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Analysis

Life sciences and health care M&A update: Q2 2021

Though biopharmaceutical (biopharma) research and development (R&D) is under mounting pressure for its prolonged inability to yield returns greater than the industry cost of capital, a recent Deloitte report shows small improvements in returns on pharmaceutical innovation. COVID-19 has spurred on these changes, and the industry is well-positioned to build on the momentum and look optimistically for a future with higher returns on pharmaceutical innovation.

Measuring the return from pharmaceutical innovation

  • Measuring the return from pharmaceutical innovation
    Though biopharma R&D is under mounting pressure for its prolonged inability to yield returns greater than the industry cost of capital, a recent Deloitte report shows small improvements in returns on pharmaceutical innovation. Nevertheless, peak sales among the selected companies remain at much lower levels than in 2013, despite a small uptick this year, and R&D costs continue to increase. Costs are increasing due to the growing complexity of development and longer cycle times. There is a pressing need to optimize processes and fundamentally change the drug development paradigm through use of digital and transformative approaches. COVID-19 has spurred on these changes, and the industry is well-positioned to build on the momentum and look optimistically for a future with higher returns on pharmaceutical innovation.1
  • Transparency in Coverage Rule
    The Transparency in Coverage Rule, which goes into effect in 2022, builds on interoperability and hospital price transparency requirements and ultimately seeks to pull back the curtain on information that has long been considered a “trade secret.” Deloitte thought leaders in the health care industry expect health plans to compete more on price, service, and quality as customers gain access to pricing and claims information. The graphs below highlight key findings from a Deloitte survey conducted on 25 health plan strategy executives. The top initiatives executives intend to pursue as a result of the Transparency in Coverage Rule revolve around competitor prices, coordination with providers, and new benefit designs.2

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