2019 Global life sciences outlook - Focus and transform | Accelerating change in life sciences - Deloitte

 
2019 Global life sciences outlook - Focus and transform | Accelerating change in life sciences - Deloitte
2019 Global life sciences outlook
Focus and transform | Accelerating
change in life sciences
2019 Global life sciences outlook l Focus and transform | Accelerating change in life sciences

Contents
Outlook                                                                                                           3
Economic overview                                                                                                 4
Focus                                                                                                             12
Transform                                                                                                         23
Questions/actions leaders should consider for 2019                                                                39
Appendix                                                                                                          41
Endnotes                                                                                                          43
Contacts                                                                                                          53

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Outlook

2019 will continue to see a focus on digital transformation in life sciences.
This transformation is about using technology symbiotically and strategically,
not just adopting a particular technology or device. Data is fast becoming
the currency of life sciences, and digital enterprises are building a new
business model for the future.1

In 2019, how can leaders move forward and accelerate change in life
sciences? They should Focus and Transform.

••Focus on patients and regulators as partners, building partnerships that
    are strategic and relationship-driven

••Focus on external innovation and expanding a richly
  networked ecosystem

••Focus on mobilizing data and collaborating with nontraditional partners
  like startups and tech giants

••Focus on outsourcing for advanced technologies and manufacturing
  capabilities, and choosing vendors who share similar values and
  risk profiles

Transforming means aligning the enterprise to deliver an exceptional
customer and patient experience, using data intelligence to create value,
and evolving a digital culture and new leadership styles. While this type of
change may be challenging, it is likely to be essential to accelerating change
in the year ahead.2

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Economic overview

Global health spending is on the rise. The                       Growth trends                                             US$900 billion in 2019 to US$1.2 trillion
compound annual growth rate (CAGR) for                                                                                     by 2024. From 2018 to 2024, CAGR for
                                                                 Life expectancy
health care spending across 60 countries                                                                                   pharmaceutical drugs is expected to be 6.4
is predicted to increase 5.4 percent for the                     Overall, life expectancy at birth is rising               percent, or six times the 1.2 percent over
period 2018–2022, compared to just 2.9                           rapidly and expected to reach 74.4 years                  2011–2017.7 Drivers of growth are predicted
percent over 2013–2017. The overall share                        by 2022, up from 73.3 in 2017. Falling infant             to be novel therapies that address key,
of Gross Domestic Product (GDP) devoted                          mortality is contributing to most of the                  unmet needs and increased access to
to health is forecast at 10.5 percent for                        gain.4 However, the US Centers for Disease                medicines, as a result of new pricing policies
2019. Per-person spending varies widely                          Control and Prevention (CDC) reports that                 around the world.
by country—from US$11,674 in the US to                           life expectancy in the United States fell for
                                                                                                                           Challenges to growth include payer scrutiny,
just US$54 in Pakistan. Except for North                         the third year in a row, to 78.6 years.5
                                                                                                                           sales losses due to genericization, and
America, all regions anticipate spending to
                                                                 Pharmaceutical drug and disease trends                    competition from biosimilars. In 2019, it is
accelerate compared to the growth over the
                                                                                                                           estimated that US$19 billion in prescription
period 2013–2017.3                                               Global pharmaceutical spending is
                                                                                                                           sales may be at risk due to patent expiries,
                                                                 predicted to outpace overall health
                                                                                                                           with approximately half resulting in lost
                                                                 care spending.6 Worldwide prescription
                                                                                                                           sales.8
                                                                 drug sales are expected to rise from

Figure 1. Worldwide prescription drug sales, 2018–2024

      1400

      1200
                                                                                                                    +6.4% CAGR 2018–24

      1000

       800

       600
                                                                                                                                                                     828
                                                                                                                                                 749       785
                                                                                                                              663       706
                                                                                               583       608        631
       400               590          572           569         581      565         576
               558
                                                                                                                                                                     262
                                                                                                                                                           240
                                                                                                                                                 216
       200                                                                                                                             192
                                                                                                                     151      169
                                                                                               125       138
                                                                 94      100         112
               69        77            82           88
                                                                                                                                       100       104       109       114
                                       67           70           76      78           80       81        84          89       95
               60        66
         0
              2010       2011         2012         2013         2014    2015         2016      2017     2018        2019     2020     2021       2022      2023     2024

                                Prescription excl. Generics & Orphan             Orphan                        Generics

