The industry will face more chaos in 2020 due to continued pressure to lower drug prices in the U.S., which means that Big Pharma as well as CDMOs need to continue to find ways to work smarter, more effectively to bring down costs that otherwise can exceed $2 billion before a drug is brought to market, based on estimates from Tufts University. We’re also seeing concerns about drug shortages and the need to stockpile some necessary drugs as well as a shortage of qualified chemists in 2020.
Below are four trends that Seqens NA expects will impact the industry this year:
1. Continued pressure on drug pricing
Congress continues to make noise about the need to lower drug prices. But, given other issues currently preoccupying Congress, it might not be able to draft legislation to address pricing. Drug development can take at least a decade and cost $2 billion before a drug is approved by the FDA and/or EMA and reaches the market. And drugs are getting more complex. Laws that restrict pricing likely will remove financial incentives to invest in new development, thereby reducing innovation and hurting the industry and especially the patients who are hoping for new medicines.
2. Demand for U.S. manufacturing will rise
Even with the possibility of a new trade agreement with China, there will a push to bring back manufacturing to the U.S. rather than worry about tariffs and other problems importing APIs into the country. While costs in Asia are lower, the costs in the U.S. are decreasing and reaching parity. U.S. customers are increasingly seeing the value of working with CDMOs in closer proximity (rather than a 12+ hours-time difference when working with Asia), and without the fear of worrying about protecting their intellectual property (IP).
3. Supply chain issues are important
There are significant concerns about the supply chain in the U.S., including getting raw materials from other parts of the world. The industry and the federal government need to look at various ways to remove some of the uncertainty about importing raw materials cost effectively and efficiently. The security of the supply chain seems to be an issue that's getting Congressional attention, and there could be some movement on that issue over the next year.
4. A limit to industry growth could be not enough employees
The industry is projected to grow significantly over the next decade but there’s one challenge that needs to be addressed, and it’s not funding or potential new medicines. It’s the number of people who are looking to enter the market. MassBio and other groups have projected significant worker shortages within the next few years if not addressed. Expect public-private partnerships to be established to help recruit and train people to work in labs. Colleges, especially those facing declining enrollment, will likely focus more on career preparedness, including internships, to give their students a leg up for after graduation. It will be important for colleges, local governments and local businesses to work together in what’s realty in the interest of all three.