1、Driving resiliency2024 Global Life Sciences Sector Outlook2ContentsIntroduction 3Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios 5Extracting value from Generative AI and emerging technologies 17Pricing pressures rising globally,threats of impacts on R&D
2、innovation worldwide 31Accelerating speed of time to value in R&D 48Shifting trends in openness:Globalization vs.localization and impacts for multinational companies 60Achieving better patient outcomes with personalized experiences and shared decision-making 75Contacts 90Learn more 92Endnotes 943Int
3、roductionIntroductionWith the global pandemic firmly in the rearview mirror,life sciences companies are looking at key macro-and micro-economic drivers to guide their future growth.While the list of trends with wide-ranging global impact is broad,in this year,life sciences enterprises are paying par
4、ticular attention to those more disruptive trends including increasing pricing pressures and changes in United States regulation,the acceleration of Generative AI(GenAI)adoption and impact,the geo-political environment,and as always,breakthrough science and outcomes.Companies are exploring how the e
5、volution of GenAI can impact their operations and determining where to focus first and how to generate differential value.The potential of advanced technologies and these collaborations are directly integrated with life sciences companies overall efforts to improve patient outcomes and inform their
6、R&D decisions.Companies are looking to the potential of GenAI to bring more value across the boardboth in terms of cost reduction and revenue uplift.GenAI and other AI technologies,coupled with digital transformation tools,are poised to increase overall efficiencies and process innovation across man
7、y areas of the life sciences value chain.A top 10 biopharma company with an average revenue of US$65-75 billion could capture between US$5-7 billion of peak value by scaling the use of AI over 5 years.1 The promise of AI and GenAI is expected to yield new partnerships in the rest of 2024 as large co
8、mpanies look to obtain technological capabilities,secure industry talent,and drive competitive advantage.In the coming year,pharma companies will be finetuning strategies to create top-line value through strategic acquisitions with a cautious but active mergers and acquisitions(M&A)and capital envir
9、onment expected as inflation is expected to lessen and interest rates likely stabilize.An active acquisition market may also offset loss of exclusivity patents,which could cost life sciences companies more than US$200 billion in revenue.2 However,when it comes to M&A,companies should continue to exp
10、ect regulatory scrutiny over antitrust concerns.Partnerships and collaborations in conjunction with AI and GenAI are also driving new trends in accelerating the speed of time to value in R&D.With ongoing regulatory changes,pricing pressures,and loss of exclusivity in 2024,companies will need to harn
11、ess the power of innovation3 and leverage the potential of AI and GenAI to demystify complex disease biology,expedite drug discovery,cut study timelines,revitalize the clinical trial experience,and improve regulatory success.Leading biopharma companies are already adopting new AI/GenAI technologies
12、and other data innovations across the value chain,while forming new partnerships,collaborating early with regulators,and outsourcing for cost and time savings.Pharmaceutical trade started to rise in the third quarter of 2023,4 and the global market for pharmaceuticals is expected to reach almost US$
13、1.2 trillion in 2024.5 During the pandemic,trade and supply chains were vital to increasing the production and distribution of medical supplies and vaccines,6 however,in the past two years,global trade is noticeably more concentrated and geopolitically closed.This means major markets are increasingl
14、y relying on a smaller pool of trading partners7 with attempts to protect and build local markets on the rise.As such,multinational corporations(MNCs)are lobbying government officials to find ways to temper the blow of export controls.8 MNCs are also working with governments to address drug pricing
15、and value,which continue to come under scrutiny as pricing pressures are being felt globally.9 While less-developed countries have voiced concerns over the unaffordability of medicines for decades,developed-world concerns around drug pricing are now pushing unaffordability to the top of the global h
16、ealth agenda.10 In the rest of 2024,government-mandated pricing pressure and controls are expected to play an increased role in the affordability and accessibility of certain medicines.11 4All of the above efforts underscore the foremost area of focus for life sciences companies:delivering better ou
17、tcomes for patients.Companies have been focused on directly and indirectly improving patient experiences with the intent of ultimately improving their health outcomes.The data are bearing that out.Life sciences executives surveyed by Deloitte US believe that the leading action their organizations ne
18、ed to take in 2024 is“improving the patient experience,engagement,and trust.”12 With personalized care and treatments supporting better experiences,biopharma and medtech companies are exploring the many opportunities to improve touchpoints throughout the patient journey.13 This includes a proactive
19、and predictive approach to what patients need.14 And as the process becomes more digitally enabled and personalized,it is also expected to become more“straightforward”and seamless.All of this will be to the benefit of patients and their long-term outlook.In this outlook we examine what we see as dis
20、ruptive trends like the impact of Gen-AI,the growth of the obesity market and treatment with GLP-1s,the IRAs first full year of impact as well as those trends which are more evolutionary in naturelike the continued complexity around navigating globalization in an uncertain geopolitical environment o
21、r the continue advancement of more personalized patient experiences.With geopolitical,economic,and regulatory landscapes still proving uncertain,life sciences will likely need to continue relying on innovation,agility,and collaboration as they build on their strong commitment to bettering the lives
22、of patients.1.“Realizing Transformative Value from AI&Generative AI in Life Sciences,”Deloitte,April 2024.2.Ibid.3.“Unleash AIs potential:Measuring the return from pharmaceutical innovation 14th edition,”Deloitte,April 2024.4.United Nations UNCTAD,“Global Trade Update,”December 2023.5.Statista,“Phar
23、maceuticals Worldwide,”accessed 9 April 2024.6.Kristalina Georgieva,Ngozi Okonjo-Iweala,“World Trade Can Still Drive Prosperity,”International Monetary Fund,June 2023.7.United Nations UNCTAD,“Global Trade Update,”December 2023.8.Alex Capri,“China decoupling versus de-risking:Whats the difference?”Hi
24、nrich Foundation,12 December 2023.9.Ibid.10.“The global battle over high drug prices,”The Economist,21 May 2019.11.Deloitte analysis 12.Deloitte analysis2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios 5Cautious op
25、timism in 2024The economic and geopolitical climate will likely continue to impact decision-making in 2024.Over the past year,life sciences and medical technology(medtech)companies have been managing inflation,rising interest rates(which can curtail access to capital),and slower economic growth.Howe
26、ver,in 2024,inflation seems to be lessening,rates appear to be stabilizing,if not dropping,and growth is likely to be moderatesetting up a cautious,but still active mergers and acquisitions(M&A)and capital environment.M&A activity collectively in biopharma,platforms,medtech,and diagnostics was brigh
27、ter than many expected in 2023with 254 M&A deals and US$209.8 billion in total announced valueeclipsing 2022 figures of US$143.5 billion.1 The overall sector fared better than the overall M&A market where US and global total deal value across all sectors fell 11%and 18%respectively,compared to 2022.
28、2Valuations grew for life sciences companies in most stages of their life cycles over the past year.In 2024,pharma companies will be finetuning strategies to create top-line value with strategic acquisitions,while also planning for long-term bottom-line improvements,including divestitures and cost r
29、eductions.While glucagon-like peptide 1(GLP-1)obesity drugs have been a boon for pharmaceutical companies,their rise,along with macroeconomic headwinds,are creating uncertainty for medtech valuations,which were down US$300 million in 2023.However,fundamentals are strong,and medtech leaders are bulli
30、sh on growth in 2024,given the improving supply chain situation.Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios6M&A:Crea
31、ting momentumPharmas megadeals put buying power on displayA primary driver of strength in 2023 were large/mega cap pharmaceutical companies with undeployed capital(figure 1).3 Dealmakers are paying healthy premiums for assets with high commercial potential with oncology being the strongest therapeut
32、ic area attracting investment.4 The top 10 megadeals closed in 2023 were each worth more than US$4 billion,led by multibillion dollar deals by Pfizer/Seagen(US$43 billion)and Bristol Myers Squibb/Karuna Therapeutics(US$14 billion).5 A number of the leading acquisitions involved medicines either near
33、ing regulatory approvals or in advanced testing.6In 2024,companies should continue to expect regulatory scrutiny for a variety of investment activities.To facilitate the Pfizer/Seagen deal and address antitrust regulators concerns,Pfizer agreed to donate the rights of royalties from sales of cancer
34、drug Bavencio to the American Association for Cancer Research.7 At the end of 2023,the US Federal Trade Commission(FTC)also settled its Amgen/Horizon Therapeutics acquisition challenge.8 Daniel OConnell,CEO,AcumenOver the next year,some big pharma companies will continue to look to M&A to plug portf
35、olio gaps as a result of loss of exclusivity(LoE)across various therapeutic areas.In particular,late-stage development/early-stage commercial assetsthat could contribute material revenue growth over the next few yearsare expected to be attractive targets.9Figure 1.2023 M&A deal characteristics in li
36、fe sciences by buyer groups“Blockbuster and mega blockbuster product opportunities are getting the most attention in M&A,and that will likely continue over the course of 2024.Once the best late stage assets are picked upwe should start to see more partnering and M&A for earlier stage assets,as there
37、 is a lot of interest in accessing new product growth opportunities.”Small/mid-capPharmaceuticalsMedTech&diagnosticeCRO/CDMO/supplierLarge/mega capPrivate equityPrivate strategicStrength in cell and gene manufacturing and supportive AI tools for biological drug develop-mentConsiderable investments i
38、n products used in protein-based drug therapy developmentSignificant capital deployed into both CROs and CDMOsSmall asset acquisitions of life sciences suppliersGeographic expansion inorthoperdics and consolidateplay in spineTuck-in deals across various therapeutic areas,including neurovascular,diab
39、etes,and spineMinimal activityLarge transaction in interventional urology;otherwise,limited tuck-in activityPre-clinical oncology;milestone payments arecommon,contingent oncommercialization+regulatoryAcquisitions of companied with approved oncology assets,particularly in the ADC spaceDriven largely
40、by one acquisition in the antibiotics space seen as a platform for further growthAcquisitions of approved and late-stage rare disease assetsSource:Deloitte analysisTotal deal value$5B2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and sh
41、ifting portfolios 7Successful acquisitions may offset LOE patents for large pharmaceutical companies.Between 2022 and 2030,pharma companies will likely lose more than US$200 billion in revenue from the anticipated tectonic patent cliff.10 Pfizer,which faces US$17 billion in potential LOE between 202
42、5 and 2030 and significant undeployed cash on their balance sheet from their COVID-19 portfolio,closed the largest M&A deal for biopharma in 2023.In its US$43 billion deal to acquire Seagen,Pfizer gained a market leader in antibody-drug conjugate technology to strengthen its position in oncology.11
43、Pfizer projects an increase of US$3.1 billion in 2024 for top-line growth directly from the deal as well as bottom-line improvements over the long-term plan(figure 2).12 Figure 2.Pfizers long-term plan to strengthen top-line growth after acquiring Seagen(illustrative)Pharma M&A strategy highlight:Of