Source: EvaluatePharma, 2018

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Regional and country outlooks,                         •• United Kingdom: A major exporter of               •• India: The world’s tenth-largest
2018–2022                                                 pharmaceutical products. Pharmaceutical              pharmaceutical market in US-dollar terms.
                                                          sales are up 5.7 percent annually.                   Private expenditure is expected to drive
Regionally, transition economies9 are
                                                          However, continued uncertainty around                growth. In particular, the increased use of
expected to be the fastest-growing market,
                                                          Brexit throughout 2019 may disrupt                   online pharmacies is creating a demand for
averaging 9.3 percent per year, with the
                                                          trade. Pharmaceutical sales in the United            more advanced, costly medicines among
highest growth expected in the Ukraine
                                                          Kingdom are expected to rise at a CAGR               India’s growing middle class. NCDs account
at 15.2 percent CAGR in US-dollar terms.
                                                          of 4 percent in nominal local-currency               for 53 percent of deaths, while diabetes
Latin America is likely to be the slowest at
                                                          terms.18 Age-related diseases, including             accounts for only 2 percent. The leading
3.6 percent growth per year. North America
                                                          dementia, (especially Alzheimer’s),                  cause of death is ischemic heart disease
is expected to remain the largest regional
                                                          Parkinson’s, rheumatism, osteoporosis,               followed by chronic obstructive pulmonary,
market, averaging 4.9 percent growth per
                                                          and metabolic disorders are on the rise,           diarrheal, and cerebrovascular diseases.24
year, but will see a fall in its share of total
                                                          and the UK’s obesity rate is among the
pharmaceutical spending to 34.8 percent                                                                     Pharmaceutical Research &
                                                          highest in Europe. The number of people
by 2022.10                                                                                                  Development (R&D)
                                                          with diabetes is expected to reach 5.2
                                                          million by 2025, from 4.5 million in 2016, with   Worldwide pharmaceutical R&D spend is
•• United States: While pharmaceutical
                                                          cancer and circulatory system diseases being      expected to decrease from 4.1 percent
   spending is expected to rise at a CAGR
                                                          the leading causes of death in England and        CAGR in 2018 to 3.1 percent in 2019.
   of 5.4 percent over the forecast period,
                                                          Wales.19                                          Companies may improve R&D efficiencies by
   a sharp deceleration may be expected
                                                                                                            using big data and predictive analytics, or by
   by 2020 in anticipation of a possible
                                                       •• China: Pharmaceutical sales are expected          directing less revenue toward replenishing
   cyclical downturn in the US economy and
                                                          to see a CAGR of 8.7 percent in nominal           pipelines. Overall, R&D spend from pharma
   continued political uncertainty. In 2019,
                                                          local-currency terms. Central government          and biotech companies is expected to be
   Americans without health insurance will
                                                          reforms represent a maturation of the             US$177 billion in 2019, compared to about
   not face a penalty, and private insurers
                                                          market,20 and the recent expansion of             US$171 billion in 2018.25
   may shift their focus to younger and
                                                          drug reimbursement lists is expected
   healthier clients and low-cost policies.                                                                 According to Deloitte’s annual study,
                                                          to fuel demand. In the next year, there
   It is predicted that the public sector                                                                   Measuring the returns from pharmaceutical
                                                          will likely be continued concerns around
   will struggle to cover costly care for the                                                               innovation, projected R&D returns for
                                                          corruption and safety as a result of
   elderly and low-income families.11 Heart                                                                 12 large cap biopharma companies, have
                                                          recent drug scandals.21 However, evolving
   disease and cancer are the leading causes                                                                fallen to their lowest level in nine years,
                                                          invoicing systems are being designed
   of death in the United States.12                                                                         at 1.9 percent in 2018, down from 10.1
                                                          to streamline distribution channels and
                                                                                                            percent in 2010. The cost to bring an asset
                                                          prevent corruption.22 Noncommunicable
•• Japan: The second-largest pharmaceutical                                                                 to market has increased to record levels in
                                                          diseases (NCDs) account for 85 percent
   market after the United States. Its aging                                                                2018 (to US$2.168 million) but the forecast
                                                          of deaths. Other leading causes of death
   population is expected to continue to                                                                    peak sales per asset have more than halved
                                                          are cerebrovascular disease, ischemic
   drive demand for drugs to treat cancer,                                                                  since 2010 (from US$816 million in 2010 to
                                                          heart disease, chronic obstructive
   diabetes, cardiovascular disease, and                                                                    US$407 million in 2018). In contrast, more
                                                          pulmonary disease, lung cancer, and
   other age-related conditions.13 However,                                                                 specialized biopharma companies are
                                                          Alzheimer’s, according to the latest data
   Japan is the only declining market among                                                                 outperforming these large cap companies
                                                          from 2016. The share of people over 65
   major countries,14 despite the launch of                                                                 with projected returns of 9.3 percent in
                                                          is expected to rise to nearly 14 percent
   health technology assessments (HTAs)                                                                     2018, as despite higher development costs,
                                                          by 2022. A chronic-disease plan, targeting
   aimed at improving cost efficiency.15                                                                    they have higher projected pipeline values.26
                                                          cardiovascular disease, cancer, and
   Pharmaceutical sales in Japan are
                                                          chronic respiratory diseases, aims to             Biotech
   expected to significantly lag16 behind the
                                                          cut deaths for 30- to 70-year-olds by 10
   6.3 percent worldwide average over the                                                                   Biotechnology products are expected to
                                                          percent by 2020.23
   forecast period.17                                                                                       contribute steadily to sales, rising to 52
                                                                                                            percent of the top 100 product sales by
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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

2024, from 49 percent in 2017. In 2019,                  accelerating growth. The Chimeric Antigen                            In 2019, safety, efficacy, and costs will likely
biotech is forecast to represent 27 percent              Receptor T-cell (CAR-T) therapy market is                            continue to be the biggest challenges in
of the global market, and by 2024, 31                    projected to increase at an annualized rate                          this sector.34 As these drugs comprise
percent.27                                               of over 51 percent during the time period,                           substantial shares of payer budgets, they
                                                         2018–2030.30                                                         may face a backlash. Payers’ decisions
To date, Japan has fostered a series of
                                                                                                                              to reimburse a drug that may carry a
licensing deals, contract manufacturing                  The first two CAR-T immunotherapies,
                                                                                                                              significant price tag will heavily depend on
tie-ups, and mergers and acquisitions,                   as well as a novel gene therapy targeting
                                                                                                                              the drug’s value, with many ways for value
and continues to be an attractive place for              a disease caused by mutations in a
                                                                                                                              to be determined.35 The therapy could avert
biotech firms to do business. Japan became               specific gene, gained US Food & Drug
                                                                                                                              downstream medical costs or be justified by
the world leader in regenerative medical                 Administration (FDA) approval in 2017.31
                                                                                                                              the payer due to low patient numbers. Ten
products with the introduction of the                    These therapies received Priority Review,
                                                                                                                              percent of prescription drug spending is on
Pharmaceuticals and Medical Devices Act in               Breakthrough Therapy, and Orphan Drug
                                                                                                                              orphan indications, or about 1 percent of
2014.28                                                  designations, demonstrating the FDA’s
                                                                                                                              approximately US$3.7 trillion in US health
                                                         commitment to expediting the development
Orphan drugs, next-generation cell and                                                                                        care spending for 2018.36
                                                         and review of these groundbreaking
gene therapies
                                                         treatments.32 Cellular and gene therapy-                             Biosimilars
By 2024, the orphan drugs sector is                      related research and development is
                                                                                                                              Biosimilars have been on the market in
expected to almost double and account                    advancing rapidly in the United States
                                                                                                                              Europe for more than a decade, and India
for 20 percent of prescription sales.29                  and China, where hundreds of trials are
                                                                                                                              released its first biosimilars guidelines
In particular, gene and cell therapies are               underway.33
                                                                                                                              in 2012. But while Europe has approved

Figure 2. Rapid growth of cell therapies being investigated

                                                                            Approximately an 80% increase within
                                                                                    the last 12 months2

                                                                                                             Russia
                                                                                                                        21%
                              Canada
                                                                                                      43%         14
                         25%
                         4%     28     50%                                                                             36%

                          18%
                                                                                                             China
                                3%                                                                       4% 2%
                                                                                                                                                       USA and China are the
                                                           Europe                                      6%                                              leaders in the development of
                                 USA                 20%                                             9%                           Japan
                                                                    35%
                                                                                                                                                       cell therapies
                         18%                                                                                                  21%
                                                                                                             335                           32%

                                                            157             Middle East                                              19                CAR-T therapies
                                             40%   11%
                                 431                                 2%                                                79%                             represent the largest share of
                                                                                                                                           5%
                    19%                                             8%                  31%                                    42%                     the global cellular therapy
                                                                          38%
                                                                                 11                Southeast Asia
                                                                                                       13%       12%
                                                                                                                                                       market
                                        1%                  24%
                               12%   10%                                                           13%
                                                                                  31%                                                                  China has the largest number
                                                                                                             8
                                                                                                                                                       of CAR-T therapies under
                                                                                                                 62%     Australia                     investigation (280+) followed by
                                                                                                                                     37%               the USA (170+)
                                                                                                                       50%
                                                                                                                              8

                                                                                                                                  13%
                   LEGEND

           CAR-T cells
           TCR-T cells
           NK T cells                                                           Date as of September 24, 2018
           TAA / TSA
           iPSC/Gamma-Delta T cells                                             Note: The percentages indicate the proportion of studies for certain intervention/therapy and
                                                                                      the number inside the donut hole indicate the grand total of studies conducted.
           TIL

Source: Deloitte analysis
                                                                                                                                                                                          6
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

