Bristol-Myers Squibb’s splashy $74 billion Celgene buy is set to reset the top ranks of pharma, but the industry’s year ahead will be shaped more directly by larger trends impacting the sector’s perception, investment and future growth.
Public criticism and scrutiny from lawmakers will likely remain, keeping biotech and pharma under pressure. At the same time, a cooperative FDA and scientific advances in oncology, cell and gene therapy should continue to serve as a tailwind, generating new approvals and investor optimism.
Digital opportunities, including in artificial intelligence, have also proved attractive to drugmakers, spurring changes among executive teams.
Here are seven trends to watch as 2019 unfolds:
Political pressure on drugmakers rises
Among Elijah Cummings’ first acts as chairman of the House Oversight Committee was announcement of a broad investigation into prescription drug prices.
After two weeks as head of the powerful committee with broad subpoena powers, the Maryland Democrat has made clear rising pharmaceutical costs will be an early target. That attention, and House Democrats’ focus on healthcare in their retaking of the House of Representatives, are among the signs that political pressure on drugmakers could ramp up over the next two years.
Congress has periodically put the industry’s pricing practices at the center of its scrutiny in years past. But that spotlight will likely be fixed more permanently under Democratic control of the House.
Making that attention more dangerous for pharma is the Trump administration’s actions to push forward policies anathema to drugmakers. Plans to require list prices in television ads and link Medicare payments to what’s paid abroad remain in early stages, but criticism of the industry has flowed freely from the Republican White House.
Democrats may be reluctant to hand the president a major domestic policy win on drug pricing. But that doesn’t rule out some bipartisan cooperation, potentially resulting in tangible policy losses for an industry used to wielding its political clout.
«We are willing to work with Democrats and Republicans to accomplish what was set forth in @POTUS’s drug pricing blueprint—lower list prices and reduced out-of-pocket costs for Americans,» Health and Human Services Secretary Alex Azar wrote in a Jan. 15 tweet.
Price hikes remain, but companies become more selective
Upping prices at the start of a new year is standard practice for the industry. This year, however, was a test of how drugmakers would proceed after a confrontation between President Donald Trump and Pfizer led many to announce price freezes or temporary roll-backs of previous price hikes.
Unsurprisingly, drugmakers were largely undeterred, with many moving ahead with increases ranging between low- to mid-single digits. While seemingly a provocative move, the underlying rationale is clear: biotech and pharma companies depend on price increases for revenue growth, particularly for older products.
Investment bank Raymond James did, however, track fewer hikes in the key Dec. 1 to Jan. 1 period than it did in 2017, suggesting pharma companies are becoming more selective in which drugs they take increases on.
That idea is borne out by moves from Pfizer, Merck & Co., Eli Lilly and Biogen. Price increases taken by each were largely kept to products crucial to future growth, or limited to a select basket of products.
Merck, for example, in November increased the prices of its top-selling cancer drug Keytruda and its vaccine Gardasil, along with three other products. In announcing late last year price increases for 41 drugs, Pfizer emphasized that for about 90% of its product portfolio, prices would remain the same.
Such an approach could reflect pharma efforts to walk a fine line between limiting their exposure to criticism, while retaining pricing as a lever to pull for higher revenue and profit.
«We suspect many of these firms are simply taking more of a wait-and-see approach, with a greater number of increases anticipated in the weeks ahead,» wrote Raymond James analyst Elliot Wilbur in a Jan. 1 note to investors.
Oncology remains a top draw for biopharma
In recent years, pharmaceutical companies have consistently prioritized investment into cancer drug development, making for an industry-wide turn toward oncology.
Ninety billion dollars in cancer-focused dealmaking between December and the opening weeks of 2019 show that emphasis hasn’t waned.
Uniting deals by Bristol-Myers Squibb, Eli Lilly and GlaxoSmithKline is a shared desire to deepen cancer drug pipelines and strengthen commercial presence in what has become the industry’s hottest field.
AstraZeneca, Gilead Sciences, Regeneron and Sanofi, meanwhile, have all made a concerted effort in the space than in the past.
Scientific and clinical advances have catalyzed drug development, but so too has a cooperative regulator and a market accepting of price tags stretching past $100,000 per year.
Those tailwinds look likely to persist in 2019.
A Product Manager with expertise in pharma marketing and sales operations