44、fsetting loss of exclusivity(LOE)with new acquisitions2025 Potential Non-COVID Revenues excluding BDUS$52B122-25 CAGR 6%with new launchesNew launchesUS$84B25-30 CAGR 10%US$70B25-30 CAGR 6%US$17B2US$20B3US$25B4US$XB52025-2030 Potential LOEs2030 Potential Non-COVID Revenues from Launches through H1 20
45、242030 Potential Non-COVID Revenues from BD Deals2030 Potential Non-COVID Revenues from Additional Internal Pipeline2030 Potential Non-COVID Revenues(at different CAGR rates)Source:Pfizer,“Pfizer Invests$43 Billion to Battle Cancer,”March 13,20232024 Global Life Sciences Sector Outlook|Value creatio
46、n:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios8Pharmas near-term divestures/cost reductionsThe immediate term may look bleaker as multiple pharma giants announce divestitures and cost reductions1314including some work force cuts.Pipeline assets may be sold to other
47、big pharma companies,while others sell to smaller companies and retain minority stakes.Given a few high-profile successes,this trend is likely to continue in 2024.15 As a result,freed-up capital may be deployed into accretive transactions.16 While cautiously optimistic for 2024,17 many experts expec
48、t that deal volume and value will pick up over the next year.18 Medtech returns to growth after 2023 divestituresWhile pharma M&A activity was a bright spot in 2023,medtech and diagnostics M&A was not as strong.Over the past year,activity declined across M&A and venture,but the decline was not unexp
49、ected as medtech companies focused primarily on portfolio rationalization,divestitures,and cost transformation.19 According to Deloitte US research,divestitures are being used to reduce debt and improve capital structures,generating improved balance sheets.20 Total deal value decreased nearly 45%yea
50、r-over-year to US$13.5 billion,while deal volume actually accelerated.Some stakeholders continue to be optimistic about deal volume in 2024,21 with companies targeting smaller deals in the US$200 million to US$800 million range.22 Regulators are also scrutinizing medtech deals.A protracted battle wi
51、th regulators led to Illumina divesting its interest in Grail at the end of 2023.23 Medtronic scrapped a US$738 million deal to buy South Korean-based EOFlow,an insulin patch-pump maker.24 In 2024,M&A is poised for a positive inflection point for improved activity as strategics and private equity al
52、ike re-enter the acquisition fold.M&A activity from medtech mega-cap players is likely to include high-growth small/mid-cap companies as well as emerging companies with interesting technology that could disrupt existing businesses.23 Optimism is also being propelled by digital therapeutics and at-ho
53、me diagnostics,growing use of biometric diagnostics,and speed to market.24 Private equity:Megadeals and tougher fundraising environmentMore going private More sponsor-backed companies may decide to go private instead of languishing at a below-IPO stock price in 2024.27 Private equity(PE)investments
54、in life sciences peaked in 2021 with 695 PE transactions totaling US$127.5 billion.28 The space includes biotech and medical device companies as well as providers of related tools and services,like contract research organizations(CROs).29 Volume of P&E deals soars for life sciences suppliersPE conti
55、nues its interest in life sciences suppliers,deploying more than US$10 billion in capital into contract development and manufacturing organizations(CDMOs).M&A deal value across CROs/CDMOs/suppliers has jumped nearly 85%year over year to US$28.3 billion,while volume is up 50%.CDMOs are expected to at
56、tract more PE interest in 2024 and beyond as the need for highly specialized manufacturing facilities continues to increase.30 Tougher fundraising environmentNotable PE megadeals in 2023 included the US$7.1 billion privatization of biopharma CRO Syneos Health and the acquisition of veterinary drug m
57、aker Dechra Pharmaceuticals by Swedens EQT for about US$6.1 billion,one of the biggest UK PE deals in 2023.31 However,while EQT has been very successful in fundraising over the recent years,they are looking for new sources of capital,like private wealth,in a tougher overall fundraising environment.3
58、2 2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios 9Venture capital:Billion-dollar fundraises amidst biotech challengesLife sciences dealmaking in the startup space continues to decelerate after experiencing record
59、 highs in 2021 but is still above pre-pandemic levels.Venture capital(VC)remains active and resilient compared to many other fields,33 and six funds that closed in the second half of 2023 now have more than US$6 billion to deploy into new investments in 2024.34 A notable development to kick off star
60、tup investing in early 2024 is a US$3 billion raise by biotech creator Archa multibillion dollar deal that comes roughly two years after raising a similar amount.35 The pace of biotech IPOs stalled in 2023 with only 19 drugmakers pricing initial share sales.36 Many experts are cautiously optimistic
61、for 2024,and some anticipate a roller coaster year.37 Six IPOs kicked off 2024,however,including a US$93.8 million deal for gene editing startup Metagenomione of the rare biotech companies to go public recently without a drug already in clinical trials.38 Biotech also hit a 10-year peak for bankrupt
62、cies with 18 companies filing for protection,preceded by 8 in 2022,and the next highest year in 2014,with 7.39 Three companies already filed in early 2024,Humanigen,Athersys,40 and Invitae(which is preparing for sale).41 Partnerships and collaborations:Expanding capabilities in tech and R&DIntegrati
63、ng AI/ML Representing a broader industry transition,there is a growing focus on precision medicine and personalized therapies that leverage advanced technologies,like artificial intelligence(AI)and machine learning(ML).42 The promise of AI is expected to drive additional new partnerships in 2024 as
64、large companies look to obtain new technological capabilities,secure industry talent,and drive competitive advantage.Several AI-based drug development partnerships were signed in Q3 and Q4 of 2023.43 The Verge Genomics/Alexion(AstraZeneca Rare Disease)collaboration is worth US$42 million up frontcon
65、sisting of a fee,equity,and near-term paymentsand the potential for US$840 million in downstream royalties.44 The collaboration will use CONVERGE,Verges AI-enabled approach for identifying novel drug targets for rare neurodegenerative and neuromuscular diseases.45 AbbVie made an upfront payment of U
66、S$30 million with potential milestone payments and royalties to AI/ML company BigHat Biosciences to commence an antibody research collaboration in oncology and neuroscience.46 Medtech companies continue to explore strategic collaborations across the health care ecosystem to leverage AI.GE HealthCare
67、 recently signed a US$44M contract with BARDA to develop AI-augmented ultrasound technology.A partnership was also formed with Mayo Clinic for innovation in medical imaging and theranosticsto enhance precision diagnosis and improve patient treatment using multi-modal data,AI,and digital health solut
68、ions.Medtronic partnered with NVIDIA and Cosmo Pharmaceuticals to integrate NVIDIAs AI technologies into its GI Genius intelligent endoscopy module.Theyve also partnered with IBM Watson Health to develop AI tools for the diagnosis and treatment of heart disease.R&D picking up steam and a multibillio
69、n-dollar dealLoE is also driving market leaders to various types of partnerships.The top 20 highest value licensing,collaboration,and partnerships deals in 2023 were each worth at least US$1 billionthe total reaching about US$75 billion already by Q3 2023with the largest transaction having a potenti
70、al value of US$22 billion.47 Half the deals in the top 20 list for 2023 were around oncology assets and technology platforms,followed by cardiology and neurological diseases.In the booming area of antibody-drug conjugates,Merck and Co.and Daiichi Sankyo came together in a US$5.5 billion deal that ha
71、s a potential lifetime value of US$22 billion.48 The deal was the largest in a decade and unusual in that it involved a US$4 billion upfront cash payment.Daiichi Sankyo will retain rights for Japan,and the two giants will collaborate globally to develop candidates in other markets.49 2024 Global Lif
72、e Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios10In 2024,biotech companies with strong late-stage pipelines are ripe for acquisition and seeking exits.50 But many small to mid-cap biotech companies facing a cash crunch are also
73、looking to acquisitions,while a record number go bankrupt.51 Partnerships are a growing trend and may be an alternative to M&A to boost values in 2024.New sources of capital:Partnerships and strategic collaborations as alternatives to M&A for biotechTighter capital markets for small and midsize biot
74、ech companies in 2023 required many companies to find alternative ways of financing,including cutting costs and private investment.IPOs and public markets cooled,and venture funding investment was lower than in 2022 but still above pre-pandemic levels.At BIO Europe in late 2023,pharma companies made
75、 clear that substantial funding will be available for early-stage investment.However,biotech companies are still cautious and uncertain about how readily accessible funds will be.52 Addressing challenges with creativity and resourcefulnessBiotech companies are increasingly looking at partnerships an
76、d other creative collaborations as an alternative,or precursor,to M&A.The length of time to get regulatory clearances can be especially challenging,and many small to midsize biotechs have shorter cash runways for 2024 than in the past.In addition,prior to M&A,alliances and joint ventures may be used
77、 to demonstrate the viability of the business proposition,leaving regulators more comfortable with the arrangement.53 Reaping the benefits of partnerships and strategic collaborationsSome substantial benefits may be gained via joint efforts to acquire or have access to:New assets,like innovative sci
78、ence,platforms,and patents New capabilities and resources,like expertise,manufacturing,commercialization for large-scale indications,established infrastructures globally,and advanced technologies,e.g.,AI New markets and patient populations Ecosystem-wide synergies and gap funding through public/priv
79、ate partnerships A trusted relationship that builds a pathway to future M&ATo find a symbiotic collaborator,companies need to first critically assess fit,complementary skills/resources,and the values/benefits that bring each partner to the table.But even when fit is determined and the deal has been
80、structured and negotiated,the real work begins.“Small to midsize biotechs may underestimate the resources and effort a partnership will take.When you have a limited resource base to start with,there are not a lot of departments to hand these things off to.Also,companies shouldnt underestimate the wo
81、rk it will take to build trustand to stay true to the principles that were the basis for partnering in the first place,”Renee Aguiar-Lucander,CEO,Calliditas Therapeutics2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfol
82、ios 11New sources of capital:Public/private partnerships for biomedical innovationWith tightened funding in the private sector,some companies find that government funding can become gap funding.COVID-19 provided an exemplary model for how governments can work with collaborators to advance care and t
83、reatment for all diseases,and,contrary to popular belief,government and nongovernmental institutional investment in biomedical areas does not reduce private spending on R&D.56 Beyond the pandemic,governments may continue to move disruptive ecosystem-wide solutions for biomedical innovation by:Priori
84、tizing patients and communities in the innovation pipeline Leveraging the full continuum of relationships and partners Supporting funding and collaboration infrastructure for last-mile innovations57A governments ability to subsidize research and development in areas of unmet need may serve as a mech
85、anism to drive research to the last-mile pipeline(figure 3).58 Two mechanisms that some governments have used in the past could be key to de-risking high-risk research areas:Push incentives that reduce the cost of development by offering financial,tax,and technical incentives regardless of anticipat