65 biosimilars,37 and India currently has over           United States.49 Public and government
50 approved biosimilars on the market,38                 scrutiny of generics’ price increases, along     Not-for profit generics:
the United States just made its first approval           with underperformance, are causing some
                                                                                                          Civica Rx
in 2017.39 To get biosimilars to market more             companies to reevaluate their portfolios,
quickly and help save costs, the FDA is                  including divestiture of low-margin
                                                                                                          A new business model
accelerating the approval process through                products.50 Some companies and hospitals
its Biosimilars Action Plan launched in July             are partnering and manufacturing their           disrupting the generics
2018.40 The plan was updated in December                 own generics in response to shortages
                                                                                                          segment. In 2018, Civica
2018, to better address anti-competitive                 and high prices.51 In 2019, generic drug
practices that abuse current regulations and             shortages are likely to continue due to          Rx, a not-for-profit generic
distribution systems.41 The new policies and             issues with manufacturing quality and
                                                                                                          drug company formed by
revised guidance aim to prevent companies                capacity, including the impact of the
from gaming exclusivity provisions                       hurricane in Puerto Rico. Disruption in the      a consortium of hospitals,
and ensure that when drugs transition                    role of pharmacy benefits managers (PBMs),
                                                                                                          launched in the United
into biologics, they don’t receive extra                 and other players in the value chain, are
exclusivities they aren’t entitled to have.42            expected to be another factor in the future.     States with the aim of
When markets become more competitive,
                                                       •• Europe: The European Medicines Agency           addressing shortages and
regulators expect prices will fall, and more
access will be made available to patients.43              (EMA), which, as a result of Brexit, is         high prices of lifesaving
                                                          moving from London to Amsterdam
The World Health Organization (WHO)                       in 2019, is showing an upward trend in          medications. Attracting
is undertaking an effort to harmonize                     marketing approvals for innovative drugs        the interest of 120 health
standards for biosimilars worldwide.44 In                 and generics.52
2017, it launched a pilot prequalification                                                                organizations, including
program for biosimilars in an effort to make           •• Japan: The government has a target of
                                                                                                          the US Department of
expensive treatments for cancer more                      achieving an 80 percent market share
widely available in low- and middle-income                for generics by September 2020, and it          Veterans Affairs (VA), its
countries.45                                              is encouraging Japanese companies to
                                                                                                          initial focus will be 14
                                                          develop generic drug production facilities in
Generics
                                                          lower-cost Asian countries. Not only would      hospital-administered
Governments worldwide are looking                         this likely reduce drug prices in Japan, but
                                                                                                          generic drugs.56 Civica Rx
to boost patient access to affordable                     it is expected to also strengthen Japanese
medicines and may increase demand for                     pharmaceutical sales across Asia.53             presents a new business
generic drugs.46 Over 2018–2024, US$251
                                                       •• India: Accounts for approximately 20            model—a non profit, non
billion in drug revenues are at risk from
patent expiries with established pharma                   percent of global generics output, and          stock-bearing company
giants likely to struggle to compete against              generic drugs account for three-quarters
                                                          of the Indian market by volume. Local           with transparent pricing.
generics.47 While this may create growing
pipeline opportunities for generics, the                  production of generic drugs and vaccines        It will own the right to
number of companies manufacturing                         keeps prices low, while local companies
                                                          are taking advantage of low labor and           manufacture all products
generics is consolidating, and the number
of complaints about rising prices for some                research costs to export generics.54            and be backed by the FDA.57
generics is increasing. Drug shortages may
                                                       •• Latin America: Governments are not
also restrict growth.48
                                                          only expected to focus spending on
                                                          generics, but also restrict imports of more
•• United States: The largest generics market
                                                          expensive medicines.55
   in the world. Generic drugs account for
   the majority of pharmaceutical sales in the

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Personalized medicine                           for personalized medicine are anticipated
                                                to be reimbursement, clinical utility, data
The global personalized medicine market is
                                                connectivity, and access.60 About 30 percent
expected to increase over 11 percent CAGR
                                                of personalized medicine is focused on
for the period 2017–2024, with the help of
                                                oncology.61
advances in health care analytics, artificial
intelligence (AI), and blockchain.58 In 2019,   The FDA is planning a new 52-person
the shift to value-based, personalized health   Office of Drug Evaluation Science (ODES)
care will likely require new platforms to       to improve the review of new medicines
support the patient and many stakeholders       and standardizing the approach for using
needed to deliver targeted breakthroughs        personalized medicine, digital data, and
to patients.59 The most pressing challenges     patient reporting.62

  Personalized medicine: LinkDoc
  Digital health startups are enjoying robust funding, especially in China.63 LinkDoc is
  a Chinese medical data solution company that provides clinical, structured data and
  personalized information to government bodies, insurers, pharmaceutical companies, and
  research organizations. It serves China’s oncology hospitals, as well as 500 hospitals in over
  30 provinces.64
  LinkDoc’s tools work to provide better decision making, by standardizing health care data and
  personalizing information, using AI and Big Data. Millions of clinical electronic medical record
  (EMR) data can be converted into research-grade data. Its image-intelligent diagnosis system is
  designed to increase efficiencies, while reducing rates of misdiagnosis or inaccuracy.65

Therapeutic focus

Oncology is expected to remain the dominant therapy segment, growing US$129 billion
in projected worldwide sales over 2017–2024, and reaching US$233 billion by 2024.
Immunosuppressants are expected to have the highest CAGR gain in the period, 2017–2024,
at 15.7 percent, followed by Dermatologicals (13 percent), Oncology (12.2 percent), and Anti-
anemics (11 percent).66

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Figure 3. Top 15 prescription drug & OTC therapy categories by worldwide sales, 2016–2022

               Therapy Areas                                                    WW Sales 2017 (US$B)   Projected WW Sales 2024 (US$B)

      1.      Oncology                                                         104.0                   233.0

      2.      Anti-diabetics                                                   46.0                    59.5

      3.      Anti-rheumatics                                                  55.7                    56.7

      4.      Vaccines                                                         22.7                    44.6

      5.      Anti-virals                                                      42.4                    39.9

      6.      Immunosuppressants                                               3.7                     38.1

      7.      Bronchodilators                                                  27.2                    32.3

      8.      Dermatologicals                                                  12.9                    30.3

      9.      Sensory organs                                                   21.6                    26.9

     10.      Anti-hypertensives                                               23.0                    24.4

     11.      Anti-coagulants                                                  16.8                    22.9

     12.      MS Therapies                                                     22.7                    21.5

     13.      Anti-fibrinolytics                                               12.7                    20.4

     14.      Anti-hyperlipidemics                                             11.3                    16.4

     15.      Anti-anemics                                                     7.6                     15.7

              Top 15                                                           445.0                   683.0

              Other                                                            379.0                   567.0

              Total WW Prescription & OTC                                      825.0                   1247.0

