PwC Reports on the Future of Pharma

The global pharmaceutical market will more than double in value to $1.3 trillion by 2020, according a PricewaterhouseCoopers report, entitled Pharma 2020: The Vision – Which Path Will You Take? The factors influencing this estimate include increasing worldwide demand for medicines as the population grows, ages and becomes more obese, and as chronic conditions and infectious diseases tied to global warming rise. However, the industry’s current business model is unsustainable and fundamental change in the way it operates is required in order to capitalize on future growth opportunities, according to the report.

By 2020, the report contends, Brazil, China, India, Indonesia, Mexico, Russia and Turkey could account for as much as one-fifth of global pharmaceutical sales, up by 60% from 2004. Also, chronic conditions in the developing world will increasingly resemble those of the developed world, with a significant rise in hypertension and diabetes. In addition, many scientists are predicting global warming and a rise in greenhouse gases to have a major effect on the world’s health, resulting in the spread of diseases such as malaria, cholera and higher prevalence of respiratory illnesses such as asthma and bronchitis.

“The pharma industry will not be in a strong position to capitalize on opportunities unless R&D productivity improves,” said Dr. Steve Arlington, global pharmaceutical research and development advisory leader, PricewaterhouseCoopers and principal author of the report. “The core challenge is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced.

“Over the next decade, the industry must shift its investment focus more toward research and less on sales and marketing. Pharma’s traditional strategy of placing big bets on a few small molecules, marketing them heavily into primary care with the aspiration of achieving blockbuster sales, will no longer suffice,” added Dr. Arlington. “It must focus on the development of medicines that prevent, treat or cure. These must demonstrate tangible benefits and tackle unmet medical needs. Governments and payers must play their part and ensure the industry is rewarded for these efforts.”

Some of the major changes the report forecasts are:

The blockbuster sales model will disappear and the emphasis will be based on therapeutic benefit and outcomes that can add the most value.

Companies will be financially rewarded for developing new therapies versus me-too medicines. Risk-sharing agreements will become more mainstream, with drug manufacturers adjusting prices according to the results of outcomes analysis data that demonstrates drug efficacy.

Focus will shift from treatment to preventive healthcare. There will be a significant increase in the production of vaccinations, with the market estimated to grow to $42 billion by 2015.

New technologies will drive R&D and will reshape the business strategies of pharma companies.

The current R&D model, involving Phases of clinical trials and regulatory submissions, will be replaced by collaborative in vivo testing and “live license” issued contingent on the ongoing performance of the drug over its lifecycle. The industry will conduct smaller, more focused clinical trials, continuously sharing results with regulators.

There will be greater international regulatory collaboration by sharing safety and efficacy data. There may well be one global regulatory system by 2020, administered by national or federal agencies.

Supply chain functions will become revenue generating and will be responsible not only for distribution but creating new channels to market products. Furthermore, 2020 will likely give rise to “made to order” therapies rather than “made to forecast” using just-in-time manufacturing and delivery techniques learned from other industries such as the automotive sector.

More sophisticated direct-to-consumer distribution channels will diminish the role of wholesalers.