Bristol-Myers Squibb's splashy $74 billion Celgene buy is set to reset the top ranks of pharma, but the industry's year ahead will be shaped more directly by larger trends impacting the sector's perception, investment and future growth.
Public criticism and scrutiny from lawmakers will likely remain, keeping biotech and pharma under pressure. At the same time, a cooperative FDA and scientific advances in oncology, cell and gene therapy should continue to serve as a tailwind, generating new approvals and investor optimism.
Digital opportunities, including in artificial intelligence, have also proved attractive to drugmakers, spurring changes among executive teams.
Here are seven trends to watch as 2019 unfolds:
Jump to see each trend
- 1. Political pressure on drugmakers rises
- 2. Price hikes remain but companies become more selective
- 3. Oncology remains a top draw for biopharma
- 4. FDA keeps pace of approvals high — presuming shutdown doesn't linger
- 5. Rise of the pharma chief digital officer
- 6. Biosimilars begin to bite in the U.S.
- 7. Ecosystem supporting cell and gene therapy grows
Political pressure on drugmakers rises
Among Elijah Cummings' first acts as chairman of the House Oversight Committee was announcement of a broad investigation into prescription drug prices.
After two weeks as head of the powerful committee with broad subpoena powers, the Maryland Democrat has made clear rising pharmaceutical costs will be an early target. That attention, and House Democrats' focus on healthcare in their retaking of the House of Representatives, are among the signs that political pressure on drugmakers could ramp up over the next two years.
Congress has periodically put the industry's pricing practices at the center of its scrutiny in years past. But that spotlight will likely be fixed more permanently under Democratic control of the House.
Making that attention more dangerous for pharma is the Trump administration's actions to push forward policies anathema to drugmakers. Plans to require list prices in television ads and link Medicare payments to what's paid abroad remain in early stages, but criticism of the industry has flowed freely from the Republican White House.
Democrats may be reluctant to hand the president a major domestic policy win on drug pricing. But that doesn't rule out some bipartisan cooperation, potentially resulting in tangible policy losses for an industry used to wielding its political clout.
"We are willing to work with Democrats and Republicans to accomplish what was set forth in @POTUS's drug pricing blueprint—lower list prices and reduced out-of-pocket costs for Americans," Health and Human Services Secretary Alex Azar wrote in a Jan. 15 tweet.
Price hikes remain, but companies become more selective
Upping prices at the start of a new year is standard practice for the industry. This year, however, was a test of how drugmakers would proceed after a confrontation between President Donald Trump and Pfizer led many to announce price freezes or temporary roll-backs of previous price hikes.
Unsurprisingly, drugmakers were largely undeterred, with many moving ahead with increases ranging between low- to mid-single digits. While seemingly a provocative move, the underlying rationale is clear: biotech and pharma companies depend on price increases for revenue growth, particularly for older products.
Investment bank Raymond James did, however, track fewer hikes in the key Dec. 1 to Jan. 1 period than it did in 2017, suggesting pharma companies are becoming more selective in which drugs they take increases on.
That idea is borne out by moves from Pfizer, Merck & Co., Eli Lilly and Biogen. Price increases taken by each were largely kept to products crucial to future growth, or limited to a select basket of products.
Merck, for example, in November increased the prices of its top-selling cancer drug Keytruda and its vaccine Gardasil, along with three other products. In announcing late last year price increases for 41 drugs, Pfizer emphasized that for about 90% of its product portfolio, prices would remain the same.
Such an approach could reflect pharma efforts to walk a fine line between limiting their exposure to criticism, while retaining pricing as a lever to pull for higher revenue and profit.
"We suspect many of these firms are simply taking more of a wait-and-see approach, with a greater number of increases anticipated in the weeks ahead," wrote Raymond James analyst Elliot Wilbur in a Jan. 1 note to investors.
Oncology remains a top draw for biopharma
In recent years, pharmaceutical companies have consistently prioritized investment into cancer drug development, making for an industry-wide turn toward oncology.
Ninety billion dollars in cancer-focused dealmaking between December and the opening weeks of 2019 show that emphasis hasn't waned.
Uniting deals by Bristol-Myers Squibb, Eli Lilly and GlaxoSmithKline is a shared desire to deepen cancer drug pipelines and strengthen commercial presence in what has become the industry's hottest field.
AstraZeneca, Gilead Sciences, Regeneron and Sanofi, meanwhile, have all made a concerted effort in the space than in the past.
Scientific and clinical advances have catalyzed drug development, but so too has a cooperative regulator and a market accepting of price tags stretching past $100,000 per year.
Those tailwinds look likely to persist in 2019.
Companies remain eager to invest, even as competition increases and pipelines swell. The FDA, meanwhile, waved through 17 cancer drugs last year — adding to a five-year total of nearly 60 new treatments.
And while cancer drug prices have faced scrutiny, criticism to date has fallen most heavily on drugs in other therapeutic areas. Payers, meanwhile, appear generally willing to cover newly approved therapies.
FDA keeps pace of approvals high — presuming shutdown doesn't linger
The Food and Drug Administration set a record last year for the number of new drugs approved, greenlighting 59 novel therapies — well above the regulator's 10-year average of 33 per year.