Source: EvaluatePharma, 2018

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Medtech                                            in 2018, up from 31 in 2017.74 In a new             •• China: The National Medical Products
                                                   Report on Non-Device Software Functions:               Administration (NMPA) is targeting data
Medtech is projected to grow at a 5.6
                                                   Impact to Health and Best Practices, the               integrity in a new checklist to guide on-site
percent CAGR over the forecast period
                                                   agency addresses medical software                      inspections of medical device clinical trials
2017–2024. In 2019, worldwide medtech
                                                   functions not part of SaMD.75 As more                  released in late 2018.84
sales are predicted to be US$475 billion,
                                                   devices become connected in the Internet
growing to US$595 billion by 2024. The                                                                 Navigating geopolitical uncertainty
                                                   of Medical Things (IoMT), the FDA’s medical
fastest-growing device areas by CAGR are
                                                   device cybersecurity program is being               Disputes over US health care policies are
predicted to be Neurology (9.1 percent),
                                                   strengthened to protect patients,76 as part         expected to continue, causing uncertainty
Diabetic Care (7.8 percent), and General and
                                                   of the Medical Device Safety Action Plan.77         for all market players in the next few years.
Plastic Surgery/Dental (tied at 6.5 percent).67
                                                                                                       There is also considerable uncertainty for
By 2024, In Vitro Diagnostics is expected         •• United Kingdom: The National Institute            Western Europe, where Brexit has raised
to be the largest medtech segment with               for Health and Care Excellence (NICE)             risks for some economies and health care
annual sales of US$79.6 billion, followed by         set new standards for digital health              systems across the region.85 If no deal is
Cardiology and Diagnostic Imaging. Medtech           technology development in 2018. The new           reached by 29 March 2019, the United
R&D spend is estimated at US$39 billion by           guidance outlines what evidence is needed         Kingdom has a contingency plan to remain
2024.68                                              when innovators submit health care apps           part of the EU medicines and medical
                                                     and wearable devices to National Health           devices regulatory networks. Medicines
Software-as-a-Medical Device (SaMD) is
                                                     Service (NHS) commissioners.78                    and medical devices have been prioritized
a rapidly growing area of innovation that
                                                                                                       on alternative routes to maintain access
regulators across the globe are working to
                                                  •• European Union: The EU is preparing for           to these supplies for UK patients.86 On
de-risk and make more agile.69
                                                     a new regulatory framework in 2019—the            4 January 2019, the UK’s Medicines and
Medical device and SaMD regulations                  Medical Devices Regulations (MDR) 79 and          Healthcare products Regulatory Agency
                                                     In Vitro Diagnostics Directive (IVDR).80          (MHRA) issued “Further guidance note on
•• United States: In 2019, the FDA will              The MDR provides a three-year transition          the regulation of medicines, medical devices,
   launch its software precertification (Pre-        period to 26 May 2022, and the IVDR,              and clinical trials if there’s no Brexit deal,”
   Cert) program for Software-as-a-Medical           a five-year transition to 26 May 2022.81          whereby UK Marketing Authorizations, which
   Device70 and recently released a new              Once in place, the new regulations will           are currently Centrally Authorized Products
   working model: Developing a Software              be stricter than those imposed by the             in the EU, will be grandfathered in on
   Precertification Program.71 The agency will       FDA, particularly with the depth and              exit day.87
   review previous software approvals and            breadth of clinical evidence required and
                                                                                                       Pricing pressures
   also test its model on some new software          post-market product monitoring.82 The
   submissions, applying the standards               regulatory change will result in product          Pricing pressures on the pharmaceutical
   it uses for medical devices classed as            reclassification and recertification for          segment are predicted to continue,
   medium-risk. Data-sharing between                 many of the medical devices and in vitro          driven by governments, patent losses,
   developers and reviewers will also be             diagnostics on the market today. Notified         and increased promotion of generics and
   tested.72 The FDA is updating its Medical         bodies and industry are expected to               biosimilars.88 To deal with these pressures,
   Device De Novo Classification process,            struggle to meet the tight timelines              some pharmaceutical companies are buying
   amending the definition of a medical              required.                                         rivals to streamline marketing staff or
   device (excluding certain medical software                                                          buying unique treatments that do not have
   functions). This process aligns medical        •• Australia: The Therapeutic Goods                  lower-cost alternatives.89 Many will continue
   device quality systems with international         Administration (TGA) released guidance            to look for ways to increase efficiencies,
   standards and finalizes the FDA’s proposed        on SaMD regulation in late 2018. However,         enhance trial savings, and demonstrate
   rule for procedures and time frames for           the TGA is concerned that its current             value.90
   requesting internal agency supervisory            regulations underestimate the risks posed
   review.73 Digital health companies                by many SaMDs and its advice is likely to
   contributed to 38 De Novo authorizations          change in the near future.83

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

•• United States: Rising health care                     Branded Medicines Pricing and Access.             500 percent. The Central Drugs Standard
   costs are driving greater scrutiny of the             The scheme places a 2 percent cap on the          Control Organization is launching a
   economic value of new treatments by                   growth in sales of branded medicines to           digital database that will list information
   government and private payers.91 The US               the NHS, potentially saving approximately         on pharmaceutical producers and
   administration is looking to test lower drug          £930 million in 2019. Pharmaceutical              medicines.107
   prices and raise pricing transparency.92              companies are expected to repay the NHS
                                                                                                         Expanding access to drugs, cell and gene
   The aim is to align US prices more closely            for spending above the cap but will benefit
                                                                                                         therapies
   to those abroad, but some believe                     from faster NICE appraisals, and patients
   this could dampen innovation.93 The                   are likely to get access to new medicines       In 2019, life sciences companies should align
   potential International Pricing Index Model           up to six months earlier than today.103         their commercial models with changing
   for Medicare Part B Drugs94 would affect                                                              market dynamics. If physicians are no
   certain pharmaceutical companies more               •• France: The government has an                  longer the key decision makers, and clinical
   than others.95 Also proposed is giving                 agreement with the Federation of               programs are no longer sufficient to gain
   Medicare Advantage plans the option                    Medicines Enterprises to regulate the price    market access and product differentiation,
   of applying step therapy for physician-                of medicines from 2017 to 2019. 104            life sciences companies may want to
   administered and other Part B drugs96 as                                                              demonstrate the economic and humanistic
   well as overhauling how physicians are              •• Germany: The government approved               value that their products provide to all
   reimbursed for prescription drugs through              the German Drug Law (AM-VSG) in 2017,          stakeholders, not just the clinical benefits.108
   Medicare Part B.97 In addition, legislation            aimed at ensuring Social Health Insurance      Market access becomes a priority, before
   is under review to eliminate rebates on                financial stability and extending the price    field force, calls, samples, details, and Direct-
   prescription drug purchases.98 Rebates                 moratorium for all patent-free drugs until     to-Consumer (DTC).
   are negotiated by PMB managers and                     2022.105
                                                                                                         Trade wars and supply chains
   used by large health plans and employers
   to lower prices for their clients.99 New            •• Japan: The government is seeking to            Global pharmaceutical companies depend
   alternatives are likely to emerge, and                 constrain pharmaceutical prices, while         on stable supply chains, and uncertainty
   drug manufacturers will need to rethink                promoting innovations to improve               about trade policy could cause disarray
   their market-access approach and                       treatment. A full HTA for drugs is being       in supply chains. Scores of biopharma
   pricing strategies. Some believe lower                 put in place to ensure that only the most      materials and medical devices from China
   prices overall could be more beneficial                cost-effective treatments are used. The        are targeted in the US$100-billion trade war
   to consumers.100 Should the PBM model                  ministry is also increasing the frequency of   between the United States and China.109
   be disrupted in 2019, new investments in               its price reviews.106                          About half of the goods the United States
   technology, processes, and organizational                                                             imports from China could be subject to
   capacity will likely be required.101                •• India: The Drug Price Control Order            tariffs.110
                                                          (DPCO) regulates the prices of 384 drugs
                                                                                                         Uncertainty also makes it very difficult for
•• United Kingdom: The Health Service                     on its National List of Essential Medicines.
                                                                                                         companies to make investment decisions.
   Medical Supplies Act grants public                     In the second half of 2018, it announced
                                                                                                         For global pharmaceutical companies,
   authorities more power to regulate                     plans to expand the list to include more
                                                                                                         major decisions on strategic investment
   medicine prices.102 For 2019, the                      medical devices and consumables and was
                                                                                                         can have a time horizon of at least 10 years.
   Association of the British Pharmaceutical              preparing new rules to cap distribution
                                                                                                         In 2019, a lack of a clearly foreseeable end
   Industry (ABPI) and the NHS have agreed                margins for pharmaceuticals amidst
                                                                                                         to the US-China trade war could put future
   to a new voluntary scheme regarding                    complaints of some margins increasing
                                                                                                         investments at risk.111

