2016 Pharma Predictions

Dec. 17, 2015
The pharmaceutical industry will experience continued uncertainty as more companies continue to merge and as election candidates take sides

Ushering in a New Year calls for reflection and prediction, and pharma is no exception. Hard on the heels of a restless and historic 2015, the industry will experience more uncertainty as companies merge and as election candidates take sides. Fasten your seatbelt — 2016 is going to be another bumpy ride. Here are the top five trends we expect.

While Turing and Valeant have borne the brunt of public scrutiny on price gouging, all manufacturers can expect careful product value examination from the media and government alike. Oncology drugs and specialty pharmaceuticals will face even more thorough investigation, as Congress and presidential candidates put laser focus on increasing demand and high costs.
Fallout from the scandals will also trickle down from manufacturer surveillance to extended oversight of pharmacies and distribution channels. Reuters has reported that prescription drug benefits managers at CVS Health, Express Scripts and Optum Rx called it quits with numerous specialty pharmacies, some of whom have already countered with lawsuits.

The three biggest wholesalers (Cardinal, McKesson and ABC-Walgreens) will seek more channel control to keep costs manageable and increase efficiency in drug delivery.

From Celgene/Receptos to Allergan/Teva, 2015 was a banner year for pharma M&A. 2016 will bring similar plot lines and more landmark deals (Pfizer/Allergan is already inked), but arrangements will evolve in size and shape. Big Pharma will search for new avenues to increase profit through tax inversion. 

Cost-cutting initiatives will also continue, as struggling companies avoid becoming easy targets for acquisition. GSK’s development center closings and Baxalta’s bid for Ariad are two major examples from 2015; they’re likely to be repeated by other manufacturers in 2016.

Expect more shedding of non-core business units to reduce expenses and drive profitability. Sanofi, for example, hasn’t been secretive about its desire to sell its profitable animal health outfit, and others will follow suit. Branded companies will extend their generic portfolios; generics manufacturers will buy branded products. Like the Allergan/Teva deal, the lines that once defined “who offers what” will be blurred and reshaped.

At 2016’s year end, the list of the top 25 pharma companies will look much different than it does now.

The discord in provider and manufacturer philosophy — cost of drugs versus effectiveness of drugs — challenges manufacturers to bring powerful yet expensive products to market. As such, 2016 could be the year drugmakers deploy new outcomes-based strategies.

Risk-sharing agreements have gained traction, especially in Europe. Moving from theory to application, a few manufacturers will likely select one or two products critical to their business specialty and attempt a risk-sharing agreement, but validating a drug’s effectiveness will prove difficult. If test cases go well, these payment models could expand in the next three to five years.

Given the unending controversy over Obamacare and the candidates’ disdain for the industry, a spotlight will remain on pharma throughout the election year.

The government will roll out a number of regulatory updates, starting with AMP Final Rule. Manufacturers have been waiting for direction on how the calculation will work and what action they’ll need to take; nearly five years later, the rule is finally under review with the Office of Management and Budget. One thing is certain: There will be lawsuits as a result. Other regulatory changes the election will affect include the 340B Mega Rule, which could reduce discounts and expand conditions included in the program, as well as the N-class drugs.

There’s only one prediction that’s guaranteed in pharma: Change is constant. Complexity is greater than ever, and with so much at stake for providers, patients and elected officials, 2016 stands to dramatically change pharma as we know it.

Jon Brier is a Product Manager at Revitas, Inc. and has been with the company for more than 15 years. Revitas is the leading provider of enterprise-class solutions for channel and contract management, on premise and in the cloud. Revitas solutions enable organizations to accelerate revenue through diverse, multi-level sales channels and attain maximum value from contracts. For over 25 years, Revitas has empowered companies in channel-intensive industries to achieve best-in-class performance and sustainable competitive advantage. For more information, please visit www.revitasinc.com.

About the Author

Jon Brier | Product Manager

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