COVID changed Life Sciences companies…will they change back?

By Vicky Levy, Global Life Sciences sector leader, Deloitte Consulting, LLP

It is hard to believe we are already four months into 2022…and more than two years into the pandemic. We have seen progress in response to COVID-19 as life sciences companies, regulators, and health care providers challenged convention and replaced some traditional business models with new ones. The question is, will the industry continue to move forward, or will it backslide?

There is nothing like a crisis to force an industry to change. In the early phases of the pandemic, there was an expectation that core activities, such as research and development, and clinical trials, would grind to a halt. There was also a feeling that some pharmaceutical companies were too big to make changes, or that they would be hamstrung by their legacy infrastructure and not able to meet the moment. What we saw was quite the opposite, according to our report, Breaking barriers to digitalization in biopharma. Many companies quickly adapted as the sector was forced to become more digital and virtual. At the same time, regulators also adapted and addressed many real and perceived barriers, helping industry transition. In a blog last summer, my colleagues Anne Phelps and Neal Batra noted that the pandemic caused traditional orthodoxies in life sciences to change, and regulators had to change, too.

The good news is that there appears to be broad agreement among CEOs and executives we interviewed for our annual outlook…the sector cannot revert to its pre-pandemic ways. However, they also acknowledged that maintaining momentum could be a challenge. It’s human nature to return to more familiar ways of working because it instills a certain level of psychological confidence. But to a person, each interviewee told me they are developing strategies to ensure they don’t revert back to less-efficient legacy ways.

I am optimistic. New ways appear to be having a positive impact even beyond the notable COVID-19-related successes. After a decade of consistent declines, the pharmaceutical sector rebounded with record-high returns on investment (ROI) in 2021, according to the Deloitte's Center for Health Solutions 2021 analysis of projected R&D productivity among the top 15 largest biopharma companies. While much of the growth was driven by the development of vaccines and therapies to prevent and treat COVID-19, it wasn’t the only factor. In addition, the projected ROI jumped from 2.7% in 2020 to 7% in 2021, according to our research. This was the largest year-over-year increase in internal rate of return (IRR) we’ve seen since we began analyzing the data 12 years ago. 

Four trends that could reshape the global life sciences sector

Our recently released 2022 Global Life Sciences Outlook explores some of the changes that emerged during the pandemic and explains how we expect those trends to continue to reshape the industry in the months and years ahead. Here are four key trends that are indicative of continued progress:

• Collaboration: Prior to the pandemic, it would have been inconceivable for pharmaceutical companies to willingly share information with competitors. Data is king! Historically, companies haven’t shared anything that could be a competitive advantage. That perspective has changed 180 degrees. As pharmaceutical companies raced to develop vaccines and therapies to prevent and treat COVID-19, some companies established channels through which competitors could access and mine their data. Organizations learned that these more open models and collaborations enhance their competitive advantage rather than hinder it.
• Digital transformation: The pandemic required life sciences companies to become more digitally savvy, which often led to more agile, nimble, and adaptable organizations. A recent Deloitte and FORTUNE report found that 77% of CEOs across 15 industries agree the pandemic accelerated digital transformation. The CEO of a global pharmaceutical company told us that the pandemic seemed to accelerate digital innovation by 10 years in just 18 months. In the year and years ahead, we expect visionary leaders will continue to drive investments focused on long-term, strategic digital objectives. For example, to strengthen supply chain resilience and help transform manufacturing, many companies are using automation, smart factories, and artificial intelligence (AI). According to Deloitte’s life sciences digital innovation survey, 76% of respondents are currently investing in AI for clinical development.
• Research and development: Some processes that were put in place to expedite the development of COVID-19 vaccines and therapeutics are now being applied to other drugs. Remote monitoring and remote visits helped pharmaceutical companies recruit patients and keep clinical trials moving forward during the pandemic. Case in point: Across the pharmaceutical industry, the number of new clinical trials increased by nearly 18% between 2020 and 2021—for a wide range of products. In 2021, there were nearly 1,300 oncology trial initiations—up 23% from the prior year, according to Deloitte’s report, Never the same again: How COVID-19 created seismic change in life sciences regulations.
• Sustainability, climate, and equity (SCE): The pandemic created an even stronger sense of urgency to address SCE. As I noted in my 2021 Outlook blog, the pandemic shined a light on health and social inequities around the globe. Pharmaceutical companies, for example, faced distinct challenges with their highly visible role in drug pricing and access to medicines. In response, large and small companies from around the world have made bold commitments to improve diversity and inclusion in clinical trials in the communities they serve and among the people they employ. Many companies are also working to improve their carbon footprint, according to a new report from the Deloitte Center for Health Solutions. For example, the Pharmaceutical Supply Chain Initiative (PSCI) is a new coalition of nearly 50 pharmaceutical and health care companies that have pledged to maintain transparency and integrity in their supply chain practices through a shared audit program. Another program, dubbed Energize, is a collaboration between 10 global pharmaceutical companies with the goal of increasing renewable energy access for hundreds of pharmaceutical suppliers. Work is also underway for new global SCE standards,¹ and companies should try to determine how best to demonstrate their progress with robust measures and enhanced disclosures.²

Conclusion

We are bullish on the sector given what we have witnessed over the past two years. Many pharmaceutical and medtech companies are emerging from the pandemic as more effective and nimbler than they were two years ago. We have seen an unprecedented level of collaboration and greater focus on patient outcomes and the consumer experience. The life sciences sector demonstrated a remarkable ability to pivot in response to a crisis. While a few companies might return to pre-pandemic business practices, I’m optimistic that most industry leaders will push to maintain and accelerate the progress they’ve made.

Endnotes: 

1. Rolling NDA and BLA Submissions: Accelerate Your Timeline for Review, Certara, April 23, 2021

2. Shortening Approval Delays for New Drugs: A Safe, Straightforward Prescription, MEI, June 21

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