The term unprecedented disruption could hardly cover the far-reaching impacts of the events of 2020. The 2021 life sciences trends reflect an industry still moving at lightning speed to adapt to the new strategic, operational, and technological modalities rolling across the business landscape.
Clarkston’s 2021 Life Sciences Trends Report brings to focus six trends that will continue to drive the industry this year. From navigating the trust imperative to realizing true digitalization, the trends in this year’s report will have implications across every aspect of a life sciences business.
TREND #1: Creating Trust will be a Key Strategic Priority for the Industry
Trust has been an issue in the life sciences industry from the beginning. Part of the trust challenge is innate to the nature of the industry – businesses are simultaneously tasked with creating life-saving treatments for every patient while successfully turning a profit and recouping billions and billions in R&D expenditures. Furthermore, the industry as a whole is largely judged as a single entity in that the bad actions of one company are often attributed to the entire industry. Coupled with a history of angry accusations over drug pricing, aggressive marketing tactics, addictive products, and more, and it’s easy to see how the industry landed in a trust quandary.
A 2019 Gallup Poll found that the pharmaceutical industry was the most poorly viewed industry by the American public. In fact, the industry was not only ranked most negatively – it scored an all-time low in the survey’s nearly 20-year history.
Then, in the early months of the novel coronavirus outbreak, a separate survey – the annual Edelman Trust Barometer – was updated and showed a record-breaking 26-point gain from an earlier iteration of the survey just a few months prior. While this increase certainly isn’t permanent (with some surveys already showing a net decrease in public trust of the industry over 2020), it does clearly demonstrate that there’s hope in successfully overcoming the industry’s long-term reputation challenge.
It’s becoming increasingly evident that gaining trust isn’t just a PR move for better headlines – there are profound benefits and significant risks posed by a lack of trust. As the industry has rapidly digitalized over the past few years (and more specifically throughout 2020), trust will become even more critical. Reaping the benefits of a truly digital ecosystem requires massive amounts of data – data that patients, providers, and care constituents must be willing to provide. For many life sciences businesses, their ability to earn returns on digital investments will be dictated by the level of trust patients, providers, and more have in their business as a whole.
Distrust won’t only diminish a business’ ability to leverage digital capabilities, it can also erode actual outcomes. Low levels of trust for a business are also associated with skepticism about their products, information, and motives. That is to say, patients that distrust a life sciences company are less likely to adhere to a treatment protocol that the same company helped create. Studies have also demonstrated a correlation between a lack of trust and under-representation in clinical trial recruitment.
Meeting the trust imperative starts with a simple concept – transparency. The more patients know and understand about how a business operates and how decisions are made, the greater trust they have in the business. The concept, while simple, requires broad strategic, operational, technological, and cultural shifts across the business entirely.
Now, more than anytime in modern history, the average citizen has a much greater and more nuanced understanding of drug research, development, clinical trials, and distribution. Major publications, news channels, and more are providing daily coverage on the status of COVID treatments and vaccines from conception to distribution and administration. This creates an optimal opportunity for the life sciences industry to use this point in time as an inflection point towards a trust-based relationship with the public.
Similarly, collaboration between drug companies large and small, academic institutions, regulatory bodies, and more in development of the COVID vaccine have also contributed to increased levels of trust in the industry. By demonstrating open, collaborative relationships with companies typically considered competitors, life sciences businesses eschew the no-holds-barred, profit-over-everything mentality that many associate with the industry. In joining together, these collaborative ventures further build towards a relationship of trust with the public by demonstrating that saving lives is their purpose.
As shared by the team behind the Edelman Trust Barometer, sharp increases in trust are rarely sustained and in fact, without long-term action, most commonly result in sharp decreases shortly after. Now is the time for a true shift in public perception of the life sciences industry – a shift that must be centered in transparency and openness.
TREND #2: Drug Pricing Reform Efforts Swirl Under a New Administration
The pricing debate in the life sciences industry has raged for decades with patients, policymakers, insurers, and more only increasing their fervor each year. As reported by the Kaiser Family Foundation, 79% of American citizens say that the cost of prescription drugs is unreasonable. Additionally, 63% believe that there are not as many regulations as there should be to limit the price of prescription medications. But, seemingly in contradiction, 74% of Americans currently taking prescription drugs believe that affording them is easy. Clearly, like so many issues in the life sciences industry, the close connection to individuals’ health and well-being makes the pricing debate all the more complicated.
Over time, businesses in the life sciences industry have explored creative approaches to pricing. Value-based pricing, updated reimbursement models, pledges to limit annual price increases, tying price increases to inflation, installment and subscription plans, and countless more tactics have been offered as a means of addressing the stigma of drug pricing but few have netted the industry a comprehensive, sustainable approach.
Consistently growing public pressure and media attention has forced politicians, regulators, and policymakers from both parties to make strong statements when it comes to drug pricing. When he took office, President Trump vowed to once and for all address drug pricing in the industry. The administration’s efforts to address drug pricing, however, have largely fizzled. Among the administration’s more publicized proposals, the Trump White House attempted to tie Medicare pricing for certain drugs in the United States to prices paid in other developing countries. While that rule remains caught in the court system, it represents one of the few initiatives with bipartisan support as President-elect Biden has also voiced support for a similar approach.
Looking towards the coming Biden administration, a Democratic majority in Congress opens the doors for President-elect Biden to pursue broad measures for addressing drug costs. While the initial focus will of course be addressing the continued fight against COVID-19, the Biden team has made their other priorities public.
In the healthcare manifesto released on the Biden team’s website, the President-elect highlights his core areas of initial focus. Among the broad areas, the manifesto includes proposals to protect and strengthen the Affordable Care Act, reduce complexity in healthcare, eliminate disparity, and of course, address drug pricing. Specific to drug pricing, the Biden administration specifically mentions:
- Allowing Medicare to negotiate pricing directly with drugmakers
- Limiting launch prices for drugs with no competition
- Limited price increases for all “Brand, biotech, and abusively priced generic drugs” to inflation
- Allowing patients to purchase prescription drugs from other countries
- Improving the supply of quality generics
- Eliminating tax breaks for advertising spend
While industry analysts have posited that a Democratic-controlled Congress would create a high-likelihood of significant drug pricing reform being passed, it remains to be seen how transformative that reform will be. President-elect Biden has a long history working with the life sciences industry, having played a significant role in the Obama Administration’s Cancer Moonshot initiative and served on various relevant committees in his time as a U.S. Senator. His nuanced understanding of the industry affords a greater opportunity for collaboration and cooperation. That said, public pressure continues to mount for some kind of demonstrable change so the President-elect, his team, and Democrats at large are likely eager to show progress in healthcare, particularly drug pricing.
Addressing the pricing issue, as with gaining public trust, will require businesses to adopt an organizational mindset of transparency. The COVID-19 crisis has put the drug development process under a microscope, enabling a population that is incredibly more informed on the efforts and investments businesses must make in order to create a successful treatment. Businesses in the industry should continue to capitalize on this exposure, bringing more insight into how prices are developed, the various stakeholders across the healthcare value-chain, the costs that go into each step of the process, and how decisions are made in bringing a treatment to market. Creating an understanding through transparency won’t immediately quell the pricing debate, given the complexity and need for deeper understanding. It will, however, help to remove the “good” (patients) vs. “evil” (drug makers) mindset in the debate and allow for a more effective dialogue in addressing the challenge of drug pricing.