“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity….”Charles Dickens
The opening words to Charles Dickens’s novel A Tale of Two Cities perfectly encapsulate the situation pharmacy finds itself in right now. The outlook has never seemed more promising – or more ominous.
The best of times
Let’s start with the good news: a rapidly strengthening scientific base, growing demand for medicines and the removal of former impediments to free trade.
A strengthening scientific base
The scientific foundation on which pharmacy rests is improving exponentially, thanks to massive increases in processing power; advances in genetics and genomics; and new data management tools. For the last half-century, computers have been doubling in performance and capacity every 18 months. This revolution has transformed biomedical research. In 2001, it cost US$95 million to read an entire human genome.1 Today, two leading manufacturers are developing machines that can do so for as little as $1,000 – in a matter of hours.2
Inexpensive gene sequencing will let doctors diagnose and treat patients based on information about their individual genomes. And, by 2020, genetic testing will be part of mainstream medical practice in some countries.
Technological developments have also paved the way for electronic medical record (EMR) systems that capture vast quantities of outcomes data. Numerous healthcare providers in the mature and growth markets alike are building the necessary infrastructure. Meanwhile, with sophisticated data sharing, processing and mining techniques, scientists can easily collaborate and make better sense of what they see.
In effect, two changes are taking place concurrently. Our technologies for collecting biological data are improving by many orders of magnitude. Our technologies for synthesising and analysing that data are also becoming much cheaper and more efficient. Together, these advances will help pharma break through some of the barriers that have previously held it back.
The progress we’ve already made in understanding breast cancer is a quintessential example. For many years scientists thought breast cancer was a single disease. Then, in 1990, researchers discovered the first gene to be associated with hereditary breast cancer. Now they’ve succeeded in teasing apart differences in DNA to identify 10 subtypes, each with a unique genetic fingerprint .
This leap in our knowledge has transformed the prognosis for women with breast cancer. The five-year relative survival rate has soared from 63 per cent in the early 1960s to 90 per cent, and most of the improvement has taken place in the last two decades.
A better understanding of disease has produced new medicines, diagnostics and lines of research. Take Benlysta, one of the first treatments to come from mapping the human genome and the first new therapy for lupus in 50 years. The researchers who discovered Benlysta trawled through a library of human DNA hunting for genes whose function wasn’t known, but whose characteristics suggested they were linked to lupus – ignoring the conventional wisdom that you couldn’t use a gene to find a new medicine without understanding what the gene did.
Genomics isn’t the only field in which we’ve made great headway. Several stem cell therapies have already reached the market and Canadian regulators recently approved the first stem cell medicine manufactured for off-the-shelf use. Developed by Osiris Therapeutics, Prochymal is a treatment for acute graft-versus-host disease, using mesenchymal stem cells derived from the bone marrow of healthy adult donors.
With disciplines like epigenetics, we’re also beginning to understand the impact of heritable biological elements that aren’t directly encoded in our DNA. And with concepts like network medicine, we’re developing the means to understand the molecular relationships between apparently distinct ‘pathophenotypes’ .
So, while there’s still a lot more to learn about the human body, medical researchers have made huge strides in the past few years – and even better things lie ahead. By 2020, the financial and intellectual investment of the last 10 years should be starting to yield big rewards.
Escalating demand for medicines
That’s not all. The global pharmaceutical market is growing steadily, with sales reaching $1.08 trillion in 2011 – a year-on-year increase of 7.8 per cent. The mature economies proved very sluggish, but the growth economies were another matter. Sales in the BRIC countries (Brazil, China, India and Russia) rose by 22.6 per cent, while sales in the other 13 growth countries (the ‘fast followers’, as we call them) rose by 7.2 per cent.
If this pattern continues, the market for medicines could be worth nearly $1.6 trillion by 2020. Indeed, it could be worth even more. Demand for pharma’s products is rising dramatically, as the global population increases, ages and becomes more sedentary. In 2010, there were an estimated 6.9 billion people. By 2020, there will be more than 7.6 billion.11 And, if present trends are any guide, many of them will have health problems.
More than 30 per cent of the population won’t get enough physical exercise;12 more than 20 per cent will be overweight or obese;13 and more than 13 per cent will be 60 or older.14 These are all factors that increase the risk of developing heart disease, diabetes and cancer. The number of people reaching really old age is also mounting, and the prevalence of dementia doubles every five years after the age of 65.15 Hence the World Health Organisation’s prediction that, by 2020, non-communicable diseases will account for 44 million deaths a year, 15 per cent more than in 2010.16
The global incidence of infectious diseases is increasing as well. That’s partly because some diseases have become drug-resistant. But over the past few decades new pathogens such as HIV and MRSA have emerged. And old scourges like pertussis have reared their heads again. In fact, the number of cases of pertussis in the US is now higher than at any time since the early 1970s.
