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Pharma outlook
2030: From
evolution to
revolution
A shift in focus
Pharma 2030
outlook
The pharmaceutical sector is at a crossroads. In a
heavily disrupted marketplace, characterized by
shifting payer attitudes and patient empowerment,
neither incremental adjustments nor steady
evolution are likely to halt the decline of the
traditional pharmaceutical business model.
This paper looks ahead to a 2030 scenario to examine
the trends revolutionizing the sector; trends that we
expect to have dramatic impacts.
We believe revenues will fall well short of forecasts
as current projections, as well as business and
operating models, do not refect the turbulence in
the marketplace. The continued upheaval will give
rise to three distinct pharmaceutical archetypes.
Executive teams need to carefully consider what type
of company they want to be – and plot the optimal
path towards this status.
By preparing for this future now, organizations not
only reduce the risk of decreasing income, but can
also open up new opportunities for growth. Over
the coming months, we shall produce a series of
thought-provoking articles that will examine more
deeply specifc topics outlined in this paper, which
sets the scene for volatile times ahead.
Enjoy the read!
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Chris Stirling
Partner
Global Chair, Life Sciences
Roger van den Heuvel
Partner, Head of Life Sciences
Global Strategy Group
2Pharma 2030: From evolution to revolution
Pharma 2030
outlook
Many of the developments in the pharmaceutical
industry mirror those in the automotive sector. Like
pharmaceuticals, the industry is relatively mature and
made up of a few major players. And automakers
also face intense pressure from regulators – in their
case to cut emissions, accelerating the move toward
electric and other non-polluting vehicles. The growing
dependence upon technology, primarily software,
is attracting the interest of new entrants such as
Google, Uber and Tesla who are focusing on mobility,
rather than on the automotive industry itself.
Parallels with the automotive industry
Anyone taking a cursory glance at current pharmaceutical
industry revenue forecasts could be forgiven for thinking
that all is well. However, the assumptions behind these
numbers do not adequately take into account two
seismic shifts that are disturbing the industry status quo.
The frst shift is in the balance of power across the
healthcare value chain, as governments and insurers take
center stage, pressuring pharmaceutical companies to
reduce prices and demonstrate greater value from their
therapies. Secondly, we believe a swing from treatment
to prevention, diagnostics and cure, will grow stronger in
time, attracting a host of new entrants from within and
outside of the sector.
Seismic
shifts
3Pharma 2030: From evolution to revolution
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Shift 1: Downward
pressure on pricing
With rising demand for healthcare and falling budgets,
governments and payers are exerting pressure to drive
down prices. One bold example involves the Netherlands.
Not content with striking volume deals with the major
pharmaceutical players, it is looking to utilize the power of
the EU to create even greater economies of scale. At the
moment, several member states are pooling together into a
single procurement machine with much greater bargaining
power.1 This initiative, in its early stages, is also being looked
at by other states seeking to cut their drug expenditure.
Additionally governments, insurers and patients are
requiring greater transparency around drug pricing.
The time-honored healthcare principle of fee-for-service is
also under attack. Payers, insurers and hospitals are
no longer willing to pay simply for a product push
approach; they want fees to be dependent upon the
success of the products and procedures through
measurable outcomes.
In May 2016, US-based health insurer Cigna announced
value-based contracts with Sanof, Regeneron and
Amgen for cholesterol lowering drugs, with the
insurer receiving discounts if cholesterol levels are not
suffciently reduced following the therapy.2 Another
US system – Harvard Pilgrim Health Care – has signed
a value-based contract with Lilly for its diabetes drug,
Trulicity, with rebates for under-performance, and an
incentive program for exceeding patient targets.3
Meanwhile, New York State’s Delivery System Reform
Incentive Payment has the ambitious aim of moving
80 – 90 percent of managed care payments to
value-based methodologies by 2020 – a policy that
will have a signifcant knock-on effect for drug
companies.4 Also in the US, The Health Care
Transformation Task Force made up of providers,
insurers and employers has committed to shift
75 percent of its members’ business into contracts
with incentives for health outcomes, quality and cost
management by January 2020.5
One of the challenges facing drug manufacturers is to
build closer relationships with patients. This has many
benefts – including better understanding of patient
experience and improved adherence. However, the
industry has some way to go to become a trusted part
of the healthcare ecosystem.
Although value-based pricing (VBP) comes with its
fair share of risks and challenges, as evidenced by
Novartis’ Entresto drug, there is large potential to
create a win-win situation for multiple healthcare
stakeholders if structured and implemented correctly.6
In KPMG’s white paper,
Value-based pricing in
pharmaceuticals: Hype or hope?
7 we explore in
greater detail some of the challenges of introducing a
value-based pricing approach.
4Pharma 2030: From evolution to revolution
Catalyzed by an exciting range of new, disruptive
technologies, the pharmaceutical industry needs to
reimagine its future. By 2030, we should not simply
expect more targeted therapies, practitioners will also be
able to predict the likelihood of a patient being diagnosed
with a disease or health condition, and shift from
treatment of symptoms to prevention measures and
complete cures, rather than providing temporary respite.
In this new world, some conditions may well become
a thing of the past. For example, it is now possible to
cure hepatitis C, which was previously regarded as
incurable and afficts 180 million people worldwide.8 This
has created a paradigm shift that has taken healthcare
professionals, patients and payers by surprise.
This shift is driven by three underlying developments:
– groundbreaking new therapies
– advances in technology
– the consumerization of health through increased
access to data by patients.
The latter enables patients to better understand and
get more involved in managing their conditions, which
in turn will raise expectations.
The effects of these changes, and the speed with
which some historical treatment methods are replaced,
will inevitably differ by therapeutic area.
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Shift 2: From treatment
to prevention ... and
beyond
5Pharma 2030: From evolution to revolution
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