11
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Focus

Strategic focus on deal-making and                 In 2019, external innovation is likely to               Licensing
external innovation                                continue to be a strategic focus for pharma
                                                                                                           According to Deloitte research, licensing
                                                   companies that may face patent expiries,
The continuous search for the next                                                                         leads biopharma deal-making activities,
                                                   competition from and biosimilars, weak
generation of market-leading medicines and                                                                 constituting 93 percent of deals in the
                                                   new drug pipelines, and growing technology
decreasing returns in R&D make external                                                                    data set.115 The first three months of
                                                   needs.113 But many factors can determine
deals attractive sources of innovation for                                                                 2018 resulted in almost 20 percent more
                                                   the optimal deal structure. Below are some
biopharma companies, either through                                                                        licensing deals compared to the same
                                                   of the most successful strategic reasons
licensing, mergers and acquisitions (M&A),                                                                 period in 2017.116
                                                   buyers and sellers might consider for each
and/or joint ventures.112
                                                   type of deal.114

Figure 4. Deal types and potential strategic rationale, advantages, and disadvantages

 Deal type                    Rationale-buyer/               Rationale-seller/                Advantages                      Disadvantages
                              licensee                       licensor
 Licensing                    •• Access to talent and        •• Access to capital and         •• Access to new                •• Shared decision making
                                 expertise                      capabilities to help             capabilities or                 can complicate or delay
                                                                get to the next value            technology                      operational progress
                              •• Traditional contingent         inflection point
                                 payment structure                                            •• Access to new                •• Each party is dependent
                                 allows risk sharing         •• Upside associated with           geographic regions              on the other to achieve
                                                                the asset is retained                                            key milestones or goals
                              •• Economically viable
                                 option budgets,             •• Company investors may
                                 especially when M&A            be seeking an IPO
                                 valuations are high
 Merger & acquisition         •• Ownership of new            •• High valuations               •• Streamlined decision         •• Alignment on valuation
 (single-asset                   product(s)                     could be lucrative for           making after transition         for public companies
 companies or deals)                                            current investors and            of ownership                    may be difficult
                              •• Redundant capabilities         employees
                                 are reduced, thus                                            •• Contingent M&A          •• Tend to be more
                                 lowering costs              •• An exit option for               deals could allow for      disruptive in nature;
                                                                private investors                additonal payments tied    may result in loss of
                                                                                                 to value creation          key personnel and tacit
                                                                                                                            knowledge
                                                                                              •• Potential tax benefits
                                                                                                 for the buyer           •• Consolidation of assets
                                                                                                                            could have a negative
                                                                                                                            accounting impact
 Joint venture                •• Able to align on goals with little definition of specific    •• Ideal for areas where        •• Complex financial
                                 products or technology                                          scientific mechanisms           structure
                                                                                                 are not well known
                              •• Complementary capabilities are maximized
                                                                                              •• Entry into new or
                                                                                                 unknown markets

Source: External Innovation – How biopharma companies are bolstering R&D pipelines through deal-making, Deloitte Center for Health Solutions, 2017

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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

M&A                                                    The trend of different types of structures is                                       opposite to pharma’s traditional, legacy
                                                       likely to accelerate, but we’ll likely see less                                     culture. In the future, next-generation
Over the last ten years, the top 10 pharma
                                                       of the traditional framework of just buying                                         therapy startups are more likely to mesh
companies with the highest return on
                                                       a company outright. Instead, we can expect                                          into their own mergers and could form a
investment (ROI) spent an average of 35
                                                       more complicated, innovative structuring                                            new breed of company with a very different
percent on M&A from their total R&D and
                                                       with use of options, milestones, and                                                culture around innovation and life sciences.
M&A investment.117 The biotech segment is
                                                       partnerships.                                                                       Among the challenges is pharma’s value
seen as one of the most active in M&A.118
                                                                                                                                           chain, which is built around traditional
However, as trade tensions between the                 Focus on new entrants
                                                                                                                                           products, while next-generation therapies
United States and China escalated in the third
                                                       As the world continues to digitize, life                                            are being built around the patient. The cost
quarter of 2018, biotech M&A experienced
                                                       sciences incumbents may see next-                                                   of goods sold is also much greater than the
the slowest quarter since 2013.119 High-risk
                                                       generation or technology startups and                                               20–25 percent average that exists in life
sectors like biotech are challenged in volatile
                                                       large tech companies continue to threaten                                           sciences today, as is the revenue required
times, and 2019 is likely to continue to be
                                                       the status quo. Some new entrants                                                   to maintain return on innovation. While
volatile for pharma and biotech.120
                                                       are diversifying from other industries,                                             costs are expected to go down, they will still
While expectations around immuno-                      while others are innovating with new                                                likely be significantly higher than most other
oncology have been tempered, cell and                  capabilities.125 Traditional pharma and                                             therapies in the marketplace.
gene therapies are expected to remain                  medtech companies can take advantage of
                                                                                                                                           Smaller companies, often with one asset,
popular with investors in 2019.121 A new               these opportunities and drive innovation or
                                                                                                                                           are increasingly trying to control that asset
era of deal-making is accelerating among               find themselves increasingly on the outside
                                                                                                                                           throughout its life cycle—or for a bigger
biopharmaceutical and genomics companies               and in a reactive mode.
                                                                                                                                           portion of the life cycle. The digital world is
looking for a leadership position in next-
                                                       Startups: Key drivers in the disruption                                             making it possible for smaller companies,
generation therapies.122 In particular, China
                                                       of next-generation therapies                                                        without the infrastructure of Big Pharma, to
is in a race with the United States for "bio-
                                                                                                                                           acquire capabilities that could put them on
intelligence," investing over US$9 billion in          While only a few big pharma companies are
                                                                                                                                           par with larger companies.
expanding AI and biotech capabilities to               developing next-generation therapies, more
commodify biological and genomic data.123              than 250 startups are focused on gene-
                                                       based therapeutic solutions.126 As these
Large, transformative acquisitions in the
                                                       startups mature, pharma companies who
US$60–70 billion range defined 2018 and
                                                       may be looking to buy these companies can
the beginning of 2019. This year, companies
                                                       expect a hard time acquiring this innovation.
may be rearranging portfolios based on the
                                                       Startups bring a whole new mind-set and
coming pricing controls, and acquisitions are
                                                       tech culture that appears to be dramatically
expected to be very strategic, with a focus
on core therapies or specialties. As a result,
                                                       Figure 5. Value creation of cell and gene therapies
a lot of activity is expected in divestitures.
Some companies are being creative about                                                         45.0                                                                                100 %

divestitures and using alternative financing
                                                       2018–2024 Cumulative sales of Recently

