Looking Forward to 2022, COVID-19 Will Continue to Impact Pharma in Myriad Ways

As 2021 began, the pharmaceutical topic arguably drawing the most attention was COVID-19 and the rollout of vaccines against it. Moving into 2022, the COVID pandemic unfortunately continues to dominate headlines, as the U.S. marked 1 million new cases of COVID on Jan. 3, a single-day record for any country. However, it’s not all bad news, as the pandemic is continuing its impact across various services. For example, drugmakers are applying knowledge gained in their innovative efforts to develop vaccines and treatments to other areas of drug development, and a shift to virtual operations and health care is expected to continue.

AIS Health spoke with a variety of industry experts about their 2022 projections for pharma.

What are some pharma issues to keep an eye on in 2022, and why?

Mike DeLone, principal and life sciences sector leader at Deloitte Consulting LLP: The digitization of everything: Heading into 2022, many of our life sciences clients are ramping up their efforts to digitize virtually every business function. We’ve been talking about the transition to digital for the past several years. That’s nothing new. What is new is the sense of urgency we are seeing at both a process level and at an enterprise level. Everything from research and development to commercial processes to supply chain to human resources is being reimagined, digitized and transformed at a pace and urgency that we have not seen in years past. We recently surveyed 150 biopharma executives about their adoption and investments in digital technologies. More than 80% of respondents agreed that digitalization of operations will likely continue even after the pandemic ends.

Artificial intelligence: One of the technologies we have been watching is artificial intelligence. AI is no longer a new idea for life sciences. However, as the technology matures, it is being used for an expanding range of applications — from all aspects of R&D to immensely complicated supply chain and procurement processes to human resources. In the year ahead, I suspect we will see more companies integrate AI more holistically into all processes — from preliminary research to clinical trials to manufacturing and supply chain to commercialization and enabling functions. The combination of human intelligence and AI will likely also continue to influence how companies react and respond to health care professionals and the patients they serve.

Environmental, social and governance (ESG): In virtually every industry, including life sciences, ESG is getting a lot of attention from board members, shareholders and advocates. The threat of climate change, for example, has prompted many industries to develop environmental strategies to reduce their carbon footprints. A number of large life sciences organizations have publicly committed to dramatically reducing their carbon footprint in the near future. Life sciences companies are also continuing to emphasize their role in improving health equity. Health inequities are apparent across a broad range of illnesses — from COVID-19 to diabetes and heart disease to mental health issues. Improving clinical-trial diversity is one way to address some social health inequities. As we noted in our recent paper, members of underrepresented communities who participate in clinical trials help advance scientific discoveries. Their participation can also help improve public perceptions and build public confidence about drugs. While the return on investment for ESG might not be as immediate or obvious as other investment areas, there will likely be more pressure this year to invest in the greater public benefit. Pressure from large and small investors will almost certainly continue to influence CEOs and boards alike in the year and years ahead.

Collaboration: Partnerships and collaborations have been taking place in the life sciences industry for years, but the power of joining forces to reach a common goal was amplified by the pandemic. The companies that have been most successful — particularly around the development of COVID-19 vaccines and therapies — have been those that don’t try to do everything on their own. Collaborations and partnerships are helping to advance medicine, advance testing, advance diagnostics and advance next-generation therapies. We expect partnerships and alliances will continue to be an active lever across the sector.

Transparency and trust: Our recent research on consumer trust in biopharma showed that 72% of U.S. focus group participants wanted more transparency over pricing in order to increase trust. The life sciences sector is undergoing some fundamental changes, particularly when it comes to the magnitude of data and reporting that is expected to become available across the ecosystem. Price transparency is especially of interest. Many players such as providers and consumers are not typically exposed to pricing, and as a result there will likely be confusion, especially in understanding list price vs. net pricing, that could cause a range of implications and frictions. It will be challenging to have conversations on drug pricing without corresponding conversations on value. Therefore, it will be important for life sciences companies to revisit their core busines processes — in the areas of pricing, contracting negotiations, patient services, value communications and messaging, and external market engagement — to address the implications.

