The Bio/Pharmaceutical Industry’s Top 10 Watchlist for 2024: What’s in store?
What are the Top 10 items in the bio/pharma industry to watch for in 2024? From blockbusters in the making, to moderating industry growth, to patent & drug pricing reforms, to moves to shore up the supply chain, DCAT Value Chain Insights examines what will shape the industry this year.
A Top 10 Watchlist for the bio/pharma industry in 2024
Growth prospects for the global bio/pharma industry: up or down? How will the bio/pharma industry perform in 2023? Looking at a multi-year forecast (through 2027) by the IQVIA Institute for Human Data Science released in January 2023, the global medicine market—using invoice price levels—is expected to grow at a compound annual growth rate (CAGR) of 3–6% through 2027 to about $1.9 trillion with diverging trends by region. Growth in developed economies continues at relatively steady rates with new products offset by patent expiries. The underlying growth rate of 3-6% in spend will be driven by new drug launches and wider use of recently launched brands despite efforts by payers to constrain their budgets and the impact of lower-cost options. Latin America, Eastern Europe, and parts of Asia are expected to grow strongly from volume and greater adoption of novel medicines. Growth in the US, the largest national market representing approximately 40% of the global bio/pharma industry, on a net price basis, is forecast to adjust to -1 to 2% CAGR through 2027, down from 4% CAGR in the most recent five-year period (2018-2022). The impact of exclusivity losses will increase to $140.7 billion through 2027, including significant biosimilar introductions made in 2023 and to occur in 2024.
Uptick in new drug approvals—will it continue in 2024? The US Food and Drug Administration’s Center for Drug Evaluation and Research (CDER) approved 55 new molecular entities (NMEs) and new biologics therapeutics in 2023, a 49% increase in the number of new drug approvals compared to 2022, when 37 new drug were approved. The 55 new drugs approved in 2023 by FDA’s CDER is in line with recent years. In 2021, 50 NMEs and new therapeutic biologics were approved by FDA’s CDER and 53 in 2020. The 55 new drugs approved in 2023 represented the second highest level of approvals in the past decade, except for 2018 when 59 new drugs were approved. What will 2024 hold for new drug approvals?
Continued growth in spending on specialty medicines. Specialty medicines, as defined by the IQVIA Institute, as those medicines that treat chronic, complex, or rare diseases and possess additional distribution, care delivery, and/or cost characteristics, which require special management by stakeholders, are expected to see continued strong growth. Specialty medicines will represent about 43% of global spending in 2027 and 56% of total spending in developed markets, according to the January 2023 analysis by the IQVIA Institute for Human Data Science. Global spending on cancer drugs is expected to reach $370 billion by 2027, with growth accelerating from the launch and use of novel drugs and limited new biosimilar impact. Immunology spending growth will slow to 3-6% through 2027 from price reductions associated with biosimilar competition as volume growth continues at 12% annually. New therapies for rare neurological disorders, Alzheimer’s, and migraines are expected to drive spending growth in neurology.
Growth prospects for the global generics market: how will it fare in 2024? Unlike the innovator drug market where oncology, immunology, and diabetes drugs account for core therapeutic sectors and leading growth areas, non-core therapy areas account for the majority of the global generics market’s value, led by pain-management drugs, antibacterials, and anti-hypertensives, according to an analysis by the IQVIA Institute. In the generics market, oncology, which is the leading therapeutic sector among innovator drugs, is the only top five therapeutic area in innovator drugs that is also outperforming total market growth in the generics market. However, three major oncology brands with revenues of $20 billion are expected to go off-patent in the next several years, so it is likely that this will become a very significant field for generics growth, especially as biosimilar adoption intensifies. On a geographic basis, North America represents a shrinking share of the global generics market value due to rising competition and downward pricing pressures. Although the US generics market has begun to stabilize since 2019, strong pricing pressures remain. In turn, non-core geographic markets have greater generics growth potential.
