Current State of the Biopharma Industry & Future … State of the Biopharma Industry & Future...
Transcript of Current State of the Biopharma Industry & Future … State of the Biopharma Industry & Future...
Current State of the Biopharma Industry &
Future Outlook
A discussion highlighting key trends currently
impacting the US Life Sciences industry
October 8th, 2014
Nitin Mittal
Deloitte Consulting LLP
Life Sciences Landscape Overview
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Global Life Sciences Snapshot
Pharmaceuticals
$959 billion 2.4% growth rate
Leading area —
Oncology
Biotechnology
$232.5 billion 9.6% growth rate
Leading areas —
Oncology, autoimmune,
infectious diseases
Medical Technology
$349 billion 2.6% growth rate
Leading area —
In vitro diagnostics
Sector Overview
Growth Drivers
Health care spending
5.3% annual spending
increase on health expected
globally over next five years
Demographics Increasing life expectancy
projected to increase global
population above 65 years of
age by around 10% Sources: DTTL Global Life Sciences and Health Care Industry Group analysis of IMS Health data, September 2013; IBISWorld Industry Report L6724-GL,Global Biotechnology, April
2013; EvaluateMedTech World Preview 2013, Evaluate Ltd., 2013
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Americas
– Favorable economic trends
– Expected growth in aging population
– Rising incidence of chronic diseases
Pharmaceutical Sector Geographic Analysis
45%
25%
18%
12%
Americas Europe
Asia/Africa/Australia Japan
Sources: DTTL Global Life Sciences and Health Care Industry Group analysis of IMS Health data, September 2013; EIU Healthcare World Outlook; EIU Database; United Nations
World Population Prospects - The 2012 Revisions, http://ega.un.org/unpd/wpp/index.htm; Forbes India.
http://forbesindia.com/article/universal-health-care/indias-primary-health-care-needs-quick-reform/34899/1; Espicom Pharma Market Factbook and EIU Database
Global Pharmaceutical Sales,
by region — 2012
Europe
– Continued budgetary pressures
– Higher than the global average
proportion of the aging population
Asia / Africa / Australia
– Economic and demographic trends
continue to boost demand, e.g.,
• India’s expansion of its primary care
policy priority and spending
• China’s 2020 goal of universal access to
basic medical and health services
Regional Notes
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Current US Pharmaceutical Tailwinds
1
2
3
4
5
Greater clarity on Affordable Care Act (ACA)
implementation and its impacts
Increasingly better at capitalizing on
emerging market opportunities
Incorporation of real-world evidence into
strategic thinking and decision-making
Substantial US aging population growth;
average life expectancy is lengthening
Rising incidence of chronic diseases and
better identification of rare diseases
6 Expansion of insurance coverage to
millions of uninsured Americans under ACA
Forecasted
revenue increases
for drug makers
Healthcare Evolution and Life Sciences
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Two major drivers are redefining the healthcare industry
Delivery System
Transformation
Rising Consumerism
Search for Scale
Changing Value
Proposition
New Financial Realities
Market Drivers Market Response
New Regulatory
Framework
Affordability of
Health Care
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Significant regulatory-driven change will continue
2017+
“New Normal”
Comparative effectiveness/
real world evidence
Delivery system realignment
Value over volume
Retail insurance market
Consumerism
Rules, Regulations, and
New Funding
2010-2013
Insurance compliance
Coordination of healthcare
agencies
Excise taxes on
biopharmaceutical
companies and payers
Patient Centered Outcomes
Research Institute (PCORI)
Source: Deloitte Center for Health Solutions analysis of the Patient Protection and Affordable Care Act (P.L. 111-148)
Mandates, Pilots, and
Exchanges
Insurance reform
Independent Payment
Advisory Board (IPAB)
Accountable care
organizations (ACOs)
Payment reform
Care coordination
Quality reporting
2014-2016
Today
Health reform is changing the basis of stakeholder competition and collaboration
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This evolution will lead to expanded healthcare coverage
and growth in individual coverage through exchanges E
nd
of
Ye
ar
En
roll
me
nt
(mil
lio
ns)
ACA Coverage Changes1
Baseline Scenario
2012 2016
4M Other 15M Ind.
152M
Group
43M
Medicaid
48M
Medicare
53M
Uninsured
4M Other
143M
Group
54M
Medicaid
54M
Medicare
33M
Uninsured
22M HIX
5M Ind.
Rise in government sponsored programs
and “choice-based” markets (HIX)
Limited decline in employer-sponsored
programs – some will exit and others will
move to defined contribution
Health plans will offer a broader portfolio
of “less rich” benefit packages while
expanding coverage
Growth in “choice-based” programs
increase importance of patient’s
awareness and understanding
Key Takeaways for
Life Sciences
Source: Deloitte healthcare reform coverage model scenario analysis
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Plans and providers are evolving their business models
to adapt to the changing legislation and market trends
Provider
Consolidation
Low margins and reform pressures are
causing providers to merge, reducing local
competition and increasing pricing leverage
Hospital-owned medical groups saw >65%
growth in physician employment over the past
decade
– Physicians are seeking negotiation power with
payers, income security, and work-life balance
Rise of
Accountable
Care Models
606
0
250
500
750
Q4 '10 Q4 '11 Q4 '12 Q4 '13
TotalCount ofACOs
Source: 1. NEJM (http://www.nejm.org/doi/full/10.1056/NEJMp1101959); 2. Employing Physicians: The Future is Now, Medical Group Management Association 2011; Deloitte 2013
Survey of U.S. Physicians; 3. Health Affairs, “Accountable Care Growth In 2014: A Look Ahead”, Jan 2014); 4. Optum Health (2013); 5. Pharmacy Benefit Management
Institute (2013)
Growth of ACOs3
Provider organizations are aligning incentives
and payment around value-based care to
standardize treatment decisions
At the end of 2013, there were 606 public and
private ACOs in the market, representing a
145% CAGR over the last three years
74% of hospital CEOs say that their
organizations will be part of an ACO within the
next five years4
0%
10%
20%
30%
40%
50%
2000 2004 2008 2012
PCPs
Specialists
Hospital-Employed
Physicians1
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As plans and providers change the way they operate,
new questions regarding the market emerge
Prior Model Future Model New Market
Questions
Consolidation Fragmented plans and
providers
Consolidated plans,
consolidating
providers
What new
stakeholders are
emerging in the
ecosystem?
