What is changing life sciences market dynamics in 2022?

The impending launch of numerous “next-gen therapies”—inclusive not only of ultra-high-cost cell and gene therapies but also biomarker-based precision treatments as well as digital therapeutics—will disrupt traditional treatment paradigms and require stakeholders to take a more coordinated, expansive approach to data collection, evidence-generation, outcomes monitoring, and value assessment over time.

Life sciences’ pipelines are increasingly shifting toward more narrowly targeted precision therapies, ranging from cell and gene therapies to CRISPR, CAR-T, and other treatments that leverage patients’ biomarkers and genomic makeup to treat disease. In fact, there are over 1,764 cell and gene therapies in development. But beyond such new-in-kind drugs, investors and life sciences organizations are also pouring money into innovative digital therapeutics (DTx) and digital health tools, many of which leverage technology such as apps, telehealth platforms, and even video games to treat disease. In 2021, investors poured $29.1B into U.S.-based digital health startups, and investments in digital therapeutics increased 2.6x between 2020 and 2021.

Despite promising clinical advancements, many of these treatments carry a high price tag (ranging from tens of thousands to millions of dollars). This raises the bar for the evidence and proof of “value” that payers, providers, and regulators will require for product coverage and use. Yet next-gen therapies and digital therapeutics create two novel challenges for innovators focused on evidence generation and outcomes monitoring.

First, many next-gen therapies are durable and/or curative in nature, with safety and efficacy profiles that require long periods of monitoring to prove value for each patient. However, today’s value assessments typically rely on randomized clinical trial (RCT) data spanning shorter (one- to three-year) time horizons. Most health care organizations are just starting to develop the infrastructure needed to track and evaluate more longitudinal outcomes. Additionally, these therapies are pushing payer and provider organizations to expand the scope of their clinical value assessments to consider a greater range of pharmacoeconomic outcomes and impacts on total costs of care.

Second, the broad classes of cell/gene therapies and digital therapeutics are, together, starting to illuminate the industry-wide need for value assessments that consider an expanded range of clinical endpoints, not to mention the need for manufacturers to generate stronger evidence dossiers overall. For example, some customers may place greater weight on patient-reported outcomes (PROs) that help illuminate patient experiences, quality of life impacts, and preferences over time. To help stakeholders evaluate digital therapeutics, manufacturers may need to collect digital-first endpoints via wearable devices or smartphones, and they’ll need to provide greater proof of adherence and clinical impact over time.

It’s also worth noting how cell/gene therapies and digital therapeutics are disrupting the care continuum and dispersing the most common places for treatment, albeit in very different ways. Notably, patients are still funneled to just a handful of Centers of Excellence for initial cell/gene therapy, even if follow-up care and monitoring happens closer to home. Conversely, most digital therapeutics meet the definition of “everywhere care”—supporting patients at home, at the office, virtually, etc. In either case, clinical innovators will need to develop compelling ways to track safety, efficacy, and durability across a wide range of clinical and home-based settings.

Implications for life sciences leaders

Life sciences leaders will need to expand where and from whom they generate evidence. They’ll also need to broaden the kinds of data sources that can provide insight into endpoints customers may require. Doing so will require heightened collaboration across medical affairs, HEOR, market access, and other internal functions, as well as with cross-industry stakeholders. Such efforts will not only enable smarter, more coordinated evidence generation, but they may also pave the way for new opportunities in value-based contract design, especially for high-cost cell and gene therapy drugs.

Life sciences leaders must also recognize how payers and providers are broadening the set of treatment options they consider as comparators. Drugs are no longer evaluated in isolation. With heightened cost pressures and limited insight into longitudinal outcomes, decision-makers may expand their evaluations from just drug vs. drug to drug vs. digital therapeutic or drug vs. non-medical intervention. As a result, customers will have new demands for comparative effectiveness studies or real-world data showing meaningful differences among treatment options.

Questions to consider

• How are you working cross-functionally to identify and prepare for your customers’ future evidence needs? Are you thinking about endpoints that customers might require three to five years from now and incorporating those endpoints into study designs today?
• What real-world data sources (e.g., claims, EHR data, data from wearable devices, patient reported outcomes) can you leverage to better demonstrate the value of your products?
• Are you generating evidence that shows how your products impact a broader range of metrics beyond safety and efficacy, such as total cost of care, absenteeism, or patient satisfaction?

While federal drug pricing proposals wither on the vine, state governments and disruptive for-profit innovators will continue to pressure both manufacturers and PBMs with new models of value assessment, transparency, and price control.