86、ed failure in the marketFigure 3.Three synergy strategies for governments and collaborators1Leverage the fullcontinuum of collaboration to foster innovation2Work with centerpatients andcommunities in theinnovation pipeline3Implement last-mileinfrastructure to supporthigh-risk,high-rewardresearch end
87、eavorsSynergyAccessing new markets and new patient populations For its first ever partnership,Calliditas Therapeutics set their sights on the worlds second largest pharmaceutical market,China,in 2019.Calliditas entered into a licensing agreement with Everest Medicines to develop and commercialize it
88、s treatment for IgA nephropathy in Greater China and Singapore to address a huge patient need.54 Chronic immune-mediated kidney disease is a major cause of kidney failure in China and other Asian countries,although considered a rare disease in the United States and Europe.The partnership required Ca
89、lliditas to remain agileas clinical trial plans were disrupted by the pandemic and work on the relationship differences between its own Scandinavian culture and that of China.For example,CEO Renee Aguiar-Lucander says her Swedish colleagues had a reluctance to say“no”when something could not be done
90、.In many cultures,saying no may be viewed as problematic or impolite.54Source:Deloitte analysis2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios12 Pull incentives that reward developments already considered relevant
91、 in the market and scientifically viable by helping ensure developers financial viability into the future,even in inefficient markets59Breakthrough biomedical innovations are not only possible but probable with government investment in the right infrastructure and incentives.60 New sources of capita
92、l:Medtech VCs launch new funds After a downturn,VC investing in medtech started garnering renewed interest in mid-2023.Neuralink,Elon Musks brain-reading startup(via implantable chips),and Beta Bionics,a low-touch automated insulin delivery system for diabetics,started an upturn with nine-figure dea
93、ls.61 More selective investing Venture capital investors are searching for visionary medtech founders to make more selective investments in 2024,and the digital health market could have promising opportunities for real innovators.62 The most active category of medtech VC funding has been cardiovascu
94、lar surgical devices.From 2020 through Q3 2023,Qiming Venture Partners is the leading medtech venture investor and Medtronic,the top acquirer(figure 4).63Figure 4.Top medtech acquirers and VC investors from 2020 to 30 September 2023Source:Pitchbook,Geography:Global InvestorDeal countInvestor typeMed
95、tronic5CorporationBoston Scientific4CorporationThermo Fisher Scientific3CorporationLaborie Medical Technologies3PE-backed companyPhilips3CorporationOttobock3PE-backed companyInvestorDeal countpre-seed/seedEarly-stage VCLate-stageVCVenture growthInvestor typeQiming49025222VCHongshan39016174VCEnterpri
96、se Ireland34371410VCYuanBio Venture Capital33018132VCEuropean Innovation Council Fund3316213VCKhosla Ventures3033183VCLilly Aisa Ventures2721771CVCSOSV2762181VCShangBay Capital2631472VCJohnson&Johnson Innovation-JJDC2407134CVC2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,c
97、ollaborations,new sources of capital,and shifting portfolios 13At the end of 2023,experts estimate the average cash balance at large medtech companies stood at approximately US$5 billion,up US$1.5 billion since early 2019.64 Potential areas of M&A interest include mechanical circulatory support;tran
98、scatheter mitral and tricuspid valve repair and replacement;pulsed field ablation;peripheral vascular solutions;interventional devices to treat venous thromboembolism;and diabetes technology.65 The left atrial appendage(LLA)closure market for reducing stroke is valued at US$1.4 billion and captured
99、the interest of two companies,Johnson&Johnson and Medtronic,in separate deals.The LAA market is projected to reach US$6 billion by 2030.66 Tapping medtech giants venture arms Visionary startup founders may find opportunities through medtech giants venture arms,like Boston Scientific and Johnson&John
100、son.67 For example,Johnson&Johnson Development Corporation(JJDC),Johnson&Johnsons venture arm,has innovation teams for early-stage startups around the globeincluding in Shanghai,Boston,San Francisco,and London68with its most notable exits including 23andMe,Nevro,and Grail.69 Intuitive Surgicals vent
101、ure arm added a US$150 million fund in late 2023 bringing their total assets under management to US$250 million in 2024 across three investment areas:70 Improving health care access and coordination;precision diagnostics and interventions;and secure,enriched digital health ecosystems.71 In addition
102、to access and affordability,new business models that focus on early-detection and preventive care are drawing investment.72 Also promising are digital health companies that focus on diagnostics to improve patient outcomes.73 New sources of capital:Medtech funding through government initiatives The r
103、oad to digital health and medtech innovation is being supported through many diverse economic initiatives with a growing focus on making medical services and devices for consumers more affordable and accessible.Some examples of recent government biomedical or medtech initiatives around the globe inc
104、lude:United StatesThe US administration recently designated 31 tech hubs across the country with 13 dedicated to either biomedical or medtech innovation.Some examples are the Greater Philadelphia Region Precision Medicine Tech Hub and Elevate Quantum Colorado.74 Quantum computing has the potential t
105、o train AI in medical diagnostics more efficiently.75 CanadaOver CAD$2.1 million through PrairiesCan will help enable Albertas health and medical technology sector to ramp up the commercialization of human mobility and home health innovations.76 ScotlandThe Medical Device Manufacturing Centre(MDMC)h
106、as been awarded 3.35 million of additional funding from Scottish Enterprise to develop medical device innovation and improve the industrys sustainability.77 United KingdomThe UK government is providing the National Health Service(NHS)with 21 million across 64 trusts to deploy new AI tools for the di
107、agnosis and treatment of patients.78 AustraliaThe Australian government has set up an AUD$50 million fund for a combined AUD$115 million with Brandon BioCatalyst&ANDHealth towards a BioMedTech Incubator program.79 Shifting portfolios:Value creation in a new era of blockbuster drugs Some companies ar
108、e doubling down on oncology and specialty diseases,while others are committing to more prevalent chronic disease areas.In oncology,the Pfizer/Seagen deal escalated the excitement around antibody drug conjugates(ADCs),setting off a deal-making frenzy to snap up ADC assets and technologies.80 Merck,Da
109、iichi Sankyo,BMS,and AbbVie all began making moves to access and/or expand their position in ADCs by the end of 2023.Japans Daiichi Sankyo is also investing US$1.08 billion to create an“international innovation center”by 2030 in Germany and will equip the site to develop and manufacture future ADCs.
110、81 The size of ADC investments reflects a growing and increasingly valuable drug class that some proponents hope may eventually replace some forms of standard chemotherapy.82 2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting p
111、ortfolios14Momentum is expected to continue,as the approachusing antibodies specificity for targeted delivery of potent cytotoxic drugscomes of age.83 In 2024,deals from Johnson&Johnson/Ambryx and Roche/MediLink Therapeutics kicked off the year as well as smaller acquisitions and licensing.84 Pharma
112、 and biotech interest is also attracting venture financing to ADC start-ups.85 In parallel,the market is rewarding those focused on more prevalent disease areas with the excitement over and growth of GLP-1 obesity drugs a trend not seen in recent years.Those companies not active in either are findin
113、g themselves needing to explain their portfolio and scientific strategies.At the 2024 J.P.Morgan Healthcare conference in January,Novartis found itself needing to explain the choice to double down on radioligand therapies(RLT),a platform where the company believes it can continue its established lea
114、dership for the long-term.Like ADCs,RLTs act like a guided missile but use a ligand to target cancer cells and kill them with a therapeutic radioisotope.86 Novartis believes RLTs deliver better efficacy while producing less adverse events than ADCs.87 Rise of the GLP-1 weight loss boom,valuations,an
115、d market projectionsDrugs originally developed to treat type 2 diabetes are now being formulated as popular weight loss drugs.Eli Lilly manufactures Mounjaro for diabetes(approved 2022)and its newly approved version for weight loss,Zepbound.88 Novo Nordisk is also an obesity drug market leader with
116、Wegovy(approved 2021)and Ozempic(approved 2022).89 Among biopharma market leaders,Novo Nordisk and Eli Lilly have some of the highest valuations due to long-term growth expectations and category leadership in metabolic diseasesincluding diabetes and obesity as the most prevalent.By the end of Q1 202
117、4,Novo Nordisks market capitalization reached a high of US$572.92 billion,rising from US$88.53 billion in late November 2016.Eli Lilly had a market cap high of US$740.30 billion,rising from US$74.1 billion in November 2016.90 The positive sentiment associated with the potential of their GLP-1 drugs
118、is bringing Eli Lily and Novo Nordisk valuations on par with or greater than some leading tech growth stocks,like Tesla,as well as being disproportionate to the S&P 500 Pharma Index(figure 5).Analysts predict this upward trajectory to continue.Figure 5.Stock performance of Eli Lilly and Novo Nordisk
119、 vs.S&P 500 and S&P 500 Pharma,Q2 2021 to Q1 2024Eli LillyNovo NordiskS&P 500S&P 500-PharmaQ2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023Q1 2024-50%0%50%100%150%200%250%300%450%Stock performance of Eli Lilly and Novo Nordisk vs.S&P 500(relative performance to start dat
120、e 6 April 2021)Source:Deloitte analysis2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios 15Experts say the treatment of obesity is on the verge of heading into mainstream primary carecomparable to the growth of hype
121、rtensive drugs that ballooned into a US$30 billion market in the 1990s.91 The rising prevalence of lifestyle-related diseases is expected to continue to drive up overall GLP-1 agonist drug market projections.By 2030,the potential market is being priced anywhere from US$37 billion to more than US$100
122、 billion.92 While no one knows exactly how big it might be,93 the surge is being driven by treatments for obesity and diabetesa potential market of 30 million people in the United States alone by the end of the decade.94 In addition,GLP-1 agonists are being heralded as Sciences“2023 Breakthrough of
123、the Year”as potential new uses for the drugs emerge.95 GLP-1s are showing promise for cardiovascular disease and investigations are underway for drug addiction,Alzheimers,and Parkinsons diseases.These new uses may increase insurance coverage down the line.96Addressing lack of reimbursementBeyond the
124、 ability to meet the surging demand,another headwind to be navigated in 2024 and beyond is likely to be the lack of access and broader insurance coverage for obesity drugs.In the United States,lack of reimbursement for obesity treatments under government health care programs essentially makes these
125、medications unaffordable.98 Programs for low-income Americans do cover the drugs in some areas,but access is fragmented.99 Millions of older Americans on US Medicare cannot access the drugs,mostly because obesity drugs were originally classed as cosmetic in 2003;US lawmakers plan to push for a chang
126、e in 2024.100 If 10%of Medicare beneficiaries with obesity used a GLP-1,the annual cost to Medicare is estimated to be between US$13.6 billion and US$26.8 billion.But the total annual medical cost in the United States for obese adults averages US$1,861 higher than medical costs for people with healt
127、hy weight.101Public and private payers could learn from guidelines in several EU countries,such as Norway,the Netherlands,Poland,and Italy.102 These countries have reimbursement policies that may demonstrate a pathway to affordable coverage in the United Statesslowing the progression of the disease.
