The decade from 2014 to 2024 has brought significant changes to the life sciences industry. Pharma went into defensive mode as payers of all types introduced constraints on spend. Companies experienced declining launch returns alongside intense margin pressures. Given the rise in specialty treatments, more patients were navigating complex journeys — driving significant investment into patient support services.

As we look ahead to the next decade, we see a whole new set of dynamics at play, which includes impacts of the Inflation Reduction Act (IRA), as well as blockbusters losing exclusivity, accelerating research and development activities, and growing evidence needs. Other forces of change include rising patient activism and consumerism, expanding metabolic treatments, evolving pricing strategies, and growing opportunities both technological (with advances in generative artificial intelligence) and geographical (as markets outside the U.S. become more important to success).

One thing is certain: What drove success in the decade behind won’t be effective in the one ahead.

In considering the State of the Payer 2024 for emerging biopharmas (EBPs), we have identified three key trends — each with specific takeaways to help in shaping strategies for this brave new world.

Trend #1: Plan for the ‘Modern Launch’

IQVIA analysis found that from 2014 to 2023, the median annual cost of treatment at launch went up by 84% for non-oncology orphan treatments and 191% for oncology treatments. This finding reflects companies’ changing pipelines and focus on narrower patient populations. It also illuminates why payers keep increasing controls to mitigate spend.

As we studied brand launches, 2020 emerged as a turning point in terms of launch strategies and performance. Across nearly all therapeutic categories, post-pandemic launches consistently underperform pre-pandemic trends. While payers used to control costs more heavily at launch, they’re now limiting access gains into subsequent years, too. As a result, average launch efficiency decreased 12% from 2018 to 2023. In some cases, manufacturers are stepping in as primary payer to get a patient on therapy — fully subsidizing as much as 90% of demand! In this new world, Modern Launch windows are 18 to 36 months, suggesting that brands need more time to gauge launch performance.

How EBPs can adapt to the Modern Launch:

• More than 75% of launches are missing their first-year forecast — suggesting an urgent need to reassess launch forecasting.
• A longer launch means that investment needs to accelerate or to be maintained at higher levels for a longer period. EBPs need to be prepared to launch twice as fast or take twice as long.
• Markets and prescribers are getting sensitized to large and generous manufacturer support programs. EBPs should plan to provide high levels of patient support while in launch mode.

Trend #2: Obesity is shaking the market

Obesity is poised to become a top-five global market with a profound effect on spending across multiple areas. The first cohort of treatments has transformed the fortunes of Lilly and Novo Nordisk — propelling them to #1 and #2, respectively, in market capitalization. Longer-term impacts are still taking shape. For now, payer control is high in managing GLP-1 treatments. At the same time, more competition will be entering the market — creating downward price pressures and a proliferation of options for consumers.

For patients with obesity, there is a direct correlation between age, body mass index (BMI), and the number of comorbidities. That means there will be profound effect on many classes of drugs as treatment expands to more patients. In the short term, more patients seeking weight-loss treatment could increase diagnosis of other diseases, driving demand for other therapeutic areas. But over the next decade, patients being treated for obesity could lead to lower demand for drugs in therapeutic areas like diabetes, cardiovascular disease, immunology, oncology, and kidney disease.

What all brands can learn from the GLP-1 launches:

• Consumerism drove significant demand. Tapping into consumer motivation can drive early patient volumes — making patient awareness and advocacy keys to success.
• Obesity treatments have direct and indirect impacts on many therapeutic areas. In the short term, overlapping comorbidities can create tailwinds. But over the long term, obesity treatments will create headwinds.
• Healthcare providers who embraced GLP-1s are demonstrative of early adopters of a modern launch. EBPs should understand who is adopting and where to gain insights into prescriber behavior and promotional influence.

Trend #3: Margin challenges are expanding

A decade ago, retail branded drug gross margins were around 70%; as of 2022, the average was nearly halved to just 37%. There are many contributing factors beyond payer control and rebate pressure. Industry wide, copay offset costs have doubled since 2018, with pharma spending $23.1 billion on copay cards and debit costs in 2023. The 340B program continues growing at a double-digit rate, as many hospitals and health systems are dependent on cashflow from it. Meanwhile, IQVIA modeled the impact if the IRA had been in effect when the 10 drugs selected for MFP first launched. For Enbrel alone, the IRA would have shaved nearly 14 years of economic life. As more drugs are selected for MFP, expect pricing pressures to grow amongst commercial payers due to the spillover of negotiated prices once they become public.

How EBPs can adapt to growing margin pressures:

• As large pharma feels margin pressure, it increases their appetite for mergers and acquisitions. That’s especially true when they miss Wall Street’s expectations.
• Get smart about the impact of the IRA and Medicare Price Negotiation. Since EBP exclusions can be negated if acquired by large pharma, royalty pricing strategies become more important. Across the board, EBPs need to be ready to transition launch price strategies to lifecycle price strategies.
• Stay attuned to macrodynamic trends. Although some economic shifts may not directly influence decision making, they can have significant indirect influences on the life sciences environment.

Will EBPs fall victim to the new market realities — or create the strategies that lead to success in this brave new world? To learn more about how to thrive in the coming decade, watch the replay of the webinar, EBP Master Class: State of the Payer 2024 – Dawn of a New Era.