                                                                                                40.0                                                                                 90 %
                                                        Launched and Pipeline Products ($bn)

models, like alliances and joint ventures, to                                                   35.0                                                                                 80 %

                                                                                                                                                                                     70 %
keep a pulse on new therapies.124                                                               30.0
                                                                                                                                                                                     60 %
                                                                                                25.0
Joint ventures                                                                                  20.0
                                                                                                                 40%                                                                 50 % %

                                                                                                                                                                                     40 %
                                                                                                15.0
Large companies are expected to pool                                                                                                                                                 30 %
                                                                                                10.0
resources and create more innovative joint                                                                                                                                           20 %
                                                                                                05.0                                                        7%                       10 %
ventures and partnerships to look at parts                                                      00.0                                                                                 +0 %
of their business that might be non-core,                                                                    Cell Therapy                               Gene Therapy

but enable them to divest, monetize, or gain                                                           Top 20 Pharma        Non-top 20 Pharma      Top 20 Pharma Share of Sales

value.
                                                       Source: Evaluate Pharma, May 2018
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2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

  CAR-T therapy: Nanjing Legend Biotech
  More than 200 CAR-T therapies are being investigated in China.127 CAR-T cells have become a
  major source of cellular immunotherapy in China, and the number of clinical trials in progress in
  China continues to grow.128 In March 2018, Nanjing Legend Biotech received approval from the
  Chinese FDA (CFDA) for the first cellular therapy to officially enter the clinical trial stage in China.
  In 2017, Nanjing Legend reported remarkable data to the oncology field for its experimental
  anti-BCMA CAR-T treatment on 35 relapsed multiple myeloma patients. The data showed that
  a total 94 percent, or all but two patients, had shown clinical remissions (complete response
  or very good partial response) in two months after receiving the treatment.129 However, CAR-T
  therapy competition in China is intense, and in late 2018, Nanjing Legend was facing scrutiny
  over its data.130

Figure 6. Next-generation therapies
  Adoptive cell transfer                                                                                                                 In 2019, lack of manufacturing
  Involves ex-vivo genetic
                                                                                                             Monoclonal antibody         capacity is expected to continue
  modification of the body’s                                                                          Antibodies that bind specifically    to present a significant challenge
  immune cells to arm the cells to                                                                   to malignant cells and stimulate
  target specific tumor antigens                                                                      the body’s immune system to         for next-generation therapies.
  upon reinfusion                                                                                    attack those cells                  Many startups are not vertically
                                                                                                                                         integrated and do not have
                                                        Immunotherapies                                                                  the necessary manufacturing
                                                   contain active cells or genetic                                                       capability, e.g., to produce
                                                      constructs that exert a
                                                    metabolic, immunologic, or                                                           vectors. As a result of hundreds
                                                   other mechanism of action to
                                                           target cancer                                                                 of ongoing clinical trials and
                                                                                                                                         projected drug launches, the
                                                                                                                                         contract manufacturing capacity
                                                                                                                                         is already being taxed. Wait
     Gene therapy
                                                                                                                                         times can be 12–24 months.
     Contains an active substance
                                                                                                                                         In 2019, companies should
     that consists of a recombinant                                                                                                      continue to develop, or contract,
     nucleic acid used in or                                                                           Cancer vaccines
     administered to regulating,                                                                                                         manufacturing capability, without
     repairing, replacing, adding, or                                                     Contains or consists of cells or
     deleting a genetic sequence                                                          tissues that have been subject to              compromising quality and safety.
                                                                                          substantial manipulation to
                                                                                          influence therapeutic modulation

     Note: Other types of immunotherapies exist, such as Oncolytic virus therapy, Nonspecific immunotherapies,
     and Cytokine and Immunomodulators, many of which are still in early stages of development and testing.

Source: Deloitte analysis
                                                                                                                                                                                14
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Tech giants: Partners, competitors, or
chaos                                                     Obsessed with customer experience: Amazon
Six of the top ten tech giants are diversifying           Amazon’s deep knowledge of the customer experience is one
into health care and life sciences. They have
a cumulative value estimated at almost                    of biggest threats to traditional players in life sciences and
US$4 trillion131 and are investing in startups.           health care. In 2018, Amazon reportedly paid almost US$1
Alphabet’s venture arm, Google Ventures
(GV), allocates a third of its funding to 60              billion for PillPack,140 an online full-service pharmacy, in one of
health care and life sciences companies                   the most transformative deals in health care by a tech giant.
from genetics to telemedicine.132
                                                          Licensed to operate in all 50 US states, PillPack is dedicated
About a third of the world’s data is
generated from health care, and technology                to simplifying customers’ lives and reducing costs with its
companies specialize in data.133 In health                technology. Customers receive a personalized bi-weekly
care, tech giants are using Big Data
and AI for prediction and prevention.134                  package containing presorted medications, a recyclable
For example, AI shapes every aspect of                    dispenser, and any other medications that cannot be placed
Amazon’s business,135 and it recently
launched Amazon Comprehend Medical                        into packets, such as liquids and inhalers. A medication label
to mine and decode unstructured data in                   explaining each pill and how it should be taken is included in
medical records using machine learning.136
For Alphabet, the future is structured data               every shipment.141
and AI,137 including its deep learning platform
DeepMind Health.138                                       Amazon says it selected PillPack because the company is
Tech giants are developing medical-grade                  well run and matches its obsession for a highly differentiated
consumer technology focused on both                       customer experience.142 News of the acquisition reduced
diagnostics (e.g., Amazon Echo) and
therapeutics (e.g., Alphabet’s Calico and                 market cap by US$11 billion off major US pharmacy/drugstore
Verily), and using their deep understanding               companies.143 Delivery giants are also rattled by the threat
of the consumer to enhance and simplify the
patient experience.139                                    of Amazon Air.144 Is it a sign punishing incumbents for not
For life sciences, tech giants can be:                    already being where Amazon appears to be going?145 Amazon
•• An opportunity as potential partners,                  is poised to control every mile of the customer experience.146
•• A threat as competitors, or
                                                       business competitors, in the hope of        Regulatory disruption
•• An opportunity and a threat by disrupting           mutually beneficial results.                Pharma and medtech companies are
   a specific area and creating chaos.
                                                       A survey by Deloitte and AdvaMed also       witnessing regulatory disruption as a
In the future, a tech giant, or one of the             found medtech R&D leaders looking to        result of tech companies. A common tech
larger data companies, may begin to push               nontraditional partners for help to drive   archetype is the company who sees beyond
so far into R&D that they come up with                 innovation. Over the next two years,        traditional regulatory approaches when
their own hypotheses or even seek out                  82 percent of those surveyed plan to        entering a market, disrupting the status quo
a different type of compensation. As a                 collaborate with organizations outside of   and building consumer buy-in quickly. Once
result, they could have a real impact on               medtech-like technology and health care     behind a product or service, consumers may
R&D spend in the future, although this                 companies—almost double the                 exert public pressure on lawmakers, and
is not evident yet. In 2019, we may see                percentage today.147                        ultimately, regulators. The trend could make
more "coopetition," collaboration between                                                          the process less burdensome.
15
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