Drug pricing is likely to remain a hot topic in 2022. But the federal government isn’t likely to be the driving force behind any meaningful change. While (as of this writing) President Biden tries to revive interest in federal drug pricing reform, the Build Back Better Act—which included several initiatives aimed at slowing drug cost growth and reducing patients’ out-of-pocket costs—seems unlikely to re-emerge in anything close to its original form. Senator Joe Manchin (D-W.Va.) has recently expressed renewed interest in negotiating revised legislation that would include some efforts to lower drug costs (for the government and for consumers), but it’s unclear how that will ultimately play out. Payer/provider price transparency mandates have exposed the profits many hospitals and physicians generate from “buy and bill” and 340B pricing models, but political realities and competing stakeholder incentives make further federal scrutiny here unlikely.

All that activity may obfuscate the more likely threat to current drug pricing models and incentives. Across the past year, several for-profit innovators have positioned themselves as potential disruptors to the PBMs’ prevailing rebate-centered model—most notably, EQRx, EmsanaRx, GoodRx, and Mark Cuban’s CostPlus drug company. Some, like EQRx, present themselves as a simpler kind of PBM, while others, like CostPlus, are trying to disintermediate PBMs entirely. Their business models vary, but all claim to lower consumers’ out-of-pocket drug costs by injecting more transparency and simpler fee structures into their approach. While it’s too early to predict these companies’ lasting impact, their efforts to lower consumers’ drug prices by “disrupting from within” the industry are worth watching.

Meanwhile, several states continue to push forward with drug pricing regulations of their own. In 2021, 22 states passed more than 40 prescription drug pricing laws, and they are poised to do even more in 2022. Fueled by guidance and resources from the National Academy for State Health Policy (NASHP), these states are establishing independent drug price review boards, penalties for “unjustified” price increases, price caps, and price transparency requirements. Many of the state-level bills target PBMs as well as manufacturers. Perhaps not coincidentally, NASHP is a nonpartisan advocacy group funded by Arnold Ventures, the same organization that contributes millions of dollars to the Institute for Clinical and Economic Review, the organization better known as ICER. And ICER has been getting more involved in state-level initiatives as well. In early March, ICER announced receipt of a grant from the California Health Care Foundation (CHCF) to develop “two annual unsupported price increase reports specific to California and a policymaker guide outlining how to use comparative effectiveness research to ensure that patients have fair access to fairly priced drugs” (ICER press release, March 3, 2022). As early adopters of such initiatives and regulations begin to generate data about the impact of their efforts, interest in replicating or refining their models may grow.

Implications for life sciences leaders

Even without an urgent need to respond to official federal drug pricing reforms, life sciences leaders must not become complacent or assume that today’s dominant pricing models are set in stone. Any cracks in traditional pricing models (be they rebate-based, buy-and-bill, or ASP+) open the door to more experimentation with value-based contracting, value-based benefit designs, and other innovative approaches to pricing and access. These newer models will almost certainly require broader use of real-world evidence to demonstrate differentiated clinical outcomes and/or lower total cost of care.

Any truly disruptive changes to today’s pricing models (e.g., if CMS starts to negotiate drug prices for even a handful of high-cost therapies) could force a broad, cross-industry reckoning with legacy business models. To minimize the impact on research, innovation, and commercial growth, manufacturers would almost certainly need to reimagine long-established approaches to drug discovery, clinical development, and physician engagement. While such disruption may appear unlikely in the near term, it’s never too early to begin planning for such scenarios.

Questions to consider

• Do you have sufficient resources monitoring federal, state, and startup business activities that could impact pricing, contracting, and transparency requirements?
• Have you sufficiently modeled different pricing scenarios for your most promising products in the pipeline?
• What are you doing today to foster the kind of agility, innovation, and cross-sector collaboration that may be required to succeed with more value-centered approaches to pricing and access?

Across all sectors of the health care economy, progressive organizations will collaborate to leverage real-world data not only to identify health disparities, but also to prioritize, shape, modify, and assess multi-stakeholder interventions over time.

The outsized impact of COVID-19 on racial and ethnic minorities laid bare the limited progress we’ve made in reducing health disparities since the Institute of Medicine’s seminal 2003 report, Unequal Treatment: Confronting Racial and Ethnic Disparities in Health Care. Since the summer of 2020, nearly every health care company operating in the United States has publicly identified health equity as an executive priority. Many organizations have appointed chief diversity officers or chief equity officers, donated to organizations addressing social determinants of health, and/or kicked off internal initiatives targeting health disparities that align with their organizations’ areas of focus.

Academics, policymakers, and researchers have also been hard at work, unpacking histories and analyzing data to help the industry understand the scale and scope of the problems at hand. Through webinars, podcasts, conferences, and journal articles, these research and policy leaders have increased awareness of health disparities and their root causes, which has stimulated important conversations about how to narrow those gaps. Among the biggest areas of focus: lack of diversity in clinical trials, unequal access to diagnosis and treatment, racial bias in care delivery, and the need to address social determinants such as food/housing insecurity, technology/transportation access, and available social support.

