Drug development costs putting pressure on ‘the whole innovative medicine model,’ says analyst

By Melissa Fassbender

- Last updated on GMT

(Image: Getty/adrian825)
(Image: Getty/adrian825)

Related tags Drug development Costs

Potentially increasing costs and dropping returns from investing in innovative medicines and devices will be among the main challenges faced in 2019, says industry analyst.

Moving into the new year, the pharmaceutical industry will continue to outsource work, said Kevin Bottomley, partner, Results Healthcare. “This will grow as a percentage of what is contracted externally as opposed to what is conducted internally,”​ he said, which will drive the CDMO, CMO, and CRO industries. 

This continued growth and maturation of the life sciences business sector has been the most significant positive change over the last year, Bottomley said, citing Moderna’s recent record-breaking 604m initial public offering (IPO). This deal demonstrates that investors are still willing to invest in innovation and that the industry “is continuing to address unmet medical needs through innovative therapeutics and devices,”​ he added.

However, Bottomley also noted that pharma will want to deal with “fewer, more joined up suppliers, which will drive consolidation in these service industries,”​ echoing similar remarks made earlier this year at CPhI Worldwide​. “We will see some companies seek to position themselves in 2019 as industry consolidators, rather than consolidated,”​ he said.

Yet the biggest challenge in 2019 will be potentially increasing costs and dropping returns from investing in innovative medicines and devices, predicts Bottomley.

“The cost of developing new medicines continues to rise at an inflation-busting rate, and the returns from investing in novel medicines are dropping, putting pressure on the whole innovative medicine model, from an investor perspective.”

Also negatively affecting investment in the UK is the uncertainty surrounding the country’s decision to leave the European Union. Though the industry has already been making provisions for a “no deal” ​Brexit to ensure a continued the supply of medicines to patients – Bottomley noted this has required money “which could have been spent on developing new medicines and devices.”

In line with this, Bottomley said if he could change one thing about the industry next year it would be to reduce the cost of medicines, though he admittedly does not know how to fix this in the “currently highly and progressively more regulated markets.”​ 

Bottomley does propose that it could potentially be achieved through further international cooperation and agreement on standards. Still, he told us he is slightly more concerned about the life sciences industry in 2019 than 2018.

Yet, this is a long-term industry, he said, “and over 5 to 10 years (and beyond) this will be an industry which – because the fundamentals are strong – continues to grow and evolve and will provide long-term value for patients, payers, employees, and investors.”

Making a significant market impact by providing wider patient access to lower cost biologics is biosimilars, added Bottomley. Additionally, companies could potentially be rewarded through real-world evidence (RWE) pricing in Europe, in which medicines that provide measurable benefits are reimbursed, and others are not.

“If this can be made to work then we as patients will only pay for those therapeutic interventions which do actually work,”​ explained Bottomley. However, the major issues are systemic, he said, and increasing barriers to international trade are potentially increasing the cost and restricting access to therapeutics. 

If implemented, Bottomley said an increase in global interest rates would reduce investor interest in the life sciences sector and make capital expenditure (CapEx) investment more expensive.

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