128、For example,some European coverage models deploy effective,but lower-cost medications for patients with lower BMI that do not meet the criteria for“obesity”but whose health could still benefit from treatment.103Competition in weight loss market heats up,and digital health support services growCompet
129、itors and lower cost formulations that may also have potentially fewer side effects may be new entrants to the market.New products will need to distinguish themselves by clear advantages,and pharma companies have begun investigating:Novel molecular targets with alternate routes of administration Gro
130、wing high-quality concentrated revenue Growing high-quality concentrated revenue,like Eli Lilly has achieved in the past four to six quarters,demonstrates an enviable road to value creation.Eli Lilly is making a long-term commitment in the obesity drug market with multiple obesity drug candidates in
131、 mid-and late-stage clinical development.At the end of 2023,the company also announced a multi-year partnership with startup Fauna Bio for obesity research with animal genomes,adding to the signs of a decade-long commitment to the market.97 The result is Eli Lilly becoming the worlds largest drugmak
132、er by market capwith 12%top-line growth and 20%bottom-line growth.2024 Global Life Sciences Sector Outlook|Value creation:M&A,partnerships,collaborations,new sources of capital,and shifting portfolios16NameClose DateDeal SizeValuationDeal TypeLocationLark10/13/2021$100$800.0Late StageMountain ViewCa
133、librate11/08/2022$37.5$365.0Early StageNew YorkZoe11/01/2022$34.8$264.3Late StageLondonNutrisense06/28/2022$25.0$95.0Early StageChicagoForm Health01/13/2023$22.9$6209Early StageBostonBooHee11/21/2021$15.6$310.0Late StageShanghaiJanuary AI08/15/2022$13.0$28.8Late StageMenlo ParkNourish01/20/2023$9.3$
134、40.3SeedAustinIntelliheath02/15/2022$8.5$58.7SeedSan FrancisoVeri06/01/2022$7.9$12.5Early StageHelsinki Extended treatment intervals New double-and triple-agonist mechanisms104 Competition is already ramping up as Pfizer and Amgen are expected to release new data in 2024,105 and several drugs in dev
135、elopment may become attractive for acquisition.In late December 2023,Roche took over unlisted obesity drug developer Carmot Therapeutics in a US$2.7 billion upfront deal.106 Some smaller pharma companies are developing agents with novel mechanisms of action(MOAs),including Switzerland-based Aphaia P
136、harma and Japans Shionogi.107 Implications are expected for ingredients and support services.VCs are eyeing opportunities in weight care and management via both telemedicine and coaching as consumer interest soars(figure 6).108GLP-1 proofing portfoliosWhile the rise of GLP-1 has created tremendous o
137、pportunities in obesity and obesity-related assets,some market leaders are also looking to GLP-1 proof their portfolios,flocking to“GLP-1-resistant”therapeutic areas like rare diseases,neurology,and oncology.Medtech companies may search for assets that are not impacted by GLP-1s or assets for which
138、an increase in longevity could mean an increase in utilization.109Figure 6.Notable global VC deals for weight loss startupsSource:Pitchbook172024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesUncovering the realm of possibilityGenerative AI(GenAI)s
139、release to the public quickly amassed adoption and delighted users,enchanted by chat-enabled interfaces and powerful new large language models(LLMs).1 LLMs are foundation modelsmachine learning(ML)models pre-trained on a broad dataset that can be adapted to solve a range of problems,offering new way
140、s to build applications or other foundational models.2 Early traction for GenAI was seen from consumer releases,but GenAI is quickly showing its potential to add contextual awareness and human-like decision-making to enterprise workflows.3 This inventive era of GenAI advancement puts tremendous pres
141、sure on leaders to harness the technologys capabilities and promise,without being disrupted.4 In the year ahead,extracting GenAIs value and managing its risks,while maintaining trusted enterprise status,are at the forefront of many leaders strategic priorities.5 Amazon CEO Andy Jassy says that GenAI
142、 could be one of the most transformative technological transformations in decades,6 while World Economic Forum(WEF)President Brge Brende,reminds leaders that the immense potential productivity gains underscore the need for responsible AI governance.7 The Winter 2024 Fortune/Deloitte CEO Survey of vi
143、ewpointsfrom the CEOs of some of the worlds largest and most influential companiesshows there has been a marked increase in the adoption of GenAI.8 The majority of CEOs(57%)intend to integrate new technologies into their business models to uncover growth opportunities,with a significant portion(56%)
144、already leveraging GenAI to enhance efficiencies.9 Extracting value from Generative AI and emerging technologies182024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesCreating competitive advantage Increasing efficiencies and cost savingsIn the next y
145、ear,more than 90%of biopharma and medtech respondents surveyed by Deloitte say they expect GenAI to have some impact on their organizations.10 GenAI and other AI technologies coupled with digital transformation tools are poised to increase overall efficiencies and process innovation across many area
146、s of the life sciences value chain(figure 1).11A top 10 biopharma company with an average revenue of US$65-75 billion could capture between US$5-7 billion of peak value by scaling the use of AI over 5 years.This varies depending on an organizations size.12 Figure 1.Average 5-year value accretion sch
147、edule of AI impact(percentage of peak value realized)22%30%32%34%19%31%16%15%30%20%35%17%33%18%14%34%21%13%38%28%Research&DevelopmentSupply chainCommercialEnabling areasYear 1Year 2Year 3Year 4Year 5$0.9B$1.2B$1.8B$2.5B$3.1B$4.3B$4.1B$5.7B$5.0B$7.0BAssumptions:01.Foundational data and infrastructure
148、 are in place to enable transformational use case development02.Each function implements the full portfolio of transformational AI use cases(e.g.,AI clinical trials,AI manufacturing,AI marketing)Source:Deloitte,“Realizing Transformative Value from AI and Generative AI in Life Sciences,”2024.192024 G
149、lobal Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesSource:Deloitte,“Realizing Transformative Value from AI and Generative AI in Life Sciences,”2024.Example levers impacted by AIValue creationbreakdown40%60%90%10%45%55%95%5%Research&Developement3045%of val
150、ueManufacturing&supply Chain1525%of valueCommercial2535%of valueEnabling Areas515%of valueRevenue uplift levers Time to market Revenue from drug repurposingRevenue uplift levers Revenue from surplus manufaturing yieldCost reduction levers Time to market Cost to preclinical trail Revenue uplift lever
151、s Reduction in contract revenue leakageCost reduction levers Overall SDLC cycle time Media/PR spend Revenue uplift levers Patient coversion rate Time to/on therapyCost reduction levers Marketing content creation Prayer contract administration Cost reduction levers#of deviations Production cycle time
152、Cost reductionRevenue upliftFigure 2.Value creation breakdown by function Creating value across the value chainAre companies making choices for GenAI today that are going to create value and advantage?While it may be too early in the journey to declare,some approaches are gaining more traction and a
153、ccelerating time to value vs.others.13 Nearly 90%of value from the use of artificial intelligence in life sciences may be derived from three functional areas:research and development(R&D),manufacturing and supply chain,and commercial(figure 2).14 R&D represents the leading area for value opportunity
154、 at 30-45%.AI applied to novel drug identification and accelerating drug development could provide both cost savings and revenue uplift.Commercial may provide 25-35%,where marketing costs could be optimized and activities such as script utilization could be enhanced by AI.In manufacturing,supply cha
155、in,and enabling areas(including IT,HR,and finance)AI primarily provides opportunities for cost transformation through efficiency realization and vendor cost reductions.How can organizations turn these impacts into competitive advantage?Greater speed and efficiency can enable redeployment of capital
156、to other value creating areas.Greater effectiveness can help companies advance their science and engage their customers and patients comparatively with others.Ultimately,greater patient outcomes could be achieved.202024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emer
157、ging technologiesFinding synergies:Big pharma and big tech collaborating with GenAIIn 2024,many biopharma companies are looking for novel ways to marry the rich data sets of science with the latest GenAI technologies.15 Alternatively,technology giants with advanced types of AI capabilities are looki
158、ng to capitalize on the massive opportunities afforded by the life sciences and health care industry.16 By 2025,36 percent of the worlds data is estimated to be generated by life sciences and health care.17 Through GenAI,big pharma and big tech may be realizing these two sectors have more to gain fr
159、om working together than by competing.18 Will GenAI create the trillion-dollar pharma company?Evidence of tech titans interest was on display with their formidable presence at the J.P.Morgan Healthcare Conference in early 2024.19 Many tech company executives were looking to strike new deals with bio
160、pharma for GenAI/AI technologies,including NVIDIA,whose CEO attended the conference.20 NVIDIA achieved a US trillion-dollar market cap status in 202321 and believes these generative technologies will also enable a drug maker to become the next trillion-dollar company.22 Pharma companies collaboratio
161、ns with tech titans for GenAITech titans are working with life sciences companies on more advanced GenAI in many areas that are constantly evolving,including the following:NVIDIA:Provides a GenAI drug discovery cloud service,BioNeMo,to biopharma companies that want to create or customize their own g
162、enerative models and then offer those as a Software-as-a-Service(SaaS)model to others via cloud APIs.23 Some of NVIDIAs pharma relationships include Amgen,AstraZeneca,GlaxoSmithKline(GSK),and Roche subsidiary Genentech.24,25 Microsoft:Provides GenAI through Microsoft services,including Copilot,Micro
163、soft 365 apps,Microsoft Azure,and Bing search engine.26 Microsoft is collaborating on AI drug discovery with Novo Nordisk27 and Novartis.28 Some GenAI relationships in health care include Epic,29 Siemens,30 and health systems,like Mercy and Duke Health.31 Alphabet:Provides GenAI through Google servi
164、ces,including Gemini and Google Cloud.Its Target and Lead Identification Suite is designed to accelerate drug discovery and the Multiomics Suite to share mass amounts of genomic data in precision medicine.32 Google Cloud is working on a GenAI relationship with Ginko Bioworks,for biosecurity and engi
165、neering biology,33 and Insmed to bring about change in the drug development and commercialization process.34 Insmed built a GenAI search capability for internal records leveraging Google Vertex AI Search that also allows categorized access to external medical articles.35 AWS:Gen AI on AWS Cloud allo
166、ws integration with many leading foundations modelsincluding Amazon,AI21 Labs,Anthropic,Cohere,Meta,and Stability AIfor uses such as generating new therapeutic candidates,better matching patients with the right clinical trials,powering patient engagement applications,and enhancing manufacturing over
167、sight.36 AWS is working with Novo Nordisk on protein structure prediction at scale;with Amgen on drug discovery and manufacturing;37 and with Eversana to“pharmatize”AI across the life sciences industry,starting with a GenAI application for medical and regulatory content approvals.38 AWS also worked
168、with Pfizer on VOX,a proprietary GenAI platform for giving workers access to LLMs.39 The company enhanced productivity by using GenAI to create first drafts of patent applications and medical and scientific content for human review and finalization.40 212024 Global Life Sciences Sector Outlook|Extra
