Posted: 17 Oct. 2023 5 min. read

Three factors may be shaping priorities at biopharma companies

By Jeff Ford, principal, Deloitte Consulting, LLP, and Richa Malhotra, senior analyst, Deloitte Services LP

New regulations and inflation are likely influencing some key decisions being made by biopharmaceutical executives, according to an analysis of nearly four years’ worth of financial information from 30 of the world’s largest (by revenue) biopharma manufacturers. The word, “inflation,” for example, turned up frequently during our most recent analysis. At the same time, the sector is navigating geopolitical uncertainties, talent shortages, and emerging technologies, including generative artificial intelligence (see Can Life Sciences companies unlock the full value of GenAI?)

To understand how priorities are evolving, the Deloitte Center for Health Solutions reviewed documents and quarterly earnings-call transcripts—from the 4th quarter of 2019 through the 2nd quarter of 2023. Several themes emerged (see our analysis for more detail). In follow-up interviews, some company leaders told us the headwinds we identified are causing them to be a bit more cautious about capital investments and spending.

Here’s a look at three factors that appear to be shaping, and may continue to influence, the biopharmaceutical sector:

  1. New regulations: Most of the biopharma executives we surveyed last December predicted that new regulations would have a major impact on their business practices in 2023 (see 2023 Outlook for Life Sciences: Inflation, talent, AI are top issues for biopharma). That prediction appears to have been spot on. Some provisions of the Inflation Reduction Act (IRA), which was enacted in August 2022, are just beginning to go into effect (see How might IRA’s drug-pricing provisions affect stakeholders?) Among other things, the law lets federal regulators negotiate prescription drug prices—under Medicare Part D and Part B—directly with drug manufacturers.1 In August, the Centers for Medicare and Medicaid Services (CMS) announced the first 10 drugs that would be subject to price negotiation.2 The new rules could have a negative impact on sales, revenue growth, and research and development (R&D) investments, according to company leaders who spoke with us. If the law results in lower drug sales, some pharma companies might have less revenue to invest in R&D. In response, some company leaders might decide to focus on products that have the strongest margins. Most of the leaders we spoke with agreed that the IRA could have a disproportionate effect on small molecules versus biologics, which could influence future decisions around which modalities companies pursue.
  2. Drug discovery and development: Drug development and drug discovery continue to be among the top strategic priorities for biopharma companies, according to our analysis. The terms “clinical trials”, “new products”, “patent protection,” and “phase II and phase III” were among the most prevalent word combinations that surfaced in our analysis of documents in the drug discovery and development category. The value of a biopharma company typically has a close connection to its R&D pipeline. The return on investment in R&D reached its lowest value in 13 years in 2022.3 This was likely due to a decrease in peak-sales revenue per asset, increases in R&D costs, and approval of various high-value assets with little evidence of pipeline replenishment. Some company executives told us the cost of R&D could encourage partnerships among companies that are willing to share costs, risks, and commercial returns. Partnerships and collaborations have existed in biopharma for many years, but the power of joining forces to solve difficult scientific problems was amplified by the pandemic4 (see our 2022 Outlook for Life Sciences). Continued momentum on this front is likely.

    Within the commercial category, keywords such as “drug pricing,” “market access,” “reimbursement” and “international operations,” were prevalent during our analysis. About eight in 10 adults find the cost of prescription drugs to be unreasonable.5 Continued concerns about high drug pricing and access to affordable drugs could impact future strategies among biopharma company executives. Several leaders told us that the macroeconomic climate has compelled them to reexamine both their R&D budgets and their commercial investments. They said they are weighing the trade-offs between in-market and pipeline products. They are also trying to determine how to maximize the return on promotional and sales force-related investments.
  3. Sustainability and climate change: Climate change is increasingly being seen as a significant threat to public health and could exacerbate health inequities (see Why climate resilience is key to building the health care organization of the future). Sustainability and climate change is a focus area among shareholders, board members, and advocates across industries. The terms also featured prominently as a category in our analysis. Many biopharma company leaders have publicly made commitments to combat climate change.6 This trend is likely to continue.

Many biopharma executives share a common vocabulary, according to our analysis. However, there were several terms and phrases that we had expected to be prevalent in our analysis but were not. The executives we interviewed agreed that most of the following factors, in addition to those highlighted above, are likely to impact the industry in the near future.

  • Geopolitical uncertainty: Large biopharmaceutical manufacturers tend to be more insulated from the economic headwinds that impact other industries. But global biopharmaceutical companies are often affected indirectly by budgets and health spending trends given that their largest clients are often governments. The global political climate could force some biopharma companies to reassess their global operations and footprint. Such decisions could impact their ability to access some new or existing markets. In addition, manufacturing plans and supply chain logistics might have to be strengthened and diversified to become more resilient to future disruption.
  • Portfolio strategy: Biopharma executives typically have to determine how to meet short- and long-term portfolio needs while also deploying capital efficiently. Whether to develop drugs in house (vs. buying assets through M&A deals) will likely be a key decision for many executives. They might also need to decide whether to narrow or broaden areas of therapeutic focus. Making the most of existing resources at the customer level might also weigh heavily when deciding to make investments.
  • Customers: Improving consumer experience and trust has generally been an area of focus for the biopharma sector. Emerging technologies such as generativeAI could help improve trust and lead to new ways to engage with customers. Some potential uses may include using generativeAI for targeted physician engagement and the micro- targeting of consumers.
  • Workforce: Like many industries, overall, biopharma is facing challenges related to talent scarcity, recruitment, and retention. Amid increasingly competitive talent market,7 the subsequent demand for skilled talent (e.g., STEM, leadership), and the need for digital upskilling, organizations that can attract and retain talent and invest in future talent pipeline today will likely be more successful in achieving sustainable growth.

The biopharma landscape is continually changing. New regulations, inflation, geopolitical uncertainties, and talent shortages are likely influencing key decisions that could reshape the future of biopharmaceutical innovation. But biopharma executives could face brand new challenges tomorrow. Their strategic decisions and priorities are likely to play an important role in addressing the complex challenges and opportunities that lie ahead.


1HHS announces key dates for the first year of IRA, US Department of Health and Human Services, January 11, 2023

2Inflation Reduction Act tamps down on prescription drug price increases above inflation,, March 15, 2023

3Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2023

4Despite pandemic's challenges, collaboration in biopharma is alive and well, Fierce Pharma, January 19, 2022

5Public opinion on prescription drugs and their prices, Kaiser Family Foundation, August 21, 2023; Politicians are at war with pharma, Forbes, September 6, 2023

6Climate pillars, Biogen website; Climate, GlaxoSmithKline website

7Talent scarcity worries life sciences and pharma, Randstad Sourceright, July 18, 2022; Life science, pharma leaders worried about scarcity of talent, Chief Healthcare Executive, July 13, 2022

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