Pharmaceutical industry outlook

Innovation in Health Care: Pharmaceutical industry outlook this year. Arcus interviewed 240 senior executives in the Canadian and US pharmaceutical industry to learn more about the challenges they see in managing their businesses in 2015 and a few years thereafter. We also asked them how they would address some of their top challenges.

The top challenge identified in our research is R&D productivity.

The pace of drug discovery and development is likely to enter a more challenging phase and specific strategies will need to be developed to manage the transition to an environment with limited upside of new blockbuster drugs. A majority of executives say that the pipeline of new molecular entities is going to continue to trend at relatively lower levels, requiring contingency plans around other issues such as drug safety and patent expiries. The challenge of managing growth in this market environment will be a top priority for companies in 2015 and many years thereafter.

Senior executives attribute the slow down in R&D productivity to many areas such as overly ambitious targets in the past, the types of targets and strategies used to develop drug candidates. However, they all agree that a clear strategy isn’t apparent to address the erosion of R&D productivity.  The second is the mismatch between claims and actual velocity of new concepts or technologies related to combinatorial chemistry and genomics. There has been arguably limited impact of these areas on the pace of drug development productivity. May issues are pervasive including the speed at which compounds in development with limited promise are terminated. Clearly, the strategic imperative if innovation and effective decision-making requires a new hard look at the realities that are down the road requiring a more realistic alignment between investments and outcomes.

The third driver of change is the influence of the public. As more innovation gets directed towards perceived needs of the public, and the synergies of the focus of academic institutions and profits increase, we are likely to see bigger bets on fewer emerging themes. This approach is likely to raise the risk profile of many of these initiatives because the drug discovery process is complex with unpredictable outcomes. For example, the decision to terminate investments by Pfixer in Torcetrapib for safety reasons is a case in point of how the uncertainly associated with drug development can result in dramatic shifts in promising outcomes.

The fourth driver is the emerging challenge of low cost generics. With unprecedented impending patent expiries of over US$16 billion of revenues to be lost this year, the probability of many late-stage drugs compensating for these expiries is low. to compensate. Low cost producers have begun to take innovative approaches in advocacy and production processes which are undermining the strengths of leading drug manufacturers.

The fifth driver is the increasingly unpredictable regulatory climate. Tenures at the FDA have become relatively shorter, thus eroding the ability of companies to accelerate the approval of some drugs and moreover, increasing the risk around planning for future advocacy strategies and planning R&D invetsments more challenging.

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