Cynthia Miller, M.D., M.P.H., F.A.C.P., vice president, medical director of the access experience team at PRECISIONvalue: The pandemic will affect pharmaceutical companies along the entire drug lifecycle, from drug discovery to drug prescribing. Over the last century, medicine has shifted to prioritizing chronic disease treatment over infectious disease with the advent of antibiotics and sanitation. However, the pandemic and burgeoning climate change have elevated the importance of infectious disease once again. Companies will target vector borne, viral and resistant bacterial diseases that affect large populations in developed countries and threaten our progress in life extension through chronic disease treatments. Furthermore, since developed countries are not immune to pandemics in undeveloped countries, companies will emphasize vaccine development and manufacturing for the pandemics of the future that can be distributed globally.

Ash Shehata, partner and advisory industry leader for health plans at KPMG: I anticipate continued supply chain risk and disruption given the increased costs associated with filling, dispensing and distributing drugs. Another issue is labor shortage and wage inflation on the clinical side. There will also be the regulatory impact on pricing if the Build Back Better bill passes, as it would penalize drugmakers who raise prices faster than the pace of inflation, cap Medicare Part D cost sharing and allow Medicare to negotiate prices for some older drugs.

What do you expect to see within the biosimilars industry?

Dea Belazi, Pharm.D., M.P.H., president and CEO of AscellaHealth: The United States has been slow to approve and adopt biosimilars. Since the initial biosimilar approval in 2015, the FDA has approved 33 biosimilars, but only 18 are currently available on the U.S. market with a projected market value of $13 billion in 2021. Even with this slow uptake in the United States, there is increased utilization and a growing pipeline of products that will drive use and savings. In 2021, many blockbuster drugs were approved in the biosimilar space, along with the two interchangeable biosimilar products, [Boehringer Ingelheim Pharmaceuticals, Inc.’s] Cyltezo and [Viatris Inc. and Biocon Ltd. subsidiary Biocon Biologics Ltd.’s] Semglee.

The landscape of biosimilars in 2022 seems to be trending upwards, thanks to a number of additional blockbuster drugs anticipated to lose patent protection. There are six biosimilars with potential launches next year, including [for AbbVie Inc.’s] Humira 100 mg, [Biogen’s] Tysabri, [Roche Group member Genentech USA, Inc.’s] Avastin, [Novo Nordisk’s] NovoLog, [Genentech’s] Lucentis and [Amgen Inc.’s] Neulasta. If launched, these products will help drive biosimilar adoption and cost-savings opportunities for both patients and payers.

The complexities related to the manufacturing of biosimilar drugs is one major drawback that can restrict market growth in this space. Moreover, lack of awareness regarding the availability of biosimilars among the population is a potential factor that may hamper the projected market growth. The rising burden of various chronic diseases, such as cardiovascular disease, diabetes and cancer, will continue to fuel the biosimilar market. The affordability of these products will play a role in market adoption and growth next year and beyond.

DeLone: With the increase in number of complex biologic therapeutics being developed and launched, we have seen a spike in interest in biosimilars. Over the past few years, many large traditional pharmaceutical companies have announced their intent to enter the space, and we predict that this trend will continue. In addition, the FDA has been very active with recent releases of draft guidance for industry and educational materials for health care providers to encourage the uptake of biosimilars. Compared to generics, the biosimilars segment is in the early stages of the maturity curve with many more dynamic factors to consider, such as manufacturing complexity, regulatory environment and pricing challenges.

Reta Mourad, Pharm.D., vice president of the access experience team at PRECISIONvalue: While 2021 was a relatively slow year for biosimilar approvals compared to years past, biosimilar adoption has grown over the years with $7.9 billion in savings in 2020 and a projected aggregate $133 billion saved over the next five years. In this upcoming year, I expect that biosimilars will continue to be a hot topic in the industry. I anticipate we’ll see continued growth of biosimilar approvals, including new therapeutic areas such as the recent approval of the first ophthalmic biosimilar product [i.e., Samsung Bioepis Co., Ltd. and Biogen Inc.’s Byooviz (ranibizumab-nuna)]. We expect to see more interchangeable biosimilar approvals after the first interchangeable designation was obtained in 2021 [for Semglee]; it will be interesting to see how these biosimilars will potentially impact the market while navigating the numerous and varied state laws that have been enacted related to interchangeability.

