Finding the Right Mix for 2018 Bio/Pharma Success

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology-01-02-2018, Volume 42, Issue 1
Pages: 14–16

Will business decisions and drug pricing policies help or hinder science and drug approval advances in 2018?

Uncertainty was the theme for the bio/pharma companies at the start of 2017 as the industry waited to see how the political agenda of the incoming Trump administration would affect healthcare reform, drug pricing, R&D investment, and regulations.

In the ensuing 12 months, the industry witnessed a record number of drug approvals including the first gene therapies and a digital pill, a new commissioner at FDA, a major overhaul to US corporate tax structure, and the announced move of the European Medicines Agency to Amsterdam. Unfinished business-open questions about the fate of the US healthcare system, an unresolved federal budget, and ongoing debate over drug pricing-have extended the air of unpredictability into 2018.

Despite bio/pharma’s strong emphasis and success in science and technology, financial and policy questions may be the dominant factors in the outlook for 2018.

Politics, taxes, and drug prices

Efforts to replace the Affordable Care Act (ACA) failed in 2017; only one component-the individual mandate-was repealed as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The future funding for Medicaid and children’s health programs remained uncertain at the beginning of 2018.

A reduction in the number of insured patients could translate into a drop in drug sales. The Congressional Budget Office estimated that by 2027, 13 million fewer people would have insurance coverage if the mandate were repealed, potentially reducing the number of patients seeking prescription or generic drugs (1).

Thanks to the overhaul of the tax system enacted in late December 2017, US-based bio/pharma companies started 2018 with a sharp reduction in the corporate tax rate, lower taxes on income earned abroad, and simplified rules for expensing new investment purchases. On the negative side, the orphan drug tax credit was reduced from 50% to 25% of qualified research and clinical testing activities.

While lower tax bills may help fill bio/pharma company coffers, the debate over the high cost of drugs remains a threat to profitability. A 2017 survey by PwC’s Health Research Institute (2) found that, in general, bio/pharma executives recognize that the industry has a drug pricing problem. Executives are split, however, as to how-or if-the problem should be addressed.

The survey assessed opinions of executives from pharma and insurance companies on drug prices and value-based payment models; 45% of the respondents expect the Trump administration to accelerate downward pressure on drug prices. More than half of the respondents (54%) thought new federal or state drug pricing laws were very or somewhat likely to be enacted.

Respondents were equally split (44% responding “yes,” 44% responding “no”) on the question: Do you think the industry should consider limiting the growth of drug prices during the next fiscal year? However, more than half (53%) said their organization was not considering limiting the growth of drug prices during the next fiscal year; only 23% said their organization was considering limits to growth of drug prices.

The PwC report explored the potential of value-based contracts: a drug’s price is set based on how it performs in real-world settings versus the current approach of basing pricing on data collected during controlled clinical trials. Successful therapies would create rewards; drugs that did not perform may result in reimbursements to patients.

Pharma and health industry executives surveyed expressed enthusiasm for value-based contracts; however, participation is limited. Only one-quarter of the surveyed pharma executives reported that their organizations had participated in a value-based program; however, 80% of those that participated said the contracts were successful. More than one-third (38%) said the potential rewards of a value-based contract were worth the risks.

Value-based pricing models face a number of operational hurdles, including the lack of measurable outcomes regulatory questions, data sharing, and establishing agreement on performance metrics. The value for the patient must also be assessed.




Cost of innovation

Although promising platforms such as gene therapies are emerging, the challenge for bio/pharma is to develop these platforms in an efficient way to create “near-term value for all stakeholders,” according to the authors of Deloitte’s annual study on industry return on investment (3).

The report--based on analysis of estimated return on investment from late-stage pipelines of 12 large-cap biopharma companies--noted that projected R&D returns continued to decline from 10.1% in 2010 to 3.7% in 2016 and 3.2% in 2017. The average cost to bring a drug to market continued to increase from $1.188 billion in 2010 to $1.992 billion in 2017.

Innovation appears to be on the upswing, however, particularly in the biologics drug arena. FDA’s approval of the first gene-therapy drugs and the rebound in the number of new molecular entities approved (46 in 2017 compared with 22 in 2016) are signs of payoffs for research efforts.

Analysts at Evaluate Pharma (4) note that such scientific breakthroughs improve the lives of patients, and can richly reward the drug’s creators. They also credit FDA’s efforts to speed approvals of new therapies and generic drugs.

Recent successes and the implementation of the US tax cuts may spur renewed investment and acquisitions in 2018. The successes need to continue, however, to keep investors interested in the market. The bar for success is set high with rapid progress during the past few years, Evaluate Pharma reports, and disappointments would remind investors that in biopharma, “failure is a fact of life.”

Gottlieb outlines FDA 2018 policy goals

Reducing the number of regulations was a key component of the Trump administration’s 2017 agenda. FDA Commissioner Scott Gottlieb (1) noted the agency must recognize “when scientific innovations warrant new, more flexible regulatory approaches in order to make sure advances in care can reach patients.” To accomplish this, he wrote, the agency must “continually adapt our regulations to enhance efficiency, improve our effectiveness, and update old and out-of-date requirements.”

Planned 2018 regulations for drug compounding facilities would clarify which drugs may be compounded and promote more efficient, streamlined manufacturing standards, while ensuring safety and quality measures. Another proposed rule would establish national standards for the licensing of prescription drug wholesale distributors and third-party logistics providers, as part of track-and-trace requirements.

Clearly defined standards must not place unnecessary burdens on regulated companies, Gottlieb wrote, and should reflect the latest science. Outdated rules will be removed, he noted, singling out “an outdated inspection provision for biologics and outdated drug sterilization requirements to remove barriers to the use of certain sterilization techniques.”

The agency also faces 2018 deadlines associated with the 21st Century Cures Act including drafting guidance documents for patient-focused drug development; reporting to Congress on standards for advanced regenerative therapies, compliance activities, and hiring authority or scientific, technical, and professional personnel; and holding public meetings on the qualification of drug development tools.

A key deadline-Nov. 26, 2018-looms for bio/pharma companies to comply with requirements for product identifiers and verification in accordance with the US Drug Supply Chain Security Act.


1. Congressional Budget Office, “The Bipartisan Health Care Stabilization Act of 2017 and the Individual Mandate,” (Nov. 29, 2017).
2. PwC, Launching to Value: Pharma’s Quest to Align Drug Prices with Outcomes, September 2017.
3. C. Terry and N. Lesser, A New Future for R&D?, Deloitte, 2017.
4. A. Brown, E. Elmhirst, J. Gardner, EP Vantage 2018 Preview, Evaluate Pharma, December 2017.
5. S. Gottlieb, “Looking Ahead: Some of FDA’s Major Policy Goals for 2018FDA Voice, Dec. 14, 2017,

Article Details

Pharmaceutical Technology
Vol. 42, No. 1
January 2018
Pages: 14–16


When referring to this article, please cite it as R. Peters, " Finding the Right Mix for 2018 Bio/Pharma Success," Pharmaceutical Technology 42 (1) 2018.