2021 may trigger investments in digital business models focusing on the long term
For some pharma companies, manufacturing and distributing a COVID-19 vaccine will be the primary focus in the next several months. But companies in all industries, including life sciences, are already focusing on the capabilities they will need beyond the pandemic. Digital is leading the way.
In an EY election survey of 500 C-level executives, 54% of executives cite digital transformation as a top priority regardless of any potential policy changes resulting from the election.
The pandemic has already helped test and speed the adoption of digital tools across the pharma industry, ranging from customer relationship management to virtual employee meetings and work-from-home arrangements. At the same time, life sciences companies have responded to this potential disruption with their own exploratory programs, using artificial intelligence (AI) and other digital tools to improve or optimize clinical trial management and commercialization.
Many of the changes experienced during the pandemic may continue post-pandemic, as these digital experiments have shown that productivity has not been hampered and, in fact, it may have increased.
Securing the supply chain remains a priority
Supply chain resiliency and the push for onshoring were already issues before the pandemic, given changing global trade dynamics that spurred a push to make the US less dependent on active pharmaceutical ingredients (APIs) manufactured overseas. The pandemic underscored this issue as borders closed, further hampering movement across global supply chains.
In the election survey, 64% of all executives say they would consider acquiring or building more domestic production if there were continued focus on onshoring of production.
For life sciences companies, re-shoring the supply chain will have a material impact across the full range of the enterprise, with capital-intensive investment in new or retooled facilities and a domino effect on tax, pricing and compliance, as well as regulatory approvals.
One thing that life sciences companies should watch for is whether the new administration and Congress will provide financial and tax incentives to help support any reshoring.
Onshoring could be a key area to focus capital allocation and one that could pay off in the long term, depending on the incentives or penalties imposed. In fact, in the election survey, mid-size companies overall see onshoring as a potential boon. Business leaders at companies earning between $1b and $5b in revenue (58%) are more likely than businesses surveyed overall (35%) to say that federal policies designed to increase domestic onshoring will have a positive impact on their company’s profitability.
Look for pressures around the drug pricing, reimbursement and coverage
The price of prescription drugs will continue to be a priority for the new administration. The potential for new regulatory activity will put pressure on life sciences companies in therapeutic areas with high-priced medications. During the campaign, President-Elect Biden supported concepts similar to the Trump administration’s “Most Favored Nation” proposals. Expect increased discussion related to access to outcomes and utilization data, state-level activity and managing through rebates that will enhance the value of outcomes on top of the FDA’s “safe and effective” approval. Another thing to watch for in 2021 will be a SCOTUS decision on the integrity of the Affordable Care Act, which could lead to loss of coverage of over 20 million Americans, with downstream implications on medication adherence and loss of revenue.