We will definitely see more attention on biosimilars at the congressional level. In 2021, multiple bills were introduced related to biosimilars, and the Advancing Education on Biosimilars Act of 2021 was signed by President Biden in April 2021. While most legislation aims to increase the adoption of biosimilars, there is concern that the Build Back Better Act, signed in November, could indirectly disadvantage biosimilar competition, so I’d expect to see increased visibility into these discussions.

Finally, we will have increased debate on biosimilar reimbursement methodologies and the sustainability of the biosimilar market. Reimbursement for biosimilars had already undergone a major shift once before, but a recent study suggests that utilizing consolidated reimbursement codes could have saved $1 to $7.5 billion in 2020. We are also seeing that the current biosimilar market, impacted largely by rebate contracting and formulary preferencing, may not be sustainable for future biosimilar growth as limiting biosimilar choices may dissuade new biosimilar entrants and ultimately hinder growth in competition. The various stakeholders will certainly have differing opinions on which reimbursement methods will result in greater cost savings, and how management of biosimilars will ultimately promote or hinder the sustainability of biosimilar competition.

All in all, biosimilars will definitely be at the forefront of the managed care and pharmaceutical industries. My hope is that we’ll have another year of growth and advancement in bringing forward the true potential of biosimilars.

Shehata: I would frame this as it relates to cell and gene therapies. The last decade has brought forth a revolution in the pharmaceutical industry with the launch of the first “one-and-done,” or potentially curative, gene therapies. From the launch of [Spark Therapeutics, Inc.’s] Luxturna for an inherited eye disease, to the entry of [Novartis Pharmaceuticals Corp. subsidiary AveXis, Inc.’s] Zolgensma for spinal muscular atrophy (SMA), we are now in an era of innovation in which certain diseases can potentially be cured. However, for the time being the focus will likely remain on rare and ultra-rare monogenic diseases until the field evolves and the major challenges of cost of entry, therapeutic delivery and manufacturing are addressed.

What do you expect to see with the COVID-19 pandemic in 2022?

DeLone: It’s hard to predict what will happen with COVID-19 in 2022 especially given the recent news and, unfortunately, spread of omicron as we speak. With that said, I’ve never been more optimistic about the opportunity, the willingness and the potential for organizations — even fierce competitors — to continue to collaborate with each other. This isn’t being driven entirely by COVID, as partnerships and collaborations have been taking place in this industry for a long time. But the power of joining forces to reach a common goal was amplified by the pandemic, and I believe it will continue to be amplified in the coming year(s). The companies that have been most successful — particularly around the development of COVID-19 vaccines and therapies — have been those that rarely attempt to do everything on their own.

Shehata: There are a number of factors that will impact the pandemic outlook in 2022, including sustained immunity with existing vaccines, vaccination of children, broad access to testing, the introduction of new variants and the augmentation of intervention efforts related to antivirals, injectables and pills. There is a strong R&D focus on addressing the increased number of COVID-19 mutations and its emerging variants, for which I am hopeful will bring additional treatments and therapeutics to the forefront.

Are there any expected competitors to particular drugs or within a therapeutic class that you are anticipating will have a big impact?

DeLone: Oncology has been one of the strongest areas of pharmaceutical innovation and growth over the past several years, and based on pipelines across the industry, we expect this trend to continue. One of the largest classes within oncology has been the PD-1/PD-L1 [i.e., programmed death-1/programmed death-ligand 1] inhibitors. A key development in this space may be the launch of PD-1 inhibitors where we could see potential market shake-ups by companies providing substantial discounts to existing competitors. If this happens, it will be interesting to see if this ushers in a new paradigm for how we value first-in-class innovation vs. follow-on competitors.

