery and development of therapies.
- Real-World Evidence: Many new medicines are approved for a single or limited clinical indication. Approval of additional or alternative on-label indications requires more evidence. Manufacturers will increasingly incorporate real-world evidence (RWE) in post-market clinical trials to support regulatory approval for new novel indications.
- Emerging Biopharma Companies: With the absolute number of active R&D compounds increasing and shifts in life science industry research and development strategy, emerging biopharma companies (EBP) will launch new medicines in the next five years. EBPs will bring to market over one-third of all new drugs and biologics launched in the next five years. Of course, nimble, laser-focused EBPs will continue to be acquisition targets for larger biopharma companies.
- Pricing Reforms: In the U.S., political responses to stakeholder perceptions that patients and taxpayers are paying inappropriately high costs for medicines, the federal government has proposed a sweeping set of pricing reforms affecting Medicare and Medicaid. The proposals have “varying levels of impact and probability of being enacted.”
- Prescription Opioids: “Existing policies and new legislation will likely impact opioid prescribing and use through 2023, and the dynamics around prescription opioids, and issues around illicit drug use and overdoses, will remain complex and challenging to address. A range of likely scenarios around opioid prescribing trends include a continuation of the ongoing rapid declines in use, or a pattern of convergence at the levels of current lower-use states.”
- Margin Pressures: “The next five years likely pose a number of challenges to biopharmaceutical companies, with payer actions on prices looming, and it remains to be seen whether these companies can repeat their past successes in terms of revenues and cost management. Technology investments, such as cloud-computing, artificial intelligence, and machine learning, are among the tools being explored to improve productivity.”
- Neglected Tropical Diseases: “In the past decade, philanthropic organizations focused on neglected tropical diseases have made significant progress and many of the clinical development programs they have started or supported are beginning to result in drug approvals.”
- Advanced Therapies: “A range of novel technologies, such as induced pluripotent stem cells (iPSC) and CRISPR/Cas9, and others involving modified cells or gene-modification tools are under development. These will treat limited patient populations and raise important questions for healthcare stakeholders around cost and accessibility.”
Previous versions of the IQVIA Global Use of Medicine report have been surprisingly accurate and have provided real insights into the direction of the pharmaceutical market and the prospects for profits, innovation,
IQVIA uses a wide range of proprietary resources to compile these reports, which serve as a useful tool for health care providers and stakeholders in the medical and pharmaceutical fields. By keeping a close eye on these predictions and trends, medical professionals can prepare effectively for the changes likely to occur over the next five years and well into the future.