In an industry as heavily regulated and closely scrutinized as biopharma, the policies driven by agencies like the FDA and HHS, as well as foundational shakeups like a massive patent cliff, shape how companies define their strategies. Confronted with major change like Medicare’s price negotiation or competition from biosimilars, for instance, drugmakers are adapting to the evolved landscape.
And although sweeping change is occurring in many facets of the industry, companies are still making the system work for them. Just ask Joachin Duato, CEO of J&J, which is staring down several headwinds, notably the entry of biosimilars to compete with its megablockbuster Stelara.
“We expect to deliver operational sales growth of 3% overcoming headwinds associated with U.S. biosimilar entries for Stelara and the impact of the Part D redesign and continued macroeconomic pressures in China,” Duato said on the company’s fourth-quarter and full-year earnings call last week. “Even more impressive, we are planning for adjusted operational earnings-per-share growth of nearly 9%. I cannot think of any other company that would be able to deliver growth through the first year of losing exclusivity of a multibillion-dollar product.”
Still, despite J&J’s ability to overcome the odds, industry watchers like Michael Abrams, managing partner at Numerof & Associates, see a topography littered with difficulties for companies attempting to bring new drugs to market, from regulatory uncertainty to diminishing return on investment.
“If we look at the big picture, there's a conflict shaping up,” Abrams said. “The business of developing new pharmaceutical products and bringing them to market has never been more challenging than it is now.”
Regulatory weight
Although uncertainties abound in the regulatory arena under the newly anointed Trump administration, from a continued focus on driving down drug costs to leadership turnovers at the HHS and FDA, Abrams believes these agencies don’t have much wiggle room to make broad changes while also keeping the industry humming smoothly.
“The promise of the Trump administration is to eliminate bureaucratic regulations and so on, but I don't expect that's going to make much of a difference when it comes to getting drugs approved,” Abrams said.
A more demanding challenge is the burden of clinical proof and the economic algebra with which companies need to contend to bring a drug to market. Both forces are changing how drugmakers approach their pipelines and product portfolios, Abrams said.
“Ultimately, this attempt to run a tighter ship in terms of efficacy and affordability could backfire in the sense that fewer drugs will be in pipelines, and fewer drugs will be approved."
Michael Abrams
Managing partner, Numerof & Associates
“It’s a business environment that’s getting riskier for manufacturers, and part of that is the introduction of the IRA and and the fact that if your product is successfully commercialized, and it's too far ahead of the competition such that time elapses and there's no competitor, the reward you get is a mandatory price negotiation with the nation's largest payer,” Abrams said.
Pharmas looking to overcome increased demand for clinical effectiveness in the marketplace are digging into more robust sources of data. Real-world evidence and the availability of AI for the purpose of sorting through vast reams of information are becoming more important as regulatory burdens mount, Abrams said.
“Companies are looking to provide additional levels of reassurance for regulators and payers that the value is there,” Abrams said. “RWE over the last 10 years has moved from something that was regarded as marginal value and maybe not even quite science to a source of data that actually goes beyond clinical trials, and supplements clinical trials in a positive way.”
A public perception issue
What’s led to the challenging regulatory and commercial outlook in general is a public perception of pharma that has dwelled on issues like pricing and ignored what the industry does that’s successful, Abrams said.
“I don’t think pharma companies have done a very good job of conveying to the public what their products do and what the scenario would look like if you didn’t have these breakthrough products,” Abrams said. “Drugs like [Viatris’, formerly Pfizer’s] Lipitor enable people to live lives that are unencumbered by high cholesterol, and the enormous economic consequence of that is not adequately addressed or discussed by pharmaceutical companies.”
And as companies push innovative medicines to market, “something’s got to give,” he said, with regard to the riskier and more expensive path through regulatory hoops.
“Ultimately, this attempt to run a tighter ship in terms of efficacy and affordability could backfire in the sense that fewer drugs will be in pipelines, and fewer drugs will be approved,” Abrams said. “Either we pay for it at the counter, or we pay for it with conditions we’re saddled with that would otherwise have been addressed by products that got shelved.”