We’ve already seen the accelerated push in
approvals for CAR-T and next-generation             Regulatory disruption: Apple Watch152 ECG Tech giant
therapies as well the FDA’s Pre-Cert program        receives its first FDA clearance.153
to expedite standards for SaMD.148 The
ECG app for Apple Watch149 was one of the           The ECG app on Apple Watch154 Series 4 generates an ECG
most high-profile clearances receiving de
novo classification from the FDA.150 While
                                                    similar to a single-lead ECG. It can provide information about
this is a signal the agency is helping them         heart rate and heart rhythm and enables classification of
to innovate,151 it may also be a threat to
traditional medtech companies and the way
                                                    atrial fibrillation (AFib). However, the app cannot be used to
they currently operate.                             identify heart attacks and other heart-related conditions,
Focus on expanding a richly networked               blood clots, or stroke. In a clinical trial of approximately
ecosystem
                                                    600 subjects, the ECG app could accurately classify an
Digital technologies and massive
connectivity are creating rich networks
                                                    ECG with 99.6 percent specificity with respect to sinus
of connection, collaboration, and                   rhythm classification and 98.3 percent sensitivity for AFib
interdependence. As companies can more
easily deploy and activate assets they
                                                    classification for the classifiable results. The clinical validation
neither own nor control, opportunities and          results reflect use in a controlled environment.155
risks are expected to grow exponentially.
Rich networked ecosystems could create              Apple156 says the tool is not a diagnostic device, and patients
new value, provide a competitive advantage,
and accelerate learning. It appears the need
                                                    should consult their doctor for health advice. But with easy
for companies to translate learning into            access to an ECG, patients are starting to inundate their
innovation has never been greater.158
                                                    doctors with data. Some doctors are concerned their time is
Managing third-party risk
                                                    being pulled from those who are actually sick. But better-
A growing, networked ecosystem, however,
may also carry risk. There could be the
                                                    informed patients are changing the culture of medicine, and
traditional risk of adapting to an increasingly     the future is likely to continue to be a balancing act. Patient
complex environment, but there could
also be a broader-based and extended
                                                    support organizations could play a pivotal role.157
enterprise risk. Organizations may lack
                                                  expected to be critical, and leaders should          of the customer experience, life sciences
the necessary visibility and monitoring
                                                  look for partners that match their own risk          companies should keep patients at
of third-party activities and platforms.159
                                                  profiles.160 Smart companies will want to            the core, and start thinking “outside
In life sciences, this is seen as a possible
                                                  be proactive in understanding the risks              in” when designing value chains. They
risk because companies are ultimately
                                                  associated with “cyber everywhere."161               should create coherent and meaningful
responsible for any regulatory mishaps
                                                                                                       experiences through the entire chain of
and security breaches by vendors and              Keeping patients at the core
                                                                                                       patient interactions—from R&D to product
contracted partners.
                                                  As an increasing number of processes                 launch and commercialization phases.162
New data partners and the Internet of             and tools become digitized and more                  When patient-centricity is engrained into
Things (IoT) are already dictating a need         patient-centric, patient expectations grow.          a company’s culture, a lot of new creative
to better manage "cyber everywhere."              In order to gain a better understanding              ideas may be uncovered to create value.163
In 2019, management frameworks are

                                                                                                                                                        16
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Figure 7. Patient experience feedback loop

                                                                    Motivate action

                                  Measure and adapt                                              Gather insights

                               Plan and execute

                                                                                                    Develop strategy

                                                                                                                       Quick wins

                                                                                                                           Business
                        Data
                                                                                                                           Organization
                       Operations
                       Tech                                                                                                Operations
                                                                Model the experiennce
Source: Elevate the patient experience, Deloitte Patient Connect, 2018