169、cting value from Generative AI and emerging technologiesDemocratizing a US$1 billion investment in phenomics with GenAI modelsFounded in 2013,Recursion Pharmaceuticals is a leading AI-biotech company in what is now known as“techbio,”advancing a clinical-stage pipeline in data-driven drug discovery.4
170、1 Recursion uses its own operating system,Recursion OS,to turn drug discovery into a“search”problemgenerating,analyzing,and deriving insight from massive biological and chemical datasets.42 Its phenomics platform combines imaging and artificial intelligence for rapid validation and advancement of no
171、vel oncology targets.43 Looking to democratize its US$1 billion phenomics investment,Recursion is opening up access to years of proprietary work in hopes it will“move all of us forward faster.”44 The companys first in a potential series of GenAI foundation modelsPhenom-Betais hosted on NVIDIAs BioNe
172、Mo platform.45 In July 2023,Recursion also received a US$50 million investment from NVIDIA as part of a multi-year partnership to advance its AI technologies.46 The aim is to leverage GenAI/AI technologies to benefit Recursions own internal pipeline along with those of their partners,including Bayer
173、 for fibrotic diseases,and Roche/Genentech for oncology and neuroscience.47 Understanding the technology to extract its valueMultimodal LLMs,the building blocks of artificial general intelligence(AGI)Currently,multimodal LLMs are a step closer to mimicking human intelligence.48 The ability to integr
174、ate audio,code,images,text,simulations,and videos with GenAI is already changing the way content is being generated and delivered and will likely remodel many types of consumer,business,and health care experiences(figure 3).49,50 Half of consumers surveyed by the Deloitte US Center for Health Soluti
175、ons,report using GenAI in some capacity,and more than half believe GenAI could improve access to health care;46%think it could make health care more affordable.51 Figure 3.Broad categories of value capture from GenAISource:Deloitte,“Realizing Transformative Value from AI and Generative AI in Life Sc
176、iences,”2024.Cost reductionProcess efficiencyReduce cost,typically by 30%or greater,primarily through automating job functions and undertaking job substitutionsGovernment citizen servicesIncrease accuracy of various federal and local programs and create easier access for at-risk populationsAccelerat
177、ing innovationIncrease the pace of new product or new service development and speedier go-to-marketNew discovery and insightsUncover new ideas,insights,and questions and generallyunleash creativityCreate process efficienciesthrough automating standard tasks and reducing manualinterventionsGrowthIncr
178、ease revenue generationthrough hyper-personalizedmarketing for target customersValue captureAudioTextCodeVideoImage3D/Specialized222024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesSimple uses of GenAI,like generating ideas and design artifacts,can
179、 be“no regrets bets”for organizations to de-risk investments and accelerate progress when kickstarting their GenAI programs.52 More advanced use cases start incorporating more modalities and technologies.53 Each modality,like text or video,is a potential value-driver for a use case;expanding modalit
180、ies increases the potential benefits of a use case.54 For example,a use case for unlocking cures in drug discovery may provide value-drivers through both simulations and images(figure 4).The potential benefits in this use case are GenAIs ability to analyze and learn from vast amounts of data,includi
181、ng images,which can lead to more targeted and effective treatments.The ability to run simulations with GenAI to select the best potential drug candidates minimizes the need for real-world iterations.55 Because multimodal AI systems can interpret multiple types of data together,such as textual and im
182、age data,their development and validation require collaborative efforts between a number of disciplines.56 Leaders should bring together a cross-disciplinary team of people with the domain knowledge to think creatively about potential use cases.57(See Deloittes AI Institutes Generative AI Dossier to
183、 explore more use cases.)Figure 4.Example of a use case in drug discovery to identify new drug candidatesSource:Deloitte,“The Generative AI Dossier,”2024.Unlocking the cures(New Drug Discovery/Generation)How Generative Al can help Generative Al can be used to model the structure and function of prot
184、eins and biomolecules,accelerating the identification and validation of molecules and the creation of new drug candidates.Despite advancements in medical treatments,numerous diseases still lack effective solutions due to the complex,costly,and time-consuming process of drug discovery and verificatio
185、n.The challenge of drug development lies not just in iscovering potential treatments but also in the rigorous verification of their effectiveness,a process that is both costly and time-consuming.Compounding these issues are the unique complexities of clinical trials,which need to account for diverse
186、 populations,varied interactions with other treatments,and potential side effects.Furthermore,the rarity of some diseases creates additional hurdles due to limited data from fewer patients,making the development even more challenging.Cost reduction The use of Generative Al in the verification of dru
187、gs during clinical development could significantly reduce costs.This is due to its ability to run simulations and select the best potential candidates for further testing,thereby minimizing the need for extensive real-world iterations.Promoting public health Generative Al has the potential to signif
188、icantly improve public health by accelerating the discovery of better treatments and cures for diseases.Its ability to analyze and learn from vast amounts of data can lead to more targeted,effective treatments,directly benefitting patients and,by extension,society at large.Enabling collaboration Gen
189、erative Al can facilitate improved communication and knowledge sharing across research groups.It can process and make sense of data from various sources,breaking down data silos and opening new opportunities for collaboration and innovation in experimentation.Issue/opportunity Value captureAudioText
190、CodeVideoImage3D/SpecializedNEW DISCOVERYAND INSIGHTSMoving beyond use cases to a string-of-pearls strategyLLMs and other foundation models are starting to unlock a slew of high-value applications.About two-thirds of life sciences companies surveyed say they are building GenAI use cases,and 36%say G
191、enAI will impact their strategy in the year ahead.58 Vertical-specific use cases for life sciences are likely to command a premium due to the dependence on proprietary data.Incorporating proprietary content into a generative model can be accomplished by fine-tuning an existing LLM or training an LLM
192、 from scratch.59 In 2024,new economies may be created for access to proprietary data and synthetic data.60 While each individual GenAI use case may generate some improvements,stringing together multiple use casesalong with other digital tools like machine learning and Internet of Things(IoT)could tr
193、ansform entire processes,and that is where the value gets unlocked.This string-of-pearls strategy could be applied to everything from research to clinical development to customer engagement and patient experience.Each individual use case connects to another use case,and another,etc.61232024 Global L
194、ife Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesFigure 5.One use case in the string-of-pearls for expanding scientific research collaborationSource:Deloitte,“The Generative AI Dossier,”2024.How can the language translation use case be expanded to provide more
195、 than two value-drivers of text and audio?GenAI could not only convert text to audio in multiple languages,but also generate a supporting video in another languageadding another value-driver to support sharing content across geographies and on more platforms.String-of-pearls strategy in action,GenAI
196、 in scientific research Thinking of use cases in the context of workflow,functional area,and greater mission to be accomplished can help assemble a string of use cases.Each“pearl”should have some major contribution that will make the main goal possible to achieve,thereby enhancing the power of the w
197、hole.62 String-of-pearls for expanding scientific research productivity and global collaborationHow can GenAI help?1.Serves as a brainstorming research partner,providing the ability to search a broader knowledge base,including proprietary data2.Summarizes scientific literature for meta-analyses633.P
198、rocesses and makes sense of data from various sources4.Breaks down silos,to facilitate communication and knowledge sharing across research groups and geographies5.Assists in writing research papers,grants,literature reviews,and non-technical summaries of data 6.Creates presentations in multiple moda
199、lities7.Translates work,making it shareable across geographies(figure 5)64 Language translation at scale(Content localization)How Generative Al can help Gen Al can be used to quickly and easily scale content across regions by translating and converting text and audio into regional languages.The abil
200、ity to create and translate content at scale can be a competitive differentiator for multinational enterprises,but it can also command significant time and resources,and rapid,on-demand translation may be difficult to achieve.Tools for custom localization and quality assurance Generative Al can be u
201、sed to help organize and manage complex file types,analyze content before translation to optimize localization,and integrate glossaries,term bases,and language tools into workflow.Content personalization across industries Al-powered content personalization can supercharge localization efforts by imp
202、roving engagement,building brand loyalty,and increasing conversions.Speech recognition during translationGenerative Al can be leveraged to enable voice user interfaces(VUI),transcribe video and audio content into text,and simultaneously translate spoken content into the target language.Issue/opportu
203、nity Value captureAudioTextCodeVideoImage3D/SpecializedPROCESSEFFICIENCY242024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesAdopting an evolutionary AI mindsetAs leaders start looking beyond siloed pilots and individual use cases,they could conside
204、r how GenAI can be part of an enterprise-wide transformation that not only fundamentally changes the way work is done and value is created,but also addresses compliance,privacy,regulation,and trust.65 Successfully driving large-scale AI transformation requires an evolutionary mindset across the AI j
205、ourney(figure 6).Integrating GenAI into the enterprise tech stackUltimately,decision-makers should develop a strategy that harmonizes its existing AI enterprise strategy with GenAI,while considering GenAIs capabilities and limitations.66 Getting the most from GenAI may require enterprise-wide infras
206、tructure and platforms spanning the entire tech stack.This includes secure cloud infrastructure,foundation models,modernized data platforms that manage high quality,context-rich data,and low-code/no-code platformsto build and scale applications,in addition to establishing practices such as Large Lan
207、guage Model Ops(LLMOps)and Cloud Cost Management.67 Foundation models,the model layer of GenAIFoundation models differentiate the GenAI tech stack from previous AI(figure 7).68 Just as Microsofts Win32 offers APIs for developers to access base-level hardware and OS functions,the model layer is desig
208、ned to connect application developers to optimized hardware for adoption and democratization of GenAI.69 Experts say foundation models will form the basis of GenAIs future in the enterprise.70These foundation models are often available to developers via closed and open APIs,where developers can fine
209、-tune them with additional training data to improve context,relevance,and performance for specific use cases and verticals.71 In the model layer,closed-source model providers,like Cohere and Google host and manage models built on a vast data corpus and charge for consumption.Open-source models provi
