Kyasha Sri Ranjan and Laksheeta Johari

Image credit: Africa Studio | stock.adobe.com

High inflation and a volatile market have caused a perfect storm for the pharmaceutical industry. How companies respond will make all the difference in not only surviving but thriving in the face of macroeconomic headwinds. Weathering the storm will involve strategies that differ depending on whether you are a small, mid-sized, or large pharma company.

 (IRA) adds another twist to the turbulence. The US market has been a crucial battleground for pharmaceutical companies for decades and is a must-win space due to its size and profitability as a result of relatively free market practices around drug pricing.

The IRA could be the first substantial step in the direction of pricing controls that may contain the value of the US market in the future, which will have ripple effects globally.

Preparing to meet regulatory requirements, as well as staying ahead of the latest technologies and medical developments, will be essential to adapting to this changing environment. Companies are aiming for transformed and targeted growth, with strategies that include partnerships, digitization, and artificial intelligence (AI), increased efficiencies, and competitive intelligence (CI) to optimize their strategies.

Harnessing the power of digital technologies

Just like other industries, pharma is leveraging AI and other advanced technologies in various ways, including streamlining operational efficiencies. In fact, nearly 

are expected to utilize AI as part of their strategies by 2025. Small pharmaceutical companies, in particular, are leveraging AI to make their 

 and early development processes more efficient and cost-effective, as these areas are critical for their success.

In contrast, big pharma has extensive access to data—including clinical trial data—that enables them to apply AI across a broader spectrum with faster results. According to Bloomberg, utilizing AI for such areas as drug discovery, clinical trials, and manufacturing is a 

Big pharma companies are actively engaging in mergers and acquisitions (M&A) to take advantage of existing commercial structures and teams and to secure assets with commercial potential. Acquisitions are used by big pharmaceutical companies to fill gaps in their product portfolios and expand their offerings.

, for example, was aimed at strengthening its oncology pipeline. By building on diversifying away from its traditional areas of strength in infectious diseases, Pfizer is positioning itself to navigate future market volatility and events.

Partnerships, joint ventures, and alliances are also important avenues for innovation and growth. For example, the agreement between 

 combines proprietary technology for targeting and delivering cancer treatments with significant experience in oncology. These types of collaborations offer opportunities to explore growth while sharing the risk and reward profile of acquisitions.

Being a “jack of all trades” will not pay off

Given potential funding challenges, small and mid-sized pharma should be cautious about spreading themselves too thin. Instead of trying to cover a wide range of therapeutic areas, these companies should focus on their strengths and core competencies.

 is one of the recent standout success stories that represents the power of strategic portfolio development. Leveraging its pandemic revenues from the COVID-19 vaccine, the company channeled resources into building a well-differentiated portfolio centered around its mRNA vaccine platform.

The company strategically allocated resources to address infectious diseases with unmet medical needs, such as RSV. This approach enabled Moderna to establish itself as a formidable player in the vaccines space, despite not always being the first to market. By carefully selecting therapeutic indications with high market potential, Moderna set a compelling example for small and mid-sized pharma companies.

Effective management of expenses is also essential for pharmaceutical companies, small and large pharma alike, looking to build a differentiated portfolio. This means optimizing day-to-day operations, integrating digital technologies, reducing working capital and streamlining internal processes to make efficient use of existing capital.

 for example, announced a restructuring in April 2022 to support the company’s “innovation, growth and productivity ambitions.” The simple and lean approach appears to be a way for Novartis to focus on becoming agile by prioritizing pipeline assets that may see approval by 2026.

In addition, the company also approved the 

 because the generics business was not in line with Novartis’ focus on innovative medicine. This also suggests that the company plans to remain focused on the development and commercialization of assets that will generate significant revenue in the face of economic challenges.

The IRA requires drugmakers to negotiate prices with Medicare for some prescription medicines. The legislation will also require drug manufacturers to pay a rebate to Medicare if they raise drug prices above the rate of inflation. 

 and a public relations war are being waged by drugmakers and industry groups that claim the program would stifle development of new medicines.

Big pharma is expected to adapt because it must, but the larger question is: What impact will regulations have on big pharma’s portfolio? The 

 listed by the IRA are broadly used by patients covered by Medicare.

Six of the targeted drugs are in the cardiovascular and diabetes space. Will regulatory pressure cause larger pharma companies to prioritize rare diseases over diabetes, for example? This could benefit niche or smaller pharma companies that would not be impacted by the IRA. With potential consequences for portfolio composition across pharma, it is vital to stay informed and remain flexible as the impact of the IRA plays out.

RWE is evolving into a powerful tool that could help big pharma as it adapts to the impact of the IRA. One of the primary applications of RWE is to not only support new drug approvals, but also to demonstrate the long-term efficacy of existing on-market drugs. The FDA, as well as other regulatory bodies, also 

 as a compelling source of evidence to support drug development, regulatory submissions, and approvals.

Historically, the generation and analysis of RWE were marred by challenges, such as data standardization and time lags between data collection and publication. However, recent advancements in digital technology, including electronic medical records and smart health apps and devices, have transformed the landscape. These innovations have created accessible repositories of patient-level data and near real-time data collection, offering big pharma the opportunity to accelerate RWE collection.

One of the most effective uses of CI is to benchmark one’s main competitors—assessing how they are utilizing RWE, AI, and strategic partnerships to gain a competitive edge. These insights are essential for avoiding unexpected competitive developments that can impact a company's market performance and the net present value of its portfolios. As the industry gravitates toward RWE, big pharma should invest in building in-house capabilities and collaborative partnerships to harness the full potential of RWE, driving increased efficiencies and cost savings across all stages of drug development.

In navigating the turbulent seas of high inflation and market volatility, the pharmaceutical industry stands at a crucial juncture. Pharma companies of all sizes do not want to miss out on opportunities and are looking to build resilience in their pipeline and portfolio.

Essential strategies include prioritizing CI, harnessing the power of AI tools, embracing RWE, and fostering strategic partnerships and acquisitions. As the industry charts its course forward, it is the adaptability and foresight of these strategies that can help companies not only endure but emerge stronger in the aftermath of this perfect storm.

Articles

Companies striving for transformed and targeted growth are exploring strategies that include partnerships, artificial intelligence, increased efficiencies, and competitive intelligence.