Deloitte 2016 Global Life Sciences Outlook
Global life sciences sector should look ahead to 2016 with cautious optimism
SINGAPORE, 9 December 2015 — The life sciences sector has fared well in past economic recessions, but it should approach 2016 with cautious optimism. According to the latest Deloitte report, 2016 Global life sciences outlook: Moving forward with cautious optimism, opportunities to innovate in global, patient-centric, and value-focused approaches to growth are possible but each market’s economic, political and social dynamics should be carefully monitored and assessed before moving forward.
In the coming year, each life sciences segment will need to contend with its own unique set of issues. The pharma segment – driven by ageing populations and the expansion and rollout of improved health insurance and services – is expected to see positive growth in pharma sales, particularly in developing markets, despite its near-term economic woes. On the other hand, the biotech segment, while having steadily carved a niche, can be prohibitively expensive and face challenges in terms of regulatory approvals. Then, there is the medtech segment, whose growth opportunities appear to vary by market, depending on consumer demand and market share.
Nevertheless, four major trends are expected to dominate the life sciences sector’s attention across the board: navigating market dynamics; countering pricing and cost pressures; promoting innovation; and adapting to an evolving regulatory and risk environment.
Navigating market dynamics
With U.S. and European market growth stagnating, it is anticipated that life sciences companies will continue to look to emerging market regions for new sources of revenue in 2016, even though doing so may expose them to varying types and levels of economic uncertainty. Looking beyond the immediate challenges of 2016, the projection for these regions remains promising, as underlying demographic trends and the proliferation of chronic diseases are expected to drive demand for medical supplies.
The trend towards adoption of universal health care also looks set to continue, with more countries expanding public or public health care coverage or deepening it in order to reduce out-of-pocket spending. “But more insured individuals do not necessarily mean more revenue,” cautioned Mohit Grover, Deloitte Southeast Asia’s Life Sciences and Health Care Industry Leader. “On the contrary, some life sciences companies’ over-the-counter (OTC) revenues may in fact decline as prescription drug use goes up. For example, in Indonesia, which rolled out its universal health insurance in 2014, OTC drug companies are seeing a drop in revenue.”
Countering pricing and cost pressures
Amid the reform-driven shift to outcome-focused, value-based payment and reimbursement systems, pharma companies are likely to continue to bear the brunt of public and private payers’ efforts to control costs. Truly innovative products may command premium prices (and help pay for future innovations), but patient and payer resistance is growing. Drug manufacturers are expected to continue to experience pressure to justify the cost of their products based on, among other things, the product’s comparative effectiveness against similar offerings.
Furthermore, persistent talent shortages and the need to develop and retain employees with critical business and technology skill sets will continue to challenge global life sciences companies as they try to navigate a “new world of work” – one that requires a dramatic change in strategies for leadership, talent and human resources. Singapore, for instance, is tightening the approval process for work visas and companies may need to revisit their operations in Singapore if appropriate staff cannot be employed. Other Southeast Asian governments are working to ease restrictions on the movement of labour but it remains to be seen if and how quickly those efforts will meet the region’s talent needs.
From product development through manufacturing and distribution, life sciences companies are evolving their business models “beyond the pill” to engage more fully with providers and patients throughout the product lifecycle and transform what is possible. Digital health technology, in particular, is creating a paradigm shift in life sciences. Health data captured by wearable devices, mobile health (mHealth) applications, and social media are being used to transform aspects of health care that earlier seemed beyond the purview of such technologies.
Many companies, including start-ups and health organisations, have already begun developing innovative mHealth applications to address the problem of healthcare accessibility. With Southeast Asia’s remote, hard-to-reach geographies, telehealth applications can enable consumers to get the health care they need anytime, anywhere – and a slew of players have risen to fill this void, including Indonesia’s Dokita and Doktor Gratis, and Singapore’s Ring.MD .
Adapting to an evolving regulatory and risk environment
Life sciences stakeholders face increasingly complex operational risks and regulatory challenges emanating from technology advances, clinician and patient expectations, and a globally connected health care market. Top-of-mind issues for the sector include cybersecurity and IT quality, regulations and compliance, drug and device safety, counterfeit drugs, and intellectual property protection.
“For Southeast Asia, the gradual harmonisation of regulatory approvals and increased efforts to protect intellectual property will be a development to watch in the coming year with the scheduled implementation of the ASEAN Economic Community (AEC) in late 2015,” commented Mr Grover. “In anticipation of the free trade and economic integration that the AEC will bring, foreign companies are setting up regional headquarters, especially in Singapore, and companies with established regional headquarters are reviewing their business models to manage portfolios that include both emerging and mature markets within the diverse region.”
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1 “The Health Hub: Transformation for the new normal”. Deloitte. 2015. http://www2.deloitte.com/sg/en/pages/life-sciences-and-healthcare/articles/health-hub.html