Broad access to high-quality, longitudinal real-world data has been instrumental to these efforts. While projects in 2020 and 2021 skewed heavily toward descriptive analyses highlighting evidence of disparities and illuminating root causes, initiatives in 2022 must pivot more toward action. Such efforts to drive meaningful, sustainable change will require focused cross-industry collaboration—life sciences companies partnering with providers, payers working with health tech companies, and large multinationals collaborating with local community nonprofits. Real-world data will continue to power these efforts. But instead of just providing evidence of disparities, rich combinations of clinical, cost, behavioral, and socioeconomic data will help cross-industry leaders prioritize their efforts, pilot various interventions, and (importantly) track the impact of their work over time.

Implications for life sciences leaders

Life sciences companies will face increasing pressure to demonstrate their commitment to reducing health disparities in tangible ways. This is true not only as it relates to diversifying clinical trial participation, but also as it relates to ensuring equitable access to appropriate diagnostics and treatments.

To do this work, life sciences companies will need trusted data and insights that can help them prioritize opportunities and develop meaningful, measurable pilot programs. They’ll need to identify aligned payer, provider, and community partners willing to contribute the resources needed to test, measure, and scale programs that can move the dial on health equity. In the short term, the “sweet spots” for alignment likely cluster around programs that help address disparities in the following areas: trial participation, disease prevention, appropriate screening, earlier diagnosis, simplified access, and improved adherence to recommended treatments.

Questions to consider

• Do you have clear visibility into the nature of health disparities in the populations you aim to support with your therapies?
• Has your organization invested in the real-world data most “fit for purpose” to help drive meaningful action against the disparities you are best positioned to address?
• How might you use real-world data as a potential shared source of truth to fuel conversations with payers, providers, and other stakeholders about health disparities in the populations they serve?
• Have you identified the attributes of partner organizations best positioned to help your firm address health inequities?

Our ability to truly democratize clinical trials will depend on the extent to which we can harness ongoing technological and operational innovations to address the non-clinical exclusions built into the current system that limit patient and investigator diversity.

Sponsors and clinical research organizations (CROs) have a unique opportunity to translate recent efforts to decentralize clinical trials into structural change that meaningfully democratizes evidence generation and ensures equitable representation of both patients and investigators. The virtualization of trials is a necessary but not wholly sufficient step to accomplishing this goal, as success will require time, true partnership with communities, and the learning and unlearning of processes that stand in the way of progress.

One necessary shift is that stakeholders must recognize the current approach to clinical trials too often excludes participants on more than just clinical dimensions. Stakeholders must acknowledge the ways in which social determinants like transportation, physical location, and education status impact trial participation but are not fully accounted for in trial design. Unless sponsors do more to account for these kinds of “hidden” exclusions that often begin at the point of protocol design, it will be hard for the industry to realize the full potential of data and technologies designed to improve patient finding and patient/investigator experience during trials. At best, these tools can help expand access, diversify participation, and broaden the kinds of data collected. But without a commitment to rethinking protocol design and process flows, these same tools run the risk of adding complexity, increasing costs, and exacerbating inequities.

Progressive organizations across the ecosystem are recognizing that a similar approach can help address the challenge of expanding participation of investigators from marginalized communities. These organizations are using technology not only to reduce the non-clinical burden on investigators, but also to identify ways for clinicians who do not wish to be investigators to maintain continuity of care with their patients.

Implications for life sciences leaders

Life sciences organizations must do more to demonstrate their commitment to making trials more diverse and inclusive—even amid continued pressures on costs and speed-to-market. Meaningful changes will require sponsors to revisit assumptions around existing timelines and procedures as well as partnerships with contract research organizations (CROs), community trust brokers, digital vendors, and others. Leaders must be vigilant to ensure that the vital work required to reduce patient barriers to participation does not overshadow the work needed to broaden the pool of potential investigators.

The benefits of improved clinical trials participation (both in terms of patient recruitment and patient experience) extend beyond the impact on trial operations. The whole health care ecosystem can benefit as well. Purchasers, HCPs, and patients are eager to understand how treatments vary across patient demographics in order to support shared decision-making and appropriate utilization.

Questions to consider

• How will you identify and engage with established trust brokers to foster partnerships in local communities?
• Has your organization integrated the right patient, clinician, and community perspectives to minimize the non-clinical burdens of trial participation?
• What steps have you taken to ensure that digital technology is being used to close gaps in participation and doesn’t just increase costs/timelines or exacerbate inequities?