By Emily May, Assistant Manager, Deloitte Centre for Health Solutions
Last month I had the pleasure of presenting our 2021 Measuring the return from pharmaceutical innovation report at Amazon Web Services’ (AWS) quarterly life sciences day, introducing the significant findings from our work on productivity in biopharma R&D. A particular focus was on the implications of COVID-19 on the internal rate of return (IRR) of investment in R&D across biopharma. We discussed how the adoption of novel approaches such as pre-competitive knowledge sharing, unparalleled levels of collaboration and regulatory rolling reviews helped expedite the delivery of therapeutics and vaccines. In this blog, I share key insights from our research and reflect on the discussions we had, including how biopharma companies can sustain the positive changes seen during the pandemic.
The internal rate of return and COVID-19 asset impacts
For the past 12 years we have evaluated the IRR that biopharma companies could expect to achieve from their investment in R&D. Our latest analysis shows a large uptick in the average IRR, to 7.0 per cent, building on the slight uptick we saw in our 2020 Seeds of change report – where the average IRR increased to 2.7 per cent from 1.5 in 2019. These upticks in 2020 and 2021 are even more notable when considered against the backdrop of the year-on-year declines that we have been reporting since 2014 (see Figure 1).
Figure 1. Return on late-stage pipeline, 2013-21 – combined cohort
Unsurprisingly, the most prominent influence on the industry’s IRR in 2020 and 2021 is the unprecedented speed with which COVID-19 assets were developed and approved together with their high predicted sales forecasts. However, even when these emergency-use approval (EUA) assets are excluded from our analysis, the average IRR in 2021 still increases to 3.2 percent (see Figure 2).
This means that if we exclude EUA assets, for every $100 a biopharma company spends on R&D, they earn approximately $3 of profit. While we can’t simply discount COVID-19, we can reflect on the approaches used to speed up the rate of innovation across the industry. Moreover, we can also appreciate the impact of biopharma companies becoming household names, improving the public’s understanding of biopharma R&D processes, vaccines, immunity and importantly, their role in managing their own health. There has also been an increased awareness of the impact of health inequalities on health outcomes, and the need for more equitable access to medicines.
Sustaining the momentum of change
In our 2021 R&D report , we acknowledge the innovative ways that the biopharma industry responded to the challenges presented by the pandemic and highlighted four over-arching areas that companies should focus on to nurture the growth identified in our 2021 analysis (see Figure 3).
Figure 3. Sustaining the momentum of change from COVID-19
- Unlocking the power of collaborative data sharing - Advances in data science, analytics and digital technologies have created the ideal conditions to use the transformative power of data to improve R&D productivity. The pandemic has highlighted the value of precompetitive data sharing, expanding this to other disease areas could enable companies to build on existing knowledge and reduce duplication of research efforts to accelerate drug development. To succeed, biopharma companies will need to prioritise investment in cloud-based technology and other digital assets to establish a cohesive and interconnected infrastructure with a high level of interoperability, connectivity, and a platform that supports secure and transparent data exchange.
Companies should also embrace the power of real-world data (RWD) to better understand disease, inform patient-centric protocol design, and expand its use in regulatory submissions. Regulatory relationships were overhauled during the pandemic with open sharing of safety data and a rolling review process. This win-win approach for both biopharma and regulators, helped speed-up the approval process, enabled a greater level of transparency and provided lessons that can be applied more widely. This will be particularly beneficial as advanced platform technologies begin to reach the market.
- Building a digital talent pool - To thrive, biopharma companies need strong digital and analytical skills as creating a digital talent pool will be essential to expanding the use of data science-driven and hybrid study approaches in the coming years. Such talent is highly sought after and increasingly being nurtured by start-ups, technology companies, and academia, so biopharma companies need to rethink talent strategies and create alliances within the innovation ecosystem to access digital talent at source. Companies should also invest in reskilling existing talent to enable them to adapt to the accelerated pace of digital technology integration in their R&D operations. Moreover, aligning data scientists and technology experts to a therapy area can help to cultivate a digital talent pool with a nuanced understanding of drug development.
- The need to tackle trust, health equity, and patient centricity, was highlighted by the pandemic, and now need to be prioritised - Building trust relies on cumulative actions and behaviours. The pandemic has provided the biopharma industry with a unique opportunity to connect with patients globally by showcasing its innovative capabilities and value to society. The industry can now build on this connection in several ways, including improving health equity through a deeper focus on ensuring that patients enrolled in clinical trials match the racial and ethnic diversity of the populations affected by the disease the therapy is expected to treat.
Being able to assess the safety and efficacy of responses in representative and diverse populations could improve access to therapies and care that might otherwise not have been available thereby increasing public trust and building confidence in therapies once they are launched into the market. Our Overcoming biopharma’s trust deficit report outlines strategies that can help companies gain consumer trust by strengthening behavioural signals, such as humanity, transparency, and reliability, to and developing communications that clearly explain complex science and trials to the public, including how drugs are developed, trial outcomes and the effectiveness and/or side effects.
- Embedding environment, social and governance (ESG) commitments into purpose-led sustainability initiatives within R&D - COVID-19 has shone a spotlight on how having a shared purpose and common goal can help companies achieve beneficial outcomes. Companies that adopt ESG imperatives and embed purpose-led initiatives can be more adaptable, resilient, and serve the demands of stakeholders more effectively and gaining a competitive advantage. The inextricable link between public, planetary and economic health means no continent, country, industry or community is immune from the impacts of climate change.
The biopharma industry needs to consider how clinical trials, manufacturing, and complex supply chains contribute to their carbon footprint. At the same time the undeniable overlap between environmental and societal health places biopharma companies in a unique position to create a connected strategy that is driven by purpose and a transparent commitment to society prioritise improving environmental and social sustainability and use their innovation portfolios to impact health equity in all its forms.
While most biopharma companies have made ambitious environmental commitments and material public health investments to address areas of unmet need, companies need to continuously reflect on where R&D spend is being allocated and strive proactively to align investments to the most prominent unmet needs facing humanity.
With patients engaging in their health more than ever before and biopharma companies becoming household names, expectations about equity of access and treatment have increased. Additionally, the pandemic has exposed healthcare’s vulnerabilities and threats to equality in healthcare. ESG driven change therefore needs to be considered in tandem with how it might affect the resilience and sustainability of healthcare in the future.
Innovative technologies which enable collaboration and co-investment between governments, academia and industry, combined with the effective and efficient analysis of robust data from multiple sources can enable the development of more precise targeted treatments. This would shift the health ecosystem towards a future where medicine is personalised, predictive, preventative, and participatory. Access to information will also empower patients and cultivate a higher level of trust due to the high levels of transparency alongside active steps being taken to achieve health-equity. Patients can expect these developments to have a significant impact on the effectiveness of their treatment options, speed of medications reaching the market and on disease outcomes.