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2014 Life Sciences Outlook
Interview with Terry Hisey
2014 is anticipated to be a positive year for U.S. life sciences companies, as they continue to obtain greater clarity on Affordable Care Act (ACA) implementation and its impacts, become increasingly better at capitalizing on emerging market opportunities, and incorporate real-world evidence into their strategic thinking and decision-making. Demographics and disease trends are expected to continue boosting drug consumption, while the expansion of insurance coverage to millions of uninsured Americans under the ACA (via health insurance exchanges and Medicaid expansion) is forecast to increase revenue for drug makers, according to Deloitte LLP’s Terry Hisey, vice chairman and U.S. Life Sciences sector leader. Read on for his thoughts on the year ahead.
What is the biggest challenge facing your sector in the coming year?
This version of health reform is going to accelerate the transformation of U.S. and global health care from a volume- to value-based marketplace. And that means our clients in medical technology, pharma and biotech will be having different conversations with different people than they traditionally have. Going forward it is no longer a physician-preference world; patient advocacy groups, hospital administrators, and other stakeholders will play a key role in product selection and purchase. Companies will need to be responsive to how the market wants to buy rather than fixating on how the company wants to sell.
To strengthen their ability to compete, life sciences companies will need to shift their focus from competing on volume to competing on value, and employ new business models that recognize the impacts of health care reform and the power of new decision makers in product pricing and selection.
To do this will require a robust comparative effectiveness (CE) strategy and a real-world evidence program that supports current commercial activities, informs late-stage clinical development and provides forward visibility of the strategic needs to grow the business.
What trends might disrupt “business as usual” in 2014?
The current political landscape is playing a key role in transforming the U.S. health care marketplace and shaping the life sciences industry’s short- and long-term planning. Heading into 2014, the country will see a fair number of ACA initiatives, such as health insurance exchanges, moving from proposed and enacted to implementation. ACA-related pharmaceutical industry fees, a new medical device tax and lower government drug prices could negatively impact growth. The U.S. Food and Drug Administration’s (FDA) continued work to finalize a biosimilars pathway may also be a concern.
The U.S. health care provider landscape is also changing – physician-hospital consolidations are growing in frequency, and combined purchasing departments are growing in influence, which may reduce life sciences companies’ negotiating power. In addition, providers and health plans are now armed with a more comprehensive fact set than in the past to inform their evaluation of life sciences products.
With these and other disruptive forces in play, life sciences companies – whether drug or device manufacturers – face a fact-based messaging future. It will be important to have a strong program in place to access meaningful, robust, real-world evidence from the marketplace and clinical delivery organizations. As well, companies will require strategies to inform decisions across the life sciences value chain; ones that recognize shifting purchasing patterns and enable conversations around a product’s clinical, safety and economic impact. The true hurdle is adoption, not just product approval, so articulating a clear value proposition will be imperative.
The shifting ecosystem also generates talent issues for life sciences companies. To prosper, organizations will need institutional and individual capabilities in advanced analytics, population health management, market trends and customer segmentation, and account management to deal with more powerful/non-clinical buyers.
What are some steps companies can take to foster innovation and/or growth?
Innovation and growth across the life sciences value chain can take many forms, such as employing new commercial models; pursuing growth through non-traditional external relationships; increasing value-based contracting; using alternative distribution channels; executing work more cost-effectively; and defining a value proposition beyond the pill or the device (e.g., being a care management partner independent of a product).
Improving the return on investment (ROI) for life sciences research and development (R&D) will continue to be an important focus for companies seeking both innovation and growth, especially when developing alternatives to existing, in-line therapies. Asking the right questions, conducting clinical studies and accessing big data can support an honest evaluation of the ability of products in a company’s pipeline to dramatically improve outcomes and/or safety profiles, shift purchase patterns, lower prices and address unmet needs. Such insights may result in the decision to move forward only those compounds that will clear the dual hurdles of FDA approval and marketplace adoption.
“To prosper, organizations will need institutional and individual capabilities in advanced analytics, population health management, market trends and customer segmentation, and account management to deal with more powerful/non-clinical buyers.”