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Home > Coronavirus > Coronavirus pandemic highlights importance of life sciences industry

Coronavirus pandemic highlights importance of life sciences industry

Apr. 1, 2020 by Adam Lohr

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While the coronavirus pandemic has slowed growth in the life sciences sector this year, it has also highlighted the importance of the biotech and pharmaceutical industries as the whole world battles the COVID-19 disease and its impacts. This industry focus could have a lasting impact in shifting consumer and policymaker perspectives about these sectors in a positive direction.

Biologic breakthroughs

Advances in analysis technology and gene sequencing allowed the coronavirus genome to be sequenced in less than a month after the first case was reported. Chinese scientists immediately made the decoded genome public, and researchers around the globe are researching new therapies and novel ways to apply existing drugs to combat the disease.

Understanding the genome of the virus allows health systems to quickly compare samples from potentially infected individuals and the source sequence (2019-nCoV), and determine if the virus is present, spreading or mutating. That also gives researchers a faster path to identify potential treatments or develop a vaccine by understanding the genetic variations and similarities with other known diseases and proteins.

The growth in the biopharma industry and greater accessibility to advanced research techniques have also allowed for a large number of organizations, from private to public to academic, to work on a vaccine at the same time. More than 30 established companies, including Inovio Pharmaceuticals, Moderna, CytoDyn and Novavax, are working to develop a treatment or vaccine for the virus. These companies, and the biotechnology sector in general, saw a positive reaction from the markets on the advances in their research and capabilities.

Broader public understanding

During the coronavirus pandemic there has been much more frequent discussion in the media and among politicians about the emerging science and breakthrough medical technologies that are being used to combat the disease. We expect this to result in a broader public understanding of what the life science ecosystem is capable of creating and the value it can bring to the modern economy.

This may lead to support for further investment into research institutions and biopharma startups, which are responsible for developing the majority of new drugs and therapies. Additionally, if the electorate is better able to understand and engage with the life sciences ecosystem, it will encourage more meaningful conversations regarding drug pricing and health care reform, support for STEM education, and strengthening of our health care supply chains.

Drug pricing pressures

A major reason for the offshoring of pharmaceutical and medical device manufacturing is to manage costs and improve corporate margins. Theoretically, this aids in the suppression of even greater increases in drug pricing, which rise by an average of 5% to 10% a year. Drugmakers typically increase prices at the start of the year and at midyear, and 2020 was no exception. According to an analysis from Rx Savings Solutions, a firm that tracks drug prices, more than 60 drug makers raised prices on Jan. 1. Pfizer alone increased prices by at least 9% on more than 40 therapies.

In addition to growing public frustration and the potential push to repatriate supply chains and congressional consideration of a Medicare Part D overhaul, the Trump administration is pushing for the repeal of the Affordable Care Act.  Policy platforms from other presidential hopefuls have been another factor making drug pricing reform a theme this year.

While there are many “what-ifs” when it comes to drug pricing and broader health care reform, there are several policy considerations that have gained traction at the outset of 2020.

Policies in play

According to U.S. Health Resources and Services Administration data, the federal drug pricing program – called the 340B program – that allows safety net hospitals to obtain discounts up to 50% on some drugs and therapies saw sales reach $24 billion in 2018. And while this has been a hot topic in previous years, current economic volatility and a divided Congress appear to be focusing on other health policy issues in this election year.

House Speaker Nancy Pelosi’s proposed drug pricing bill contains several measures that are likely to be rejected by the Senate, but a restructured Part D benefit has received bipartisan support. Under a revised Senate Finance Committee bill, drugmakers would be held to inflation-pegged rebates to Medicare and new exposure in the Part D program’s coverage and catastrophic phases.

Generic approvals primed for accelerations

Since his election, Trump has made faster FDA approval of generic and biosimilar drugs a priority, even going as far as creating a special task force to streamline the process. The FDA’s efforts have in fact accelerated, and the agency has been setting records for new generic approvals.

The approval of generics is widely viewed as a critical step in controlling rising drug prices by increasing completion and providing the public with a wider array of choices. But these efforts are often hampered because of patent evergreening and marketing exclusivity strategies employed by the drugmakers.

While critics may cite the lack of new drug applications as a sign that rising drug prices are not resulting in innovation and further research and development efforts by drug makers, there is no doubt that the life sciences industry has made some of the greatest technological leaps forward in the past decade. The majority of this innovation is created by startups and middle market companies that are focused on science and bringing a greater quality of life to the public.

That is why it is increasingly critical for these companies look ahead to the challenges of labor, financing models, pricing strategies and exit planning so they can execute on the science and continue to move the ecosystem forward. As the coronavirus affects citizens, markets and governments across the world, now is the time for the life science industry to prove its value.

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Filed Under: Coronavirus, Health Care, Life Sciences

About Adam Lohr

Adam is an audit partner and life sciences senior analyst in RSM's cutting-edge industry eminence program. In addition to providing assurance services to his clients, he sits on RSM’s national life science team and leads the San Diego office life science practice.

His senior analyst responsibilities include advising the firm’s life sciences care clients and client servers as they work to navigate the rapidly changing industry environment. Adam regularly writes, presents and advises on capital markets, digital transformation, policy and other issues transforming life sciences. He is an instructor at the regional and national level, and is experienced in the application of ASC 606 revenue recognition for the technology and consumer products industries.

Adam has over 12 years of accounting and finance experience, serving private equity-backed and private closely held companies in the middle market. He specializes in providing financial audit services and helping clients respond to technical, regulatory and economic changes that impact their business.

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