210、ders,like Meta and Stability.ai,are managed by communities and are monetized when they are fine-tuned or are based on usage costs as a function of the size of a company.72Figure 6.AI value journeyMindset evolutionLeadership evolution Investment evolution Cultural evolutionExecution evolution Move be
211、yond the end less cycle of near term proof of concepts,and place long term bets on Al in key areas Goal leaders against measurable Al targets and value goals in order to drive Al evangelism and accountabiIityTreat Al investments as core enablers of enterprise business strategies and not as experimen
212、tal investmentsAl should not be looked at like a tool,but as a skill that all employees will need to possess to maximize efficiencyEvolve beyond front and back office methods and adopt a“two in the box”approach where business&IT are goaled togetherSource:Deloitte,“Realizing Transformative Value from
213、 AI and Generative AI in Life Sciences,”2024.252024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesFigure 7.GenAI Tech StackSource:Deloitte,“A new frontier in artificial intelligence,”2023.Generative Al Tech Stack321Model layer ApplicationecosystemIn
214、frastructure/Hardware End-usersOpen/Closed APls Vertically integratedfoundation modelsNiche proprietary modelswith pre-built user-facingB2B or B2C apps.Application developementUser-facing B2B and B2C apps developed in collaboration with or on top of proprietaty modelsFine-tuned modelsRefined models
215、for targeted use caseFoundational modelsOpen or close-source modelsHyperscale computeCompute,networking,storage,and middlewareSiliconSpecialized microprocessors/accelerators for training&interferenceEstablishing operational efficienciesOnce these models are built,organizations need to establish oper
216、ational capabilities around LLMOps.LLMOps focuses on unique needs of these models:compute,transfer learning,human feedback,tuning cost/performance,new metrics,prompt engineering,and building LLM pipelines.LLMOps tackles complexity of development of LLMs for efficiency,scalability,and risk reduction
217、while scaling the applications into production.In addition to LLMOps,another critical component is cloud cost management.This enables organizations to leverage the potential of GenAI while optimizing cloud resource consumption and maximize investments.Managing risks,setting up the right base modelDe
218、ploying on premises(on-prem)and private LLMsThere are risks in deploying GenAI models across the enterprise,particularly LLMs,and there are several ways they can be deployed:Via a service provider,as a SaaS model,avoiding any configuration or installation issues Deployed on an organizations private
219、cloud or network,“on-prem,”enabling control and management of API configuration73262024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesOn-prem LLMs are installed on the organizations infrastructure and available to users who have access to the organi
220、zations network and the application.Some on-prem systems are isolated or“air-gapped”from open access to the internet but may be connected via secure means.In 2024,some life sciences companies will also be looking to private LLMs for a walled garden to protect their data from going into the public do
221、main and to control costs.74 GenAI trained from a private LLM operates within a controlled environment and the dataset can be curated to align with specific guidelines,quality standards,and desired outcomes.75 Companies that build solutions on private,rather than general purpose,LLMs could also have
222、 the most impact.76Managing LLMs with orchestration startupsAs more organizations put GenAI into action and face a myriad of choices,orchestration startups are predicted to play an outsize role in 2024.These startups are attracting significant venture capital interest77 and designed to orchestrate t
223、he many tasks of managing LLMs,including:Simplifying model selection Choosing and fine-tuning models Integrating multiple LLMs into a single service Deploying applications at lower costs Creating platforms that democratize access to LLMs78Managing regulatory uncertainty,instituting governance Closin
224、g the AI trust gapThe capability many people find so captivating is GenAIs ability to mimic human thinking and behavior.Of course,human thinking and behavior arent always perfect,predictable,or socially acceptableand the same is true for technology.79 Experts say keeping humans in the loop remains c
225、ritical to check and validate the accuracy of AI and to address problems as they arise.80 Society expects guardrails to be in place so people can trust what AI has to offer.81 Trust is not an inherent quality of AI but instead the product of AI governance,risk mitigation,and the intentional alignmen
226、t of people,processes,and technologies across the enterprise.82AI-experienced executives Deloitte surveyed across industries globally in December 2023 expressed a variety of concerns about GenAI risks,including the need to:Manage hallucinations and model bias,Assess potential intellectual property i
227、ssues,and Ensure transparency and explainability.83 By 2026,more than 80%of enterprises are predicted to be using GenAI and/or deploying GenAI-enabled applications in production environments.84 Business users should have a real understanding of GenAI and keep end users in mind-not rely solely on AI
228、engineers and data scientists to contend with the risks and the consequences of trusting a tool.85 Uncertainty around regulatory and legal challenges is expected to affect the development of the overall market.86 According to one survey of technologists,41 percent say that they are concerned about t
229、he ethics of AI tools that their company uses.87 In another study of consumers and buyers in 25 countries,more than half of respondents dont trust their companies to use AI ethically.88 Almost 70 percent of these respondents believe advances in AI make it even more important to be able to trust comp
230、anies.89 Organizations can complement innovation with a strategy that also builds customer trust and brand equity.Deloitte developed its Trustworthy AI Framework to help organizations adhere to emerging regulations(figure 8).90272024 Global Life Sciences Sector Outlook|Extracting value from Generati
231、ve AI and emerging technologiesFigure 8.Trustworthy AI FrameworkSource:Deloitte,“Trustworthy AI,”2022.Deloittes Trustworthy AITM FrameworkAI governanceFair and impartialSafe and securePrivacyResponsible andaccountableTransparentandexplainableRobustand reliableTrustworthyAITMRegulatory compliancePriv
232、ate:Privacy is respected.User data is not used or stored beyond its intended and stated use and duration and users are able to opt-in/out of sharing their data.Transparent and explainable:Users understand how technology is being leveraged,particularly in making decisions;decisions are easy to unders
233、tand,auditable,and open to inspection.Fair and impartial:The technology is designed and operated inclusivelyfor equitable application,access,and outcomes.Responsible:The technology is created and operated in a socially responsible manner.Accountable:Policies are in place to determine who is responsi
234、ble for the decisions made or derived with the use of technology.Because an AI model has no autonomy or intent,it cannot be held accountable in any meaningful sense.91Robust and reliable:The technology produces consistent and accurate outputs,withstands errors,and recovers quickly from unforeseen di
235、sruptions and misuse.Safe and secure:The technology is protected from risks that may cause physical,emotional,environmental,and/or digital harm to individuals or communities.92282024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesAppointing a chief A
236、I officer(CAIO)Forward-thinking enterprises are already appointing a chief AI officer(CAIO)to lead their business visions and manage reputational,regulatory,and legal risks.93 An effective AI governance framework can help identify potential risks and gaps in capabilities,validate performance,and saf
237、eguard the business.94 While AI shares some practices with IT governance,it is a distinct discipline that benefits from both technical and non-technical stakeholders.95 The US government is expecting US federal agencies to appoint CAIOs and introduce new governance approaches to ensure their use of
238、AI is lawful,secure,and transparent.96Of particular concern for life sciences is that LLMs have the potential to pose substantial risk with respect to proprietary or sensitive information that passes through these systems,despite current safeguards.Moreover,when existing foundation models are fine-t
239、uned with a companys own data,experts say companies should double down on data governance,especially if an outside vendor is used for fine-tuning.97Companies may also consider creating a“sandbox,”an isolated environment that allows employees to explore the capabilities of GenAI tools without sharing
240、 their prompts or the data with developers.Developers,as well as users,need to apply monitoring and feedback processeshelping ensure quality of the outputs generated and to encourage continuous improvement while companies determine what level of transparency is best.98Anticipating future regulatory
241、challengesA string-of-pearls approach could also be utilized effectively in the context of regulatoryby aligning multiple technologies and geographies for a harmonized regulatory environment.99 While a global set of regulations may not be feasible,the potential of global guardrails based on countrie
242、s regulatory approaches may provide regulatory clarity and could be beneficial.100 A global collaborative and clarity of the regulatory environment can help accelerate the AI journey and adoption across regions.101Research finds AI-experienced directors and C-suite executives are looking for more re
243、gulation and collaboration globally(figure 9).102 A rapidly changing regulatory landscape and the speed of GenAI innovation can create a challenging environment for those building technologies and those looking to manage them.Figure 9.Leader support for GenAI regulation and collaborationSource:Deloi
244、tte,“State of Generative AI in the Enterprise,”January 2024.78%more regulationAgree the widespread proliferation of generative AI tools/applications will require more regulation of AI by governments72%more collaborationAgree there is not enough global collaboration with respect to ensuring the respo
245、nsible development of all AI-powered systems292024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesSome LLMs and foundation models are already testing the limits of regulations,including the EUs Digital Services Act.103 Companies can incur risks if th
246、ey do not have safeguards that help ensure that these technologies are used effectively,responsibly,and legally.104Almost half of organizations(47%)responding to the State of Generative AI in the Enterprise,survey report monitoring regulatory requirements as part of their risk management efforts.Man
247、y express concerns that widespread use of GenAI will concentrate power and increase economic disparity.1052023 saw lawmakers agree on a vision.But in 2024 we can expect to see policies start to morph into concrete action and tech companies being held accountable.In particular,the emphasis is expecte
248、d to be on content labeling,watermarking,and transparency.106United States:The US set out its most sweeping set of AI rules and guidelines in an Executive Order(EO)issued by the US government on 30 October 2023.107 In addition to AI safety and security,it includes a requirement that developers share
249、 safety test results for new AI models with the US government if the technology could pose a risk to national security.However,the EO lacks specifics on how the policies will be enforced.108 Some highlights of the EO include:Labeling guidance:Requires the US Department of Commerce to develop guidanc
250、e for labeling AI-generated content in hopes that labeling the origins of text,audio,and visual content will make it easier for consumers to know whats been created using AI online.Labeling and watermarking tools:Asks AI developers to develop labeling and watermarking tools that federal agencies may
251、 also adopt.Stakeholders say there are currently no fully reliable ways to label text or investigate whether a piece of content was machine generated.There is also no requirement to use these tools.109In 2024,the new US Artificial Intelligence Safety Institute will be responsible for executing most
