New Ecosystems In Pharma: Maturing Markets Mean New Models Are Needed

Pharma companies are under pressure. What were favorable tailwinds a decade ago – abundant innovation, relative pricing freedom, benign public and regulatory attitudes – have turned into headwinds. Safe, effective generic therapies are available for many diseases, raising the bar on innovation. Payors are pushing back, restricting the use of expensive new therapies if they don’t show economic benefit. Regulators, stung by widely publicized product failures, are increasingly cautious. At the same time, the science of drug development is getting harder as the industry targets diseases like Alzheimer’s or diabetes, where the biology is less understood and treatment pathways are more nuanced. While the industry remains highly profitable, growth has stagnated. What was once an advantaged economic formula is no longer sustainable.

Although the challenges are self-evident, pressure for change is uneven. Despite slowing growth and weaker pipelines, most of the industry’s largest companies remain enormously profitable. The churn of patent cliffs...