That rising tempo looks likely to continue in 2019, provided a government shutdown that's hampered the agency doesn't continue for much longer.
Part of that upward trajectory is due to the increasing use of expedited development and review pathways by FDA. Last year, 41% of OK'd medicines were granted Fast Track status, while 73% had Priority Review tags. (Some medicines were approved via Priority Review due to a sponsor using a special regulatory voucher.)
Surging investment in cancer and rare disease research is likely helping as well, since many medicines in either field are able to reach regulators with smaller datasets and genetically defined patient populations.
As long as the government shutdown continues, however, the FDA is unable to accept new drug applications and user fees. The agency has been able to continue work on applications already submitted, but an enduring lapse in funding could have a large impact on the number of new medicines reaching patients in 2019.
Rise of the pharma chief digital officer
This month, Albert Bourla took over the reins as CEO of Pfizer, bringing with him several changes to the leadership of America's largest pharmaceutical company.
Among them is the appointment of Lidia Fonseca as the company's first chief digital and technology officer. In announcing the role, Pfizer offered few details beyond noting Fonseca would help create a strategy that helps improve the drugmaker's "digital capabilities."
Fonseca joins a growing group of chief digital officers in the ranks of pharma executive committees.
Last October, Merck & Co. appointed a former Nike executive as the company's chief information and digital officer, expanding the role and elevating it for the first time to rank on the executive committee. The year before, GlaxoSmithKline, Novartis and Eli Lilly all added similar positions to their respective executive committees, signaling a growing emphasis pharma on upgrading digital infrastructure.
The industry's largely operated behind the curve in its adoption and use of digital technologies like artificial intelligence. Expectations, though, are high that such tools could help raise productivity in drug development, or help manage increasingly complex clinical trials.
"In every area — from where we innovate and find new medicines to how we operate, how we think about manufacturing and supply chain to how our sales reps do their work every single day — we are working on major projects to scale our digital capabilities," said Novartis CEO Vas Narasimhan to a room full of investors as the J.P. Morgan Healthcare Conference earlier this month.
Chief digital officers aren't yet omnipresent in pharma boardrooms, with many companies going without or keeping the role at a senior vice president level. Pfizer and Merck, though, make for powerful examples.
Biosimilars begin to bite in the U.S.
This year could prove a major test of how well biosimilars can live up to the lofty expectations surrounding the copycat biologic drugs.
To date, biosimilars have had little impact in the U.S., posting modest sales and price discounts to their branded counterparts that fall well short of generic levels.
Some signs, however, suggest that could begin to shift.
Seven of the 16 approved biosimilars in the U.S. garnered FDA OKs last year and the agency appears ready to add rapidly to that total. A recent tweet by FDA Commissioner Scott Gottlieb, for example, noted 70 currently ongoing biosimilar development programs.
More biosimilars are launching as well, with copies from Pfizer, Mylan and Coherus BioSciences reaching patients over the past 12 months. Roche expects a copy of its cancer drug Rituxan to become available earlier this year, while key patents for its other top biologic Herceptin expire this year in the U.S.
Three branded drugs — Neulasta, J&J's Remicade and Amgen's Neupogen — now face two biosimilar competitors. FDA research on generic markets has shown discounts begin to climb as more copies enter, suggesting the hoped-for savings from biosimilars will come only as more are approved and launched.
Still, the impact on prices and spending on biologic drugs will likely remain small relative to Europe, where the copycat drugs have been available for longer. Stronger patent defenses and exclusionary contracting with insurers have proved tall hurdles to climb, and will continue to pose challenges.
Ecosystem supporting cell and gene therapy grows
Approval of Spark Therapeutics' Luxturna in late 2017 marked the first time a gene therapy for an inherited disorder was cleared for commercial use in the U.S.
By 2025, the FDA predicts it will be approving between 10 and 20 cell or gene therapy products each year.
That expected boom reflects the significant progress of the science surrounding the use of genetic tools to construct new therapeutics. Delivery platforms like adeno-associated viruses help enable the replacement of defective genes, while technologies such as CRISPR/cas9 hold the promise of direct genetic editing.
All of this makes for what the FDA calls a "turning point" in the field, one akin to the turn toward monoclonal antibodies in the 1990s.
Just as investment in monoclonal antibody research spurred a surge in biologic drug manufacturing, gene therapy advances have led to rapid build-out of support services.
Contract manufacturers as well as drugmakers have invested in expanding production capacity for both cell and gene therapies. Swiss giant Lonza, for instance, last spring opened a sprawling, 300,000-square-foot facility that it says is the world's largest dedicated to production of the complex treatments.
Also enjoying the field's expansion are suppliers of viral vectors and plasmids as well as cold chain shippers like Cryoport.
For biotechs like Sarepta, the growth in contractors capable in gene therapy enables a hybrid model mixing internal capabilities with external support — a model Sarepta argues enables it to move faster.
"Manufacturing for gene therapy is going to be the significant rate-limiting step for folks who are really interested," said Sarepta CEO Doug Ingram in a recent interview. "We are committing hundreds of millions of dollars to ensure that we are getting manufacturing correct."