252、of the policies called for in the order.Similar to the EUs AI Act,we are likely to see an approach that grades AI by type,uses,and the level of risk they pose.110European Union:The worlds first comprehensive law is the EU AI Act.111 The new rules establish obligations for GenAI/AI providers and user
253、s depending on their level of risk.Many AI systems may pose minimal risk,but the European Parliament believes they need to be assessed.112 Critical infrastructure and other high-risk organizations are required to do AI risk assessments and adhere to cybersecurity standards.113AI systems that pose“un
254、acceptable risk”are those that are considered a threat to people and will be banned(there may be some exceptions for law enforcement).114 Critical infrastructure and other high-risk organizations will need to do AI risk assessments and adhere to cybersecurity standards.115GenAI technologies that are
255、 general purpose,like Gemini by Google and ChatGPT,have transparency requirements to:Disclose that the content was generated by AI Design the model to prevent it from generating illegal content Publish summaries of copyrighted data used for training116With limited-risk AI systems,transparency requir
256、ements call for providing enough information to allow users to make informed decisions.Users must be able to understand that they are interacting with an AI and have an opportunity to decide whether they want to continue using it or not.117 Most importantly,the EU AI Act ushers in binding rules on t
257、ransparency and ethics.118 Companies building open-source AI models are exempt from most of the AI Acts transparency requirements,unless their models 302024 Global Life Sciences Sector Outlook|Extracting value from Generative AI and emerging technologiesare as computing-intensive as GPT-4.119 As oth
258、er countries decide on policies,the EUs comprehensive regulations are poised to serve as a blueprint for overseeing the technology,120 and tech companies are likely to have two years to implement the rules.121 Singapore:Another blueprint being looked at around the world is Singapores approach to AI
259、governance that was initiated in 2019.122 IMDA,Singapores Information Media Development Authority,recently developed“AI Verify,”an AI governance testing framework and software toolkit to support the current state of AI.123As governments continue to chart the course to mitigate AIs risk to society,en
260、terprise-wide risk awarenessincluding AI literacy and individual responsibilitywill play an increasing role in day-to-day operations with the advent of GenAI.To promote the necessary AI understanding,CIOs and business leaders could support business users with resources,enhance existing workforce tra
261、ining and learning sessions,and foster an enterprise culture of continuous learning.124(See more at Deloittes AI Institute.)Looking aheadTo move beyond proofs-of-concept and scale,companies may need to upgrade enterprise technology and integrate GenAI into redesigned work processes.Organizations sho
262、uld identify where GenAI might make the most impact and build incremental digitization,moving beyond basic productivity use cases to higher order opportunities,such as new,differentiating services or business models.125 In addition,a sound governance model can help drive adoption,ensure accountabili
263、ty for outcomes,and help to realize value.126Strategy questions for life sciences and medtech stakeholders regarding GenAI 01.Does our organizational approach to GenAI have a value creation and advantaged mindset?02.How can we best scale up and build a foundation for longer-term value creation?03.Ar
264、e we sufficiently diversified in terms of the ecosystem partners we are working with?There are multiple different solutions and capabilitieshow do we balance focus and diversification?04.What guardrails does our organization need to ensure responsible use of GenAI and how do we stay aligned with shi
265、fting societal expectations?05.What do we need to do to ready our talent and organization to adapt to transformed ways and technologies?2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide31Accelerating medicines spendingDrug spend
266、ing and growth is expected to accelerate globally over the next few years but varies across countries.1 Spending for medicines is largely correlated with degrees of economic development and should be considered in the context of a countrys overall health care expenditures2 and health expenditures in
267、 the context of GDP.3 Use of medicines is typically higher in higher income countries than in lower income countries(figure 1).4Some countries are more volume driven,while others are focused on the adoption of innovation in medicines.5 Specialty medicines are projected to represent more than 40%of g
268、lobal spending by 2028,with more than half of total spending in leading developed markets.6Both population-driven volume growthand a shift in the mix of medicines to higher cost productsis expected in North America,Eastern and Western Europe,Latin America,Africa,and the Middle East over the next fiv
269、e years.At the same time,Chinas drug spending looks to be less volume-oriented and more focused on expanding access to novel drugs,while Japans spending is not likely to change as innovation is offset by annual price cuts.7 Pricing pressures rising globally,threats of impacts on R&D innovation world
270、wide2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide32Drug pricing pressures worldwideDrug pricing and value continue to come under scrutiny as pricing pressures are being felt globally.8 In 2024,government-mandated pricing pre
271、ssure and controls are expected to play an increased role in the affordability and accessibility of certain medicines.9 Its a complex topic,governed in wide ranging ways across the world,and requires taking multiple stakeholder perspectives in balance.Direct drug pricing negotiations by the US gover
272、nment are underway for the first time in the US.10 While the US government has a range of policy initiatives aimed at addressing drug pricing,the health care provisions of the Inflation Reduction Act(IRA)11 are raising concerns among some drugmakers.12 In Europe,there is similar price consciousness.
273、For example,in the UK,a new price regulation agreementthe voluntary scheme for branded medicines pricing and access(VPAS)was reached to control the level of spending on innovative drugs.13 VPAS sets a cap on the total allowed sales value of branded medicines to the UK National Health Service(NHS)on
274、an annual basis.14 The cap grows at an agreed rate of 2%per annum,but any medicine sales above the cap are required to be paid back to the UK Department of Health and Social Care(DHSC)via a levy.15In Asia,Japan has steadily reduced prices every other year,ranging from around 2%to 9.4%after the lates
275、t fiscal year-over-year(FYoY)2023 review.16 China is leveraging its large population for its volume-based procurement strategy,significantly reducing prices while saving approximately US$36.3 billion at the end of 2021.17 Developed-world concerns around drug pricing are pushing the unaffordability o
276、f medicines to the top of the global health agenda as discussed at the World Health Assembly(WHA)in 2023.18 Less-developed countries have voiced concerns over unaffordability of medicines for their health systems for decades.In 2024,the Access to Medicines Foundation is enhancing regulatory coordina
277、tion in low-and middle-income countries(LMICs).The organizations updated biennial report is expected in 2024 and is expected to assess how pharma companies monitor the number of patients with access to their essential health care products in LMICs.Figure 1.Per capita use of medicines Defined Daily D
278、oses(DDD)per capita by region compared to per capita gross domestic product(PPP),current international dollarsSource:IQIVIA Institute,December 2023;The World Bank,July 2023;International Monetary Fund,October 20232024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of i
279、mpacts on R&D innovation worldwide33Implications of the US Inflation Reduction Act The impact of pricing and access to medicines leads the list of concerns of more than half of US life sciences companies in 2024,according to a survey by Deloitte US.19 Over the next five years,the IRA is expected to
280、have implications for how the industry makes decisions and allocates resources in both research and development(R&D)and commercial efforts with corresponding implications for access to drugs across the world.The US holds almost a 43%share of the global pharma market and is home to some of the larges
281、t pharma companies worldwide.20The IRA may have a positive effect for patient affordability given reduced out-of-pocket expenses for patients in Medicare Part D,and negotiated drugs are expected to be provided to patients at the negotiated price.Furthermore,smoothing is slated to begin in 2025,cappi
282、ng Medicare Part D out-of-pocket prescription drug costs at$2,000 annually.21 As a result,its anticipated that there may be major changes to commercial insurance design over the next few years,including pressures to incorporate patient out-of-pocket costs on net vs.list prices.There can be material
283、implications for drug companies with respect to gross-to-net,total molecule valueparticularly for negotiated assets,price adjustments,and capital allocation for R&D and business development(BD).A downstream effect is expected from the IRA on the operations and financials of health insurance plans,ph
284、armacy benefit managers(PBMs),pharmacies,employers,hospitals,health systems,and other providers in the US.The price-negotiation provisions,for example,will likely impact the drug-acquisition price for providers and pharmacies and their reimbursement rates,in addition to rebates.Amongst all the playe
285、rs,the effects of lower negotiated prices put pressure on business practices.22 There may also be unintended consequences,such as differences for small molecule vs.biologic drugs as well as orphan drug dynamics(multiple vs.single orphan drug exclusion).Several negotiated drugs expect to have generic
286、s/biosimilars introduced within 12-24 months or less.In order to not create financial incentives that could deter biosimilars from entering the market,the IRA provides for a delay in selecting drugs for negotiation.23Governments in-depth reviews on the drugs selectedAn in-depth review of the first 1
287、0 drugs selected for negotiation is provided by the US Department of Health and Human Services (HHS)the“Medicare Drug Price Negotiation Program:Understanding Development and Trends in Utilization and Spending for the Selected Drugs.”Drugs selected represent nearly 20%of spending in the Medicare Part
288、 D drug benefit and were approved by the FDA more than seven years ago.24 According to the report,prices for the 10 drugs selected had more than doubled from 2018 to 2022,from US$20 billion to about US$46 billion,an increase of 134%.25 In addition,the rate of growth in spending for these 10 drugs wa
289、s more than three times as fast as for all Medicare Part D drugs over the same period.26 List prices being negotiated factor into both insurance premiums and patient out-of-pocket costs.272024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation
290、worldwide34First 10 drugs selected for price negotiationsDrugs selected represent nearly 20%of spending in the Medicare Part D drug benefit and were approved by the US Food&Drug Administration(US FDA)more than seven years ago.28 In 2024,the US administration is moving forward on seeking price cuts f
291、or 10 drugs covered by US Medicare that are commonly prescribed to older and disabled Americans;another 60 will be negotiated by 2029(figure 2).29 The first round includes medications for diabetes,heart-failure,arthritis,psoriasis,Crohns disease,ulcerative colitis,blood thinners,and treatment for bl
292、ood cancers.“Orphan”drugs for rare diseases,which treat conditions affecting fewer than 200,000 people,were excluded.Drugs purchased at pharmacies under Medicare Part D are part of the first two years of negotiations,with Medicare Part B drugs,those administered by doctors,being added in 2028.Prices