The FDA could potentially approve the first [genome-editing tool] CRISPR-based therapy. Nine gene therapies are projected to be approved in 2022. This includes breakthrough therapies for both severe hemophilia A and hemophilia B. Finally, novel mRNA [i.e., messenger RNA] and viral vector-based vaccines and therapeutics will continue to gain focus and investment.

Shehata: The field of cell and gene therapies continues to see the emergence of new modalities and delivery technologies, yet companies are being cautious because it remains to be seen which modalities and delivery technologies, if any, will win. There are a myriad of other nucleic-acid technologies evolving, such as anti-sense oligonucleotides, mRNA, RNAi [i.e., RNA interference] and other modalities, all of which will compete with “one-and-done” gene therapies.

Are there any results expected next year from clinical trials that you’re keeping an eye on?

DeLone: COVID-19 spurred on many positive trends in clinical trials, including the acceleration of decentralized trials and amplification of the importance of diversity in clinical trial participation. Our research on the returns on the innovation for the top 15 pharmaceutical companies showed that companies that implemented digital technologies in clinical development were able to more quickly recover from COVID-19 trial delays. We anticipate that investments in this space will continue to help clinical trials become more agile and diverse, as patients, investigators and regulators grow more accepting of remote data collection. Pharma companies also doubled down on their commitments on enhancing diversity in clinical trials, and we expect to see more activity in this space in 2022. Specifically, our research suggests that companies should focus on meeting patients where they are by setting up clinical trial sites in communities where underrepresented patients live. Further, companies should engage community leaders and members in bi-directional conversations about clinical trial opportunities and health more broadly.

Shehata: The Walter Reed Army Institute of Research has done a preclinical study on the Spike Ferritin Nanoparticle (SpFN) COVID-19 vaccine, which shows early signs of broad protection against SARS CoV-2 variants, as well as other coronaviruses. The Phase I human trials began in April 2021 and are expected to conclude soon, which will provide insight into the potency and breadth of the SpFN.

Todd Wills, managing director at CAS Custom Services, a division of the American Chemical Society: I have been watching the emergence of next-generation drug modalities including targeted protein degraders (PROTACs and molecular glues) closely. I am curious to see which candidates in this emerging class of drugs demonstrate the greatest efficacy.

I am also curious to see how the first wave of drug candidates that claim a significant role of AI in their discovery process (i.e., Exscientia’s DSP-1181, EXS-21546 and DSP-0038, as well as Insilico Medicine’s ISM001-055) fare as they progress to the next phase of clinical trials and, over time, if the attrition rate observed for them differs notably from the traditional average.

What are some pharma industry trends that we may see in 2022?

Shehata: Looking at the life sciences industry overall, the supply chain disruption and inflation will affect the cost structures and profitability of pharma and device manufacturers, as well as their ability to meet demand. The increasing availability and popularity of noninvasive diagnostics testing, such as Cologuard as a substitute for colonoscopies, threatens to impede demand for devices used in collecting samples. Further, uncertainty persists in regard to the Biden administration’s regulatory agenda. For example, CMS has proposed repealing the Medicare Coverage of Innovative Technology (MCIT) final rule published in January 2021.

What do you expect to see on the issue of drug prices in 2022? Do you anticipate any legislation passing?

Belazi: Pharmaceutical drug pricing continues to be a contentious policy issue. Recent data has branded drug list prices growing annually by more than 9% over the last decade, which is much higher than gross domestic product (GDP) growth. However, a RAND study found that prices for unbranded generic drugs — which account for 84% of drugs sold in the United States by volume but only 12% of U.S. spending — are slightly lower in the United States than in most other nations. Additionally, patients’ out-of-pocket costs for specialty drugs have increased faster than GDP growth over the same period — 2.8% versus 2.3%. Furthermore, the current White House administration and Congress have declared that reining in Medicare prescription drug costs to help older adults and people with disabilities is a top priority. This will put drug pricing in the crosshairs of elected officials, advocacy groups and patients.…

Prior legislative proposals on mandating pricing controls have largely not gained traction, but with continued price pressures and increases in health care costs and out-of-pocket costs, there will be increased pressure to address rising prescription drug prices.

