McKinsey released a report1 in October 2022 questioning the future of the biopharma space. Here’s a summary of its findings.
The biopharmaceutical industry has made significant strides in disease treatment over the past decade, with advancements in immunotherapies, hepatitis C treatments, multiple sclerosis drugs, and quick development and deployment of COVID-19 vaccines. However, for continued progression, the industry might need to revise its strategies.
Key accomplishments in recent years include launching more than 500 new molecular entities, transforming lives, and extending the reach of drugs through generics. The number of patients benefiting from statins, antipsychotics, and antidepressants in the US increased approximately 50% between 2010 and 2020. However, R&D has been increasingly focusing on specialty diseases with smaller patient populations, often neglecting prevalent, chronic conditions. This implies a sixfold increase in revenue per patient.
Despite strong financial records, it could be challenging to maintain such performance, considering rising development costs and stalled productivity. An over-reliance on a few large markets is also a concern. For instance, 12 out of the 15 largest biopharmaceutical companies derive 53% of their revenue from the US, up from 43% a decade ago.
Regarding the workforce, gender imbalances are being rectified, but minority representation is slow. The industry needs to work on attracting tech talent for next-generation capabilities and create a compelling employee value proposition post-pandemic.
The industry's environmental and social impact also needs improvement. Racial and ethnic minorities are underrepresented in clinical trials, research is often focused on Western concerns, and healthcare access often depends on a country's financial capacity.
Biopharma Industry Questions to Consider for Future Progress
Executives must consider several questions for future success, such as:
Meeting broader patient needs.
Transforming R&D to deliver medicines faster and at lower costs.
Harnessing the power of digital and analytics.
Revising strategies to realize global opportunities.
Relying more on ecosystem partners.
Playing a larger role in driving patient outcomes.
Taking bold actions to meet rising ESG standards.
Adapting to a changing policy environment.
Revising organizational models to attract talent.
Major forces have shaped the biopharma industry over the last decade. Here are the key uncertainties that might influence the industry's structure in 2030.
Could the rules for drug approval change?
The biopharma industry is heavily influenced by regulatory guidelines. After a decade of little major change, we might see a shift. Will the US FDA remain the global standard for approving new drugs, or will other agencies like the European Medicines Agency gain influence? Will we see more new molecules approved, breaking a long-standing limit? Will regulators start using real-world data more for decision-making?
Will drug discovery see a revival?
Some trends, such as new technologies and a better understanding of diseases, might transform drug discovery. There are numerous efforts to improve disease prevention and detection.
Artificial intelligence is being utilized to discover new drugs. Additionally, quantum computing is being explored for its potential uses. Treatments for diseases with unmet needs are also being examined.
Will the global biopharma industry become less US-centric?
Currently, the biggest biopharma companies make over half their profits in the US. However, factors like pressure on US pricing, new entrants with lower-cost business models, and a potential shift towards a broader geographic focus might disrupt this structure.
Will the tech industry disrupt biopharma?
With more technology players entering the field, the role of big biopharma may change. Key questions include whether global tech giants will transform healthcare access and decision-making, what the pharma industry's role will be in patient and population management, and how profit pools will evolve.
Will China reshape the global value chain?
As China becomes a key part of the global biopharma ecosystem, several scenarios could play out, from limited influence due to regulatory and geopolitical challenges to outsized influence in specific parts of the value chain or even a transformational impact on discovery and innovation.
Will the industry structure stay stable or undergo a shakeup?
There are potential changes that could disrupt the structure of the biopharma industry. Will smaller biotech companies continue to independently develop their assets? Will big pharma maintain its role in development and commercialization? And will life sciences companies continue to outperform biopharma firms in value creation?
What's Next for Your Investment Portfolio?
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