Meanwhile, many of the growth economies are improving access to healthcare. Brazil’s introducing mobile clinics for rural communities.18 China’s on track with a US$125 billion programme to extend health insurance cover to more than 90 per cent of the population by the end of 2012. Mexico has just completed an eight-year drive to provide universal coverage.19 And India’s National Rural Health Mission has achieved considerable progress in the 6½ years since it was launched, although much still remains to be done.
In short, there are more people – and more sick or elderly people – in the world today than ever before. More people have access to affordable healthcare than ever before. And, by 2020, access to healthcare may well be regarded everywhere as a basic human right.
Trade liberalisation
Many of the historical barriers to free trade have also been removed, bringing a period of unprecedented growth in global trade. Between 2001 and 2011, the total value of merchandise export flows (excluding services) soared from $6.2 trillion to $18.2 trillion in current US dollars.
In some respects, then, pharma’s never had it so good. The tools to develop remarkable new medicines are materialising, demand for its products is escalating and trade is getting easier.
The worst of times
Yet pharma also faces some enormous obstacles. Innovation has declined, the regulations are becoming more onerous and market conditions are getting harsher, as healthcare costs everywhere keep rising.
Poor scientific productivity
Take the vexed issue of the industry’s scientific productivity. Although the number of new medicines reaching the market picked up in 2011, pharma’s annual output has effectively flatlined for the past 10 years .
Developing new medicines is becoming an increasingly expensive business, too, although precisely how expensive is the subject of fierce debate. In 2006, the Tufts Center for the Study of Drug Development put average costs per molecule at $1.24-1.32 billion.22 Various commentators have since challenged these figures, claiming that the real cost is anything from $75 million to $4 billion, although most people lean towards the higher end of the range.
Tighter regulation
The regulatory environment is simultaneously getting more rigorous. The European Medicines Agency (EMA) recently introduced a new, three-pronged approach to the management of adverse reactions.24 And the Food and Drug Administration (FDA) is building an active surveillance system called Sentinel to oversee the safety of all medicines on the US market.
Regulators around the globe are also collaborating more closely, so a product that’s rejected in one region is more likely to be rejected in others. In late 2010, for example, the EMA pulled diabetes drug Avandia, while the FDA imposed strict restrictions on its use, and the two agencies swapped notes before reaching a decision.
More difficult market conditions Things are even tougher on the marketing and sales front. The ‘patent cliff’ is one major factor; between 2012 and 2018, generic erosion will wipe about $148 billion off pharma’s revenues. Harsher price controls are another. Most of the mature economies already use direct and indirect price controls, as we noted in ‘Pharma 2020: Taxing times ahead’. But conditions are getting more difficult in the growth economies as well.
Some instances? Russia started enforcing mark-up limits on imported medicines in April 2010.28 India announced plans to control the prices of 400 essential products in November 2011.29 And Turkey has upped the discount on treatments reimbursed through its social security system.
Many governments are also clamping down on dubious promotional practices. The US authorities have been particularly active. Between 2000 and mid-2012, the industry paid more than $30 billion to settle 226 violations, including off-label marketing and overcharging of taxpayer-funded health programmes like Medicaid – and the penalties have been steadily escalating.
The US is by no means alone, though; 24 countries have now introduced laws or codes of conduct requiring that pharma companies disclose any interactions with healthcare professionals who are also customers.32 And a recent analysis of the Securities and Exchange filings made by the top companies shows that eight face charges of corruption in foreign markets.
As the governments of the growth economies invest more public funds in healthcare, the regulators become more proactive and patients become more demanding, pharma will come under even closer scrutiny.
The way it conducts clinical trials, the partnerships it forms with payers and providers, its tendering and contracting strategies, pricing agreements and digital marketing, how it handles patient safety – all will attract more attention.
Soaring healthcare costs
Yet, serious as these issues are, there’s arguably an even bigger hurdle facing pharma: namely, the rising healthcare bill. Healthcare expenditure as a percentage of gross domestic product (GDP) is climbing in countries in every income bracket, and it’s climbing most steeply in the mature markets where the industry has historically made most of its money.
This trend is unsustainable, but the only way to reverse it is by altering our concept of healthcare itself. Instead of focusing on the treatment of disease, we need to focus on curing – or, better still, preventing – it. And pharma has a crucial role to play in making the transition.
Two key challenges
So where does the industry now stand? It’s proved remarkably resilient, given the many problems it’s dealing with. But, in essence, it faces two overarching challenges. Tomorrow’s challenge is to develop new medicines that can prevent or cure currently incurable diseases. Today’s challenge is to get to tomorrow – and that’s a tall order in itself.
Fortunately, there are a number of steps senior executives can take to help their companies reach 2020 and ready them for the opportunities the next decade brings. But some of these steps will entail making very difficult decisions.
(Courtesy :PWC study: From vision to decision Pharma 2020)