Growing sentiment from various organizations is pressuring Congress to keep international reference pricing proposals out of drug pricing reform legislation. But there appears to be support from both political parties around managing out-of-pocket costs for prescription drugs for Medicare Part D beneficiaries and will likely have the greatest chance at being passed.

These components, which promote affordability and lower patient costs without restricting access to care, resonate with patients and providers. The question of who will bear the cost of these proposals is yet to be determined.

As for cell/gene therapies, these products are regulated by the FDA’s Center for Biologics Evaluation and Research (CBER). FDA requires submission of an IND [i.e., investigational new drug application] prior to initiating clinical studies, and an approved biologics license application (BLA) to market the product in the United States. This regulatory framework did not exist before these therapies emerged in the 1960s. Since then, regulatory oversight has continued to evolve to keep pace with each new scientific breakthrough.

What do you think we may see in terms of merger and acquisition (M&A) activity next year?

DeLone: Most of the M&A activity we saw this year was primarily in therapeutic areas such as rare diseases and oncology. We didn’t see many blockbuster deals, which could set up 2022 to be a very active year. Catalysts include failed or negative results in drug trials, the need to replenish pipelines and downstream effects from mega-mergers and divestitures from prior years. Many of our large life sciences clients are focusing on their scientific core and putting less emphasis on diversification. 2021 saw a flurry of spin-offs and carve-outs, which will likely continue in 2022 and may trigger even more novel and innovative partnership and acquisitions. Many private-equity firms are also sitting on lot of cash and could be looking to make deals. As noted in a recent Deloitte blog, 2021 will likely go down as one of the biggest years ever for digital health-tech investments and revenue growth. Investors pumped nearly $15 billion into 372 digital health care deals during the first half of 2021. That tops investments for all of 2020. A decade ago, digital health investments were a fraction of what they are now (fewer than 100 deals and just $1.1 billion in investments).

Shehata: Given the uncertainty with the ongoing pandemic and its impact on competition for a limited number of high-value or innovative targets, I anticipate continued increase in valuations. Low cost of capital and internal pressure to deploy capital will contribute to growth in the number of 2022 transactions. In the biopharma market, investments will continue to be driven by the quest for innovation and transformative technologies such as mRNA, cell and gene therapies, and bispecific antibodies. Large biopharma companies will continue to sell older noncore pipeline assets and lower-performing commercial products to free up capital to develop or invest in new innovative products.

Is there anything I’ve neglected to ask about that you’d like to add?

DeLone: Retention and recruitment: After nearly two years of lockdowns, quarantines and remote work, many people are reevaluating their professional lives. The so-called “great resignation” is a challenge (and opportunity) for virtually every industry. Life sciences is no exception. This trend has led to a battle for talent unlike anything we have ever seen. As the sector continues its digital transformation, it is also facing unprecedented challenges in attracting, motivating and retaining the best and the brightest employees. The “perfect storm” analogy might be overused, but it certainly fits this scenario. Life sciences companies are competing with similar organizations for talent. In many cases, they are also competing with other industries for tech-savvy employees. Every organization needs to reimagine how they think about talent and look for new ways to attract and inspire the best of the best. There’s never been a more important time to focus on employees.

Wills: Progress in the application of machine learning algorithms that leverage high-quality data sets and molecular representations, including the proprietary fingerprints developed by CAS, to the pharma space is accelerating. These technologies will continue to make it easier and more efficient for drug hunters to locate new biologically relevant regions of chemical space that contain structurally novel drug candidates, resulting in shorter times to market and lower costs.

Contact Belazi through Caroline Chambers at cchambers@cpronline.com, DeLone through Julie Landmesser at jlandmesser@deloitte.com, Miller and Mourad via Tess Rollano at trollano@coynepr.com, Shehata through Matt Weiss at mweiss@kpmg.com and Wills through Tina Tomeo at CTomeo@cas.org.

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