The EU and drug shortages: new measures for 2024. The need to secure the supply of medicines across the European Union (EU) and avoid shortages has been highlighted as a key priority in the EU Pharmaceutical Strategy for Europe, conclusions of the European Council, resolutions of the European Parliament, and the proposed revision of the EU pharmaceutical legislation. Last month (December 2023), the European Commission, the Heads of Medicines Agencies ,and the European Medicines Agency (EMA) published the first version of Europe’s list of critical medicines. It contains more than 200 active substances of medicines for human use considered critical for healthcare systems across the EU/European Economic Area, for which continuity of supply is a priority and shortages should be avoided. The list will be expanded in 2024 and will then be updated every year, according to the EMA.
The proposed reform of the EU’s pharmaceutical legislation introduces structural measures to improve availability of medicines. Key elements include a new European alert system with earlier notification of shortages and withdrawals by companies, harmonized reporting criteria, mandatory shortage prevention plans, and coordinated management of shortages by the EMA. The reform would reinforce and strengthen companies’ obligation to ensure appropriate and continued supply. In addition, the reform brings a major overhaul of the incentives provided to companies and would reward, for newly authorized medicines, continuous supply in sufficient quantity in all EU member states. Administrative burden has also been reduced, making the marketing authorization process faster and easier. The proposed reform would also facilitate earlier market entry of generic medicines, once the exclusivity period of the originator ends.
Other initiatives proposed for 2024: The European Commission’s Critical Medicines Alliance. Hand-in-hand with the EU’s efforts to mitigate drug shortages is a plan by the European Commission to set up a Critical Medicines Alliance by early 2024. This would allow national authorities, industry, civil society representatives, the European Commission, and EU agencies to come together to develop coordinated action at the EU level against the shortages of medicines, in compliance with competition rules and EU’s international commitments. The starting point would be the shared vulnerability analysis of supply-chain bottlenecks of critical medicines (i.e., over-dependency on a limited number of external suppliers, limited diversification possibilities, limited production capacities). It would further draw on a varied toolbox, including actions to mitigate these structural risks, notably reinforcing supply by making demand more predictable, encouraging diversification and increased manufacturing for the most critical medicines, as well as EU stockpiling if needed. Another strategic focus of the Critical Medicines Alliance would be how to boost Europe’s capacity to produce and innovate in the manufacturing of critical medicines and ingredients in a coordinated and competitive way.
US-based measure to shore up the drug supply chain. The US is also pursuing policy and action to address the drug supply chain. In November (November 2023), President Joe Biden convened the inaugural meeting of the White House Council on Supply Chain Resilience, a cross-industry and government initiative to address the supply-chain challenges and vulnerabilities exposed during and post-pandemic and ways to strengthen US-based manufacturing and its supply chains. In all, the Biden Administration outlined 30 new actions to strengthen US supply chains and secure key sectors, which includes steps through the Defense Production Act to support US-based domestic manufacturing of essential medicines, new data collaboration to spot supply-chain risks sooner, and transportation and logistics initiatives to ensure the continued flow of supply chains. The implementation of these measures will be a key item to watch for in 2024.
Bio/pharma mergers & acquisitions (M&A)—up or down in 2024? In a recent analysis, the management consulting firm, PwC, projects that M&A activity in the US life-sciences and bio/pharma industry will be relatively healthy in 2024. Last year (2023) was a reasonably strong year for the pharmaceutical and life sciences sector with both deal value and volume of M&A close to pre-pandemic levels, according to the PwC analysis. In 2024, the firm expect similar levels of activity, in the $225-billion to $275-billion range across all subsectors. PwC says despite some stabilization in the macroeconomic environment and the potential for a soft landing in sight, continued geopolitical and regulatory uncertainty seems a given in 2024. Against this backdrop, along with higher interest rates, PwC says it expects dealmakers to increasingly focus on margin accretion in M&A, rather than relying prominently on growth-driven deal-making. As regulators’ perspectives on key deal factors become better understood, there may be a return of larger deals, along with continued interest in the $5-billion to $15-billion deals to fill targeted strategic gaps, according to the PwC analysis.