293、 for the first 10 drugs are expected to be revealed by September 2024.30In addition to the drug negotiation program,the IRA requires drugmakers that sell drugs through Medicare to pay rebates to the US government for drugs increasing in price faster than the rate of consumer inflation.As part of the
294、 rebate provision,prices for 48 prescription drugs included in Medicare Part B beneficiary coinsurances may be lower starting between 1 January 202431 March 2024.31 Government view,focus on cost savingsThe drug negotiation program is estimated to potentially save Medicare US$100 billion32 of the US$
295、237 billion in overall savings projected for the IRAs drug pricing provisions over the next decade.33 The US government believes Americans should not be paying two to three times more than what people Figure 2.First 10 drugs up for Medicare price negotiation cuts in 2024Source:US Department of Healt
296、h and Human ServicesDrugType of medication Pharma companyEliquisBlood thinnerPfizer and Bristol Myers SquibbXareltoBlood thinnerJanssen Pharmaceuticals,Inc.,part of Johnson&Johnson,and BayerJardianceDiabetes,heart failureBoehringer Ingelheim and Eli LillyJanuviaDiabetesMerck&Co.FarxigaDiabetes,chron
297、ic kidney diseaseAstraZeneca and Bristol Myers SquibbNovologDiabetesNovo NordiskEnbrelArthritis,psoriasisImmunex,a subsidiary of AmgenStelaraPsoriasis,Crohns disease,ulcerative colitisJanssen Biotech Inc.,part of Johnson&JohnsonEntrestoHeart failureNovartisImbruvicaCancers of the bloodPharmacyclics,
298、an AbbVie Company,and Janssen Biotech Inc.,part of Johnson&Johnson2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide35in other Organisation for Economic Co-operation and Development(OECD)countries pay for the same drugseven when
299、accounting for rebates and discounts.34 A recent US Senate Health,Education,Labor,and Pensions(HELP)Committee staff report highlighted the high cost of drugs in the US compared to other countries.35 The issue is complex,and there are many variables to consider.For example,HELPs focus is on gross pri
300、ces that are part of the negotiations.Manufacturer gross drug prices for brand name originator drugs are significantly higher in the US than other countries422 percent of prices in comparison countries in 2022.36What the drug manufacturer receives,the“net”price,can be up to 75%less.Negotiated and st
301、atutory rebates to third-party payers are the largest share of gross-to-net differences.37 In the first three quarters of 2023,net prices for brand-name drugs dropped for the sixth year in a row,with real,inflation-adjusted net prices falling-7.4%in 2023.38 Comparisons of gross prices shape public p
302、erception,and for 158 million Americans with employer-based plans,premium contributions and out-of-pocket costs,like those for prescription drugs,are taking up an increasing portion of US household budgets.39 The US government increases demand for prescription drugs by subsidizing employment-based h
303、ealth insurance in addition to being the primary funder of basic research in biomedical sciences.40Pharma industry view,focus on pharmacy benefit manager reformDrug manufacturers point to PBMs as needing significant reform.42 A concern for the Pharmaceutical Research and Manufacturers of America PhR
304、MA is that the US governments policy presents barriers to transparency and accountability.Prescription drugs are the only part of the US health care system where the difference between list and net prices is monetized as rebates that are redistributed via intermediaries to payers.43 PhRMA President
305、and CEO Stephen Ubl says reforms should shift focus to ensure that rebates companies negotiate with intermediaries(like PBMs)are passed onto patients at the pharmacy counter.44 PBMs were introduced into the system to manage benefits for health plans,and while they were Where does the money go?Gross-
306、to-net price differences A drugs net price represents the actual revenues that a manufacturer earns from a drug after paying rebates,applying discounts,and other reductions.41 Gross-to-net price differences for brand-name drugs include:Rebates,discounts,and fees to commercial payers and plans Rebate
307、s and coverage gap discounts in Medicare Part D Rebates to the Medicaid program Discounts under the 340B Drug Pricing Program Manufacturers payments to drug channel participants,including administrative and other fees to PBMs as well as fees and discounts to pharmacies,wholesalers,and other purchase
308、rs Patient assistance and copayment support funds2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide36supposed to lower health care costs,45 manufacturers list prices actually increased to accommodate rebates.46 PBMs use of pharma
309、ceutical rebates allows multiple players in the supply chain to potentially benefit financially at the expense of patients and control patients access to certain drugs.47 In addition,PBMs own their own pharmacies,and many believe this ownership creates huge conflicts of interesthurting competition a
310、nd distorting pricing.48 The US House of Representatives launched a report in 2023 that found:PBMs often require burdensome prior authorization that may cause lengthy delays to approve prescriptions.With lengthy delays,some patients may suffer,and even die,while they await authorization.49 Some pati
311、ents first have to fail to respond to a more expensive drug,even if a cheaper alternative exists because the PBM may have a financial incentive to compel the more expensive drug.50Provisions in the US Department of Health&Human Services(HHS)November 2020 final rule on pharmacy benefit managers rebat
312、es should eliminate rebates in favor of point-of-sale discounts in the Medicare Part D and Medicaid managed care organization programs.51 Essentially,the rule is designed to remove the anti-kickback safe harbor for rebates.52 However,implementation of the rule was deferred,and the IRA has extended t
313、he time to implement the rule until 2032.53Industry stakeholders are also concerned about the disproportionate power and influence of the three largest PBMs that control over 80%of all prescription drug access and reimbursement in the US.54 In 2022,these PBMs excluded more than 1,150 medicines from
314、their standard commercial insurance formularies,representing a nearly 1,000%increase in exclusions since 2014,including medicines that would provide patients needed treatments at lower costs.55 Experts say out-of-pocket costs for many patients have risen as leading PBMs logged double-digit profit gr
315、owth.56 Enforcers,like the US Federal Trade Commission(FTC),and lawmakers in Congress have started focusing on PBMs with hearings and bills,and PBMs will likely remain on the hot seat.57 Drug pricing in the context of per capita health expenditures and GDP The US spends considerably more per capita
316、on health expenditures than peer nations,spending about US$12,500 in health expenditures per capita,with a GDP per capita of approximately US$77,000 in 2022(figure 3).59 Switzerland and Germany have the next highest health expenditures per capita,at about US$8,000 each per capita in 2022;GDP per cap
317、ita in 2022 was higher for Switzerland at about US$90,000,and close to US$67,000 in Germany.60“The US is the only country where our members are capturing less than 50 cents on the dollar of the list price of the medicine,with the rest being absorbed very efficiently by other actors in the supply cha
318、in.”Stephen Ubl,President and CEO of PhRMA58 2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide37As an example of the wide range in prices paid for essential medicines across the world,in 2019,the median price paid for 60 tablets
319、 of the blood thinning medication Eliquis by a sample of private health insurers was US$440 in the US,US$162 in Switzerland,and US$96 in Germany in 2019(figure 4).61 The price in the US was 4.5 times more than in Germany.62 The Bristol Myers Squibb(BMS)customer savings and support webpage promotes t
320、hat Eliquis is covered by 90%of commercial and Medicare Part D plans,but out-of-pocket copays vary.The webpage offers a US$10 copay card to apply towards any copay for patients deemed eligible to receive it,which could be those who have insurance and still have a copay or those without insurance.63
321、Discounted prices advertised for 60 tablets of Eliquis by GoodRX,available to consumers from leading pharmacies in the US,are in the range of about US$592 to US$626a savings of 9%to 17%off the retail price.64 GoodRXs discount and coupon prices are 02,0004,0006,0008,00010,00012,00014,000010,00020,000
322、30,00040,00050,00060,00070,00080,00090,000 100,000USOther Countries Health spend per capita(US$)GDP per capita(US$)USColombiaSouth KoreaJapanFranceCanadaAustraliaSwitzerlandDenmarkFigure 3.GDP per capita and health consumption spending per capita,US dollars,2022(current prices and PPP adjusted),Sour
323、ce:Petersen KFF Health Tracker,analysis of OECD data2024 Global Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide38based on contracts between a pharmacy(or pharmacy purchasing group)and a PBM that provide the prices and are a best estimate.
324、65 Some patient assistance programs(PAPs)also provide those with limited incomes access to free or low-cost prescription drugs from the drug manufacturer.66As we point out in the patient section of this outlook,some patients do not even know who manufactures their drugs,and more than one company is
325、associated with many drugs.Finding the best available price and discount is not just a patient problem,it can become an administrative cost and burden on health care professionals(HCPs),pharmacists,communities,and the health care system as a whole if patients cannot afford the medicines they need an
326、d risk suffering additional health consequences.67Figure 4.Median prices paid for Eliquis by a sample of private health insurers in select countries in 2019Notes:Prices are for Eliquis(apixaban 5mg)60 pills.The source compared the median prices paid by a sample of private health insurance companies
327、for 34 specific health care services in 11 countries in 2019.Health cost comparisons among various countries are complicated by differences in sectors,fee schedules,and prices may not be representative of prices paid by other plans in that market.The limitations were minimized by selecting services
328、with very specific definitions and wording survey questions to match the procedures that are the basis of the US payment system.Source:Statista,12 August 2022440162142102968065UnitedStatesSwitzerlandUnitedArab EmiratesSpainGermanyGreeceSouth Africa5004003002001000Median price in U.S.dollars2024 Glob
329、al Life Sciences Sector Outlook|Pricing pressures rising globally,threats of impacts on R&D innovation worldwide39Area of high public interest and opinionThe pharma sector faces growing public scrutiny and media attention regarding drug pricing transparency and affordability.74 More than 900 name br
330、and drugs have price increases taking affect at the beginning of 2024.75 But the median wholesale acquisition cost(WAC)increase of 4.7%is now the lowest percentage increase in more than a decade,down 0.1%from 2023.76 Many believe the pharmaceutical industry is viewed unfavorably due to the rising(an
331、d total)cost of prescription drugs.77 Research organizations have been polling public opinion in the US for decades,78 and 93%of Americans feel drugmakers would still make enough money if prices were lowered.79 A 2023 poll found that 82%say the cost of prescription drugs is unreasonable,and almost t
332、hree-quarters of Americans feel there should be more regulation to limit the price of drugs.80 An end of the year 2022 poll queried Americans regarding support of various proposals for lowering drug costs(figure 5).81Figure 5.Tracking US public opinion on drug cost regulation,November-December 2022P
333、ercent who favor each of the following actions that would keep prescription drug costs down:Source:KFF Health Tracking Poll(29 November-8 December 2022)82CMS hosts patient“listening sessions”in support of Medicare negotiations Concern about high copays were expressed at the patient listening session for Eliquishosted by the US Centers for Medicaid and Medicare Services(CMS)and open to the public o
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