     Design thinking: Big Pharma
     The human aspect is critical. Design thinking brings empathy to innovation. The first step is
     to gain an empathic understanding of the problem you are trying to solve. When coming up with
     solutions, refocus back to the end user, the people you are trying to benefit.164
     A patient with systemic sclerosis was invited to meet with the team designing a clinical trial. The
     patient explained, “I’m not sure if you realize, but with the disease, I am in a wheelchair now. If you
     want me to come to your meeting at eight or nine o’clock, I need to wake up at three o’clock in the
     morning. I need to get dressed, I need to style my hair and do my makeup.” She lost part of the
     skin on her chin and wanted to look her best. She added that she also needed assistance from her
     husband, and the whole ordeal was a nightmare.165
     In lieu of an in-person meeting, the team met via Skype with the patient, and soon realized, that to
     enroll this patient in the clinical trial, or any patients with this disease, in no way could they be asked
     to travel, possibly take public transportation, and have a 20-minute visit every week. Patients may
     drop out of the trial and not be compliant—not because they don’t want to, but because they simply
     can’t as a result of this disease. This is not something readily understood within study teams. Even
     with highly qualified people, MDs and PhDs, they tend to look at the scientific needs and aspects,
     and not the human ones as much. This experience changed that mentality and the approach, as well
     as the business.166
17
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Focus on outsourcing                             Outsourcing for manufacturing                        compliant operations as pharmaceutical
                                                 capacity                                             companies carry the overall responsibility
Over the next few years, major
                                                                                                      of oversight. Communication should be
pharmaceutical companies are expected            In 2019, as cell therapy manufacturing
                                                                                                      paramount, and technology can inform
to shift from transactional outsourcing          volumes rise, demand for cell therapy
                                                                                                      better decision making, especially in real
relationships to more strategic, relationship-   manufacturing and related services
                                                                                                      time.180 Advanced technologies, such as
based models for biologics, data-driven          is expected to grow.172 Contract
                                                                                                      AI, machine learning, and the IoT, appear
clinical innovation, and manufacturing           manufacturing organizations (CMOs), and
                                                                                                      to be taking knowledge management in
capacity.167 Also, more companies will likely    contract development and manufacturing
                                                                                                      the pharmaceutical segment to the next
be outsourcing expertise in advanced             organizations (CMDOs) will continue to
                                                                                                      level. Novel visualization tools enable data
technologies, such as AI, robotic and            be to be a strategic and integral part of
                                                                                                      to be interpreted more easily in multiple
cognitive automation, and cloud computing.       the global supply process. The shift to
                                                                                                      dimensions.181
Outsourcing technology providers could           biologics, personalized medicine, and
increase efficiencies, lower costs, and          specialized, often low-volume, small                 Collaborating with new partners for
decrease clinical timelines.168                  molecules is creating a shortage in                  transformation
                                                 manufacturing capacity.173 Only one-
Outsourcing for biologics                                                                             Patients as partners
                                                 third of manufacturing—whether in the
In 2019, biopharmaceutical outsourcing           development stages or after commercial               The digitization and consumerization of
will likely continue to drive sector growth      launch—is estimated to be conducted in-              health care is changing the way patients,
as third-party contractors provide more          house.174                                            providers, and life sciences innovators
external expertise, technology, and capacity                                                          interact. Today, patients are becoming
                                                 In 2019, pharmaceutical companies should
that is unavailable in-house. Companies                                                               partners in the design of their health care
                                                 focus on building more strategic, long-term
are increasingly partnering with academia                                                             experience, and companies should explore
                                                 partnerships with CMOs and CDMOs
and contract research organizations (CROs)                                                            a greater focus on customer experience.182
                                                 to streamline the supply chain—better
for R&D capabilities.169 Biopharmaceutical                                                            The future of customer experience could
                                                 managing capacity, improving efficiencies,
delivery devices, such as prefilled syringes,                                                         become more personalized and patient-
                                                 and minimizing time-to-market.175 CDMOs
could be another outsourcing opportunity                                                              centric using interoperable data and AI.183
                                                 are expanding to become full-service
as drug companies look to make products
                                                 providers and "true partners" that can
that are easier for physicians and patients                                                              In the future, our groceries
                                                 offer a wider variety of capabilities.176
to use.170                                                                                               would be ordered automatically
                                                 Sponsors should evaluate a partner, not
Outsourcing for data-driven clinical             just on technical capability and capacity, but          based on our personal
innovation                                       experience, quality, and reputation.177                 preferences, health status, or
Patient-centricity, risk-based monitoring,       The new vendor relationship
                                                                                                         nutritional needs. While sleeping,
digitization of clinical trials, adaptive                                                                our device or digital assistant
                                                 The relationship between sponsor and
trials, and analytics are all having an                                                                  might determine that the pollen
                                                 vendor is now much more collaborative, and
impact on clinical outsourcing. In the                                                                   count is too high for a morning
                                                 the most effective relationships are built on
future, outsourcing decisions will likely be                                                             workout. The workout and our
                                                 shared understanding.178 Pharmaceutical
influenced by patients’ experiences with
                                                 companies should have an outsourcing                    schedule would be rearranged
vendors and CROs. Vendors that provide
                                                 game plan and predetermined objectives                  with other digital assistants
platforms to effectively integrate data from
                                                 for how vendors can meet requirements.                  finding a time when air quality is
multiple systems into a central decision-
                                                 A broad array of members from cross-
making tool should be in demand. The                                                                     predicted to be better. A refill for
                                                 functional teams should be a part of vendor
need for flexibility in study designs and new                                                            our allergy medication would be
                                                 selection, including project management,
drug supply requirements could influence                                                                 placed and delivered by a drone
                                                 R&D, and quality control.179
decision making, and more outsourcing
                                                                                                         before we even leave the house
work may come to smaller vendors and             Building a close relationship with regular
CROs that have better overall predictive         facility visits should be key to maintaining            in our self-driving car.184
performance analytics.171
                                                                                                                                                       18
2019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences

Patient-centricity means moving beyond                 Patient advocacy groups
engagement and developing a true                                                                          Venture philanthropy:
                                                       As patients’ expectations and demands
partnership with patients—leveraging
                                                       increase, patient advocacy groups in many          Dementia Discovery Fund
patient data and understanding the burden
of disease, the caregiver’s role, access
                                                       disease areas are becoming organized,              (DDF)
                                                       funding research, and having an effect on
decisions, and the health care systems
                                                       the regulatory environment.186 Life sciences       The Dementia Discovery
involved. In addition, a patient-centric
                                                       companies are encouraged to take the first         Fund (DDF) is a public-
approach can help life sciences improve
                                                       step in forming a symbiotic partnership
R&D productivity and may decrease the                                                                     private fund created in
                                                       with patient groups. They could start by
number of patients who drop out
                                                       inviting patients into their research labs and     2015, in collaboration
of studies.185
                                                       facilities and giving them an opportunity to       with the UK’s Department
Elevate the patient experience, from                   meet with scientific teams. These groups
                                                                                                          of Health, the nonprofit
patient engagement to patient-                         could also provide regulatory insights due
centricity                                             to their relationships with the FDA and other      Alzheimer’s Research UK
                                                       regulatory bodies.                                 (ARUK), and seven Big
     1. Digitize the core                                                                                 Pharma companies. Its
        Reimagine the core patient support             Public-private partnerships: The
        and engagement systems and                     changing nature of giving                          scientific advisory board is
        processes to build the foundational
        capability for higher-order initiatives.       Patient advocacy groups, along with
                                                                                                          made up of neuroscience
        Digitize and automate core manual              national disease organizations and venture         and drug discovery experts
        workflows with new digital front-ends.
                                                       philanthropy, fund biomedical research.            from several of its partners,
     2. Focus on patient experience                    Many of these nonprofits are cash-strapped.
        Enable individualized patient journeys
                                                       Funding sources appear to be shifting and
                                                                                                          as well as independent
        and align services, workflows, and
        interactions to those journeys. Refocus        corporate giving is undergoing a transition,       advisers. By applying the
        the digitized processes and systems            threatening the future of biomedical               venture capital model,
        to collect and analyze interaction data        research. Life science companies should
        that enhances the understanding of             pay close attention to these trends. The
                                                                                                          DDF appears to be looking
        patients’ experience on behavioral,
                                                       more philanthropic capital that is put toward      to disrupt dementia
        clinical, and socioeconomic                                                                                  188
        dimensions.                                    discovering the mechanisms of diseases,            research.
                                                       the more opportunity there will likely be to
     3. Make the engagement precise
        Leverage the data from patient                 develop new therapies.187
        interactions for insights and evidence         Regulators as partners
        that inform targeted and proactive
        interventions and encourage                                                                     The future is expected to be trust
                                                       Regulators around the world appear to
        adherence and behaviors that result in                                                          partnerships formed between the sector
                                                       be benefiting from more collaborative
        the desired health outcomes.                                                                    and regulators that optimize the use of
                                                       approaches, such as coregulation, self-
                                                                                                        new technology and ensure more effective
Source: Elevate the patient experience, Deloitte       regulation, and international coordination.
                                                                                                        compliance. We expect to see regulators
Patient Connect, 2018                                  This approach protects consumers, while
                                                                                                        coordinating nationally and internationally to
                                                       simultaneously encouraging innovation.
                                                                                                        handle products and devices for a broader
                                                       In today’s new regulatory environment,
                                                                                                        set of players in the ecosystem—including
                                                       regulatory relationships are seen as
                                                                                                        nontraditional players that have entered the
                                                       increasingly based on a “win-win” data-
                                                                                                        life sciences market.190
                                                       driven approach. The life sciences sector
                                                       appears to now view regulatory functions
                                                       as a strategic asset and are developing
                                                       the skills to effectively collaborate with
                                                       regulators.189
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