Drug pricing reforms continue in 2024. A key item to watch for in 2024 will be the publication of the first negotiated “maximum fair prices” under US drug pricing reforms authorized under the Inflation Reduction Act. A key provision under that law is for the first time ever, the US government, through the Department of Health and Human Services (HHS), was authorized and required to negotiate prices for certain prescription drugs under Medicare, the US federal health insurance program for people 65 or older. The drug-pricing measures apply to select drugs under Medicare Part D, which covers most outpatient prescription drugs from pharmacies and other pharmacy providers, and Medicare Part B, which applies to prescription drugs administered in a physician’s office or clinical/hospital outpatient setting.
Under the drug-price negotiation program, the HHS Secretary is authorized and required to select a specified number of drugs from a list of 50 “negotiation-eligible drugs” with the highest Medicare Part D spending and from a list of 50 “negotiation-eligible drugs” with the highest Medicare Part B spending over a given 12-month period. It would limit the number of eligible drugs for negotiations to 10 Medicare Part D drugs in 2026, 15 Medicare Part D drugs in 2027, 15 Medicare Part B and D drugs in 2028, and 20 Medicare Part B and D drugs in 2029 and thereafter. In addition, the program also limits the type of drugs eligible to be negotiated under the drug-pricing plan. For example, the plan applies only to “high-cost” drugs defined by levels of Medicare spending, “older” drugs, defined on the basis of the number of years from when a drug was approved by the US Food and Drug Administration (FDA), and drugs without generic-drug and biosimilar competition.
Key for 2024 will be the publication of the maximum fair prices for the first 10 Medicare Part D drugs subject to price negotiations. The process for negotiation began in 2023, and the first negotiated prices are set to go into effect in 2026. The list of the 10 Part D drugs with negotiated prices taking effect in 2026 was announced in September 2023 and the prices for these drugs will be published in 2024. The period of negotiation between the HHS Secretary and manufacturers of these drugs started in October 2023 and will continue through August 1, 2024, and the negotiated maximum fair prices will be published no later than September 1, 2024, marking the first set of negotiated drug prices under the program.
Additionally, the Centers for Medicare & Medicaid Services (CMS) released a list of 48 prescription drugs for which Part B beneficiary coinsurances may be lower between January 1, 2024 – March 31, 2024 because of the Inflation Reduction Act’s inflation rebate provision. Because of the law, companies that raise drug prices faster than inflation are required to rebates back to Medicare.
Patent reform in the US: March-in rights and drug pricing. In the US, the Biden Administration’s proposed framework to use so-called “march-in” rights as a means to address drug pricing has drawn strong criticism from the innovator drug sector of the bio/pharma industry, and this issue will continue in 2024. Last month (December 2023), the Biden Administration released a proposed framework for federal agencies on the exercise of march-in rights on taxpayer-funded drugs and other inventions, which specifies that price can be a factor in considering whether a drug is accessible to the public. The proposed measure was derived from the Bayh-Dole Act, which was enacted in 1980, and which created a framework where researchers receiving federal funds could patent their inventions and license them to private companies so they could continue to research and develop them into products. Under Bayh-Dole, the federal government has the right to “march in” under a narrow set of circumstances to require patent holders to license their inventions to additional companies if the original licensee isn’t making good-faith efforts to develop the technology into a usable, real-world product.
The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents US-based innovator drug companies, issued a statement on December 6, 2023, to strongly oppose the use of march-in rights in evaluating drug pricing. “This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures,” said PhRMA in its statement. “The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.” It specified in a fact sheet on the proposal: “The NIH [National Institutes of Health] has noted that price is not included in the law as a circumstance warranting exercise of march-in provisions. Using this Bayh-Dole provision for price regulation could stifle the same innovation this policy was designed to help accelerate.”