How will utilization
decisions be made?
Who will be involved
in the decision
making process?
How will regulatory
obligations influence
market behaviors?
How will the number
of addressable
customers change in
the future?
Decision-
Making Physician-driven
Highly centralized,
guidelines-driven
Reimbursement Volume-based Outcomes-based,
focus on risk sharing
Transparency Limited metrics
tracking, focus on
observable processes
Metrics tracking
quality, outcomes;
tied to incentives
Physician
Access
Few restrictions on
detailing
Access restricted by
systems and groups
Volume Focus Value Focus
Source: Deloitte analysis
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Trend in Pharmacy Benefit Spend for Specialty vs. Non-Specialty
(CVS Caremark)
Sources: 1) Sean P. Keehan et al.,“National Health Spending Projections Through 2020, Health Affairs, August 2011; 2) CVS Caremark Analysis, CVS Caremark Specialty Analytics,
2013; CVS Caremark non-specialty drug trend, 2012, Caremark BOB trend cohort, Enterprise Analytics, 2013.
Growth in Pharma spend is expected to stabilize at ~7% annually driven primarily by specialty products
As the specialty market continues to grow, there will be a higher level of price scrutiny
Manufacturers will need to develop value stories from a payer perspective, incorporating real world evidence
(RWE), in order to gain favorable coverage for higher priced therapeutics
Clinical and economic value considerations need to be integrated earlier in product development lifecycle
0%
5%
10%
15%
20%
1966 1976 1986 1996 2006
Average Annual Growth Rates in U.S. Prescription Drug Spending, 1966-‐2020E (%)
Actual Estimated
1999: 18.4%
2010: 1.2%
2016
18.3%
24.0% 25.0%
-3.8% -3.5% -2.5%
-10%
0%
10%
20%
30%
2012 2013 2014E
Specialty PMPY Trend Non-specialty PMPY Trend
Ultimately, LS Companies will need to proactively
manage increased scrutiny on pharmaceutical spend
Positioning for Success
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Key Areas for Growth / Innovation for LS companies
Non-
Traditional
External
Relationships
Value-
Based
Contracts
Alternative
Distribution
Channels
Data is Life Blood
The shift towards value-based,
personalized health care will require
new data capabilities and technologies
Master the Art of Ecosystems
The pursuit of information, evidence
and outcomes is resulting in
collaboration across the ecosystem
Growth of Personalized/Translational
Medicine
Improved clinical and analytics
capabilities will accelerate the rise of
personalized medicine
Key Takeaways
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“Hard Questions” in Healthcare – what works, for whom,
why and at what cost - are largely information challenges
The shift towards value
based, personalized
healthcare require new data
driven collaborations and
business models
Real world evidence and
data are driving this trend
LS companies are
well-positioned to drive
meaningful analysis of both
internal and external data
Core LS Data
Components
Clinical Outcomes
Cost of Care
Process / Benchmark
Data
Translational Research
Operational Excellence
Comparative Effectiveness
Safety Surveillance
Clinical Effectiveness
Population Health
External Data Sources Internal Data Sources
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The pursuit of information, evidence and outcomes is
resulting in collaboration across the ecosystem
Providers
Predictive & preemptive care
Genetically targeted diagnosis
Personalized medicine / safer, higher
quality service
Business development channels &
alliance opportunities
Enhanced community research
Improved clinical trial management, better
patient targeting
Payors
Disease prevention methods
Improved plan design and management
Evidence based insights to promote
healthy lifestyles
Improved forecasting capabilities for
macro health trends
Higher influence due to evidence based
clinical insights and value demonstration
Retail & Specialty Pharmacies
Innovative customer facing technologies
Improved consultative capabilities
Higher degree of influence on patients &
physician community
Insights into behavioral economics
Value add services for e-pharmacy
Pharmaceuticals, Biotech,
Academia
Improved early stage discovery, improved
pipeline by better molecular targeting
Reductions in R&D costs & durations
Identification of new bio-markers
Surface global opportunities (e.g.,
neglected diseases, biosimilars)
Improved safety surveillance
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Bench to Bedside: Translational Medicine converts
scientific discoveries into tangible therapeutics
Clinical Research
Basic Research
Health Outcomes
and Surveillance
Clinical Care
Translational Medicine turns promising biological discoveries into therapeutic treatments to improve patient care and
outcomes. However, though organizations and individuals that engage in this process understand the science, they often
struggle with the business of science and what it takes to operationalize and commercialize their products and services.
Basic science
research leading to
promising biologically
relevant discoveries
Outputs include
discoveries reported
via publications in
peer-reviewed
journals
Discoveries are
synthesized into a
therapeutic agent
Clinical trials and
studies using human
subjects are
performed
Approved treatment
or therapeutic agents
are provided to
patients
Personal health
information is
collected
Tra
nsla
tio
nal
Med
icin
e
End results of
treatment or
therapeutic agent
delivery is analyzed
Focus is on patient
and population health
Rare or long-term
effects can be
uncovered
Basic Research Clinical Research Clinical Care Health Outcomes and Surveillance