The opportunities and challenges for the pharmaceutical industry in 2017

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The pharmaceutical industry’s steady growth curve is beginning to shorten in 2017, thanks in part to a few unique challenges that have unfolded recently. R&D productivity has diminished and the pharmaceutical landscape is changing.
As such an important part of our national and global economy, the success of the pharmaceutical industry should be relevant to all. Fortunately, there are many bits of good news in this story, and we’re likely to see the market maintain its current rate of growth for the next five years.
Still, in order to thrive in 2017 and beyond, the industry will need to address the following challenges:

  1. Slowed market growth

The United States is and has led the international pharmaceutical market for many years, so slowed growth here may signal bad news for the global economy. A QuintilesIMS report indicates that market growth in the US will slowto single digits, between 6% and 9%, through 2021, which is down from a 12% growth in 2015. The sluggish market growth is attributed to hepatitis and cancer drugs that are expected to have less of an impact in coming years. Still, the US will remain the world’s largest pharmaceutical market, contributing 53% of all forecasted growth within the next five years. China is expected to continue in the second-largest spot by contributing 12% of the world’s pharmaceutical growth.
Although the global market is still expected to grow, we are expecting to see growth moderate in 2017 and beyond.
On a volume basis, the total volume of medicines consumed globally will increase by about 3% annually through 2021, only modestly faster than population and demographic shifts. Issues of pricing, market-access pressures, lower volume growth in emerging markets, and further generic-drug incursion will contribute to the lower rate of growth, according to the analysis.
The lull in market growth we are experiencing is to be expected after historically high price increases for pharmaceuticals in 2015. However, the industry will be challenged to find new ways to keep this important industry growing.

  1. Policy reform

Any changes to healthcare with a new presidential administration will undoubtedly have an impact on the pharmaceutical industry. The future of the Patient Protection and Affordable Care Act (ACA) is currently under review with various potential scenarios that may occur to repeal and replace the healthcare act. With that, there are also legislative efforts to maintain the current policy. However, with healthcare being top priority for the current administration, we can expect some change to occur.
The challenge to the pharmaceutical industry will be to enforce change while maintaining steady market growth.

  1. The future of biosimilars

Biosimilars made big waves in 2016 into early 2017, and they are expected to continue with strong growth through 2021. Even though biosimilars are growing at an accelerated rate, the market is still dominated by small molecules with 76% of the market share.
Although biosimilars are a growing segment and threaten to take market share from small molecules, there are some challenges to their production. Based on progress to date, the development of biosimilars seems to provide challenges of its own. Those that have been developed thus far have required costly clinical trials to gain market approval.
The US Supreme Court is expected to hear a case involving the development process of biosimilars later this year. The results may have an impact on notification requirements under the Biologics Price Competition and Innovation Act of 2009 (BPCIA).
Although biosimilars will present competition for biologics, they represent significant savings to the consumer. In the United States, the projected cost savings from switching to biosimilars is expected to be between $40 and $250 billion within the next 10 years.
Because they are so new to market, biosimilars also present an opportunity for pharmaceutical companies. Those who excel at marketing biosimilars within their product range stand to gain an edge over their competitors.

  1. Drug approval stagnation

2016 was a slow year for drug approvals. In this year, the FDA’s Center for Drug Evaluation and Research approved 51% fewer new molecular entities (NMEs) than in the prior year. In the years leading up to 2016, NMEs were on an upswing. Although approvals were lower than average in 2016, the number of applications for approval has remained relatively stable.
It is difficult to pinpoint the reason for a reduction in approvals, whether it is stricter guidelines or product-specific issues, so it is difficult to predict the outcome for 2017. We must wait to see whether new drug approvals will remain low again for this year.

  1. Venture Capital Flow

Venture capital flow is an important measure of any industry, and it ended on an overall weak note in 2016 asquarterly deals and dollars fell for the second quarter in a row. Pharmaceutical deals dropped by 16% and dollars dropped by 20% in 2016, and global trends within the pharma industry followed the same flow with deals declining at 10% and dollars declining at 23%. This decline may present challenges for the pharmaceutical industry as it struggles to improve or maintain growth in this year. However, new introductions and innovations, such as biosimilars, may help entice investors in the near future.

  1. Patient-centric healthcare

Technology trends are driving a shift towards patient-centric healthcare, as evidenced by wearable biometric devices and telemedicine. This trend is resulting in more informed patients who are likely to take a more active role in any treatment plan their doctor may prescribe.
Patient-centric care can provide challenges and rewards for the pharmaceutical industry. The main challenge for 2017 will be in determining how to leverage the power of this new type of care and shifting focus from partnerships with the medical community to partnerships directly with the consumer. In 2017 and beyond, the direct consumer may become the pharmaceutical company’s most strategic partner.
When dealing with the consumer, the pharmaceutical company can have an advantage at justifying prices and communicating value. We have seen a shift towards consumerism in recent years with pharmaceutical advertisements, but we can expect this trend to strengthen as drug companies have more opportunity to reach the consumer through wearables and other devices.
2017 will prove to be a crucial year for the pharmaceutical industry to foster a relationship with the public, and a large part of this will rely on their ability to build trust. As with all consumer-based efforts, we can expect that some companies will excel and others will make large blunders. Either way, the rise of consumerism provides an interesting dynamic for competition in this industry.
The shift towards value-based healthcare has also forced consumers to look at prescriptions from a new value-benefit lens. Consumers have shown that they want new therapies that are better than anything on the market, and the pharmaceutical companies must have the real-world research to back up such claims.
2017 is proving to be an interesting year for the pharmaceutical industry for many reasons. Slowed market growth is a main area of concern, but we have also seen this in prior years where the market bounced back. Things like policy reform, stagnant drug approvals and weak venture capital flow are adding to the concern.
Still, even with its challenges, the pharmaceutical industry is maintaining a stronghold. There is promising news on the horizon with biosimilars and patient-centric healthcare trends that are likely to help the market return to a full thriving state.
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EIA – Laboratório de Metrologia e Aviónicos

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