Top Pharmaceutical Industry Trends Impacting R&D and Manufacturing

The pharmaceutical industry is navigating one of its most disruptive periods in recent memory, according to Anthony Lakavage, executive vice president and head of Global External Affairs, US Pharmacopeia (USP), who sat down to discuss the sweeping pricing, regulatory, and manufacturing trends reshaping both the innovator and generic-drug sectors.

Lakavage identified two overlapping trends driving significant change. The first centers on drug pricing reform. The Inflation Reduction Act introduced mandatory government negotiations for high-cost medicines, and the Most Favored Nation (MFN) initiative has since prompted major pharmaceutical companies to voluntarily negotiate pricing agreements with the federal government. "I think the industry has never seen the kind of pricing disruption that it's seeing right now," Lakavage observed, noting that these pressures carry downstream consequences for R&D budgets, investment strategies, and manufacturing capacity.

The second major trend moves in a different direction: a strong policy push to reshore pharmaceutical manufacturing and research back to the US. Many companies have already announced significant investment commitments in response to administration encouragement.

Looking ahead, Lakavage sees these forces intensifying. IRA negotiations are set to continue expanding, and MFN programs through Centers for Medicare & Medicaid Services (CMS) Innovation Center (CMMI) are expected to shift from voluntary to mandatory participation.

On the regulatory front, Lakavage highlighted an important FDA draft guidance that would allow biosimilar medicines to be evaluated using analytical data rather than costly clinical efficacy trials. He noted that for biosimilars, any reduction in the cost and timeline of market entry is meaningful. "Anything that can reduce the cost of market entry and encourage faster, more efficient regulatory review is helpful," he said. "It changes the ROI [return on investment] calculation and hopefully should bring more biosimilar medicines to patients faster." His organization, USP, is actively developing standards to support this regulatory shift.

Transcript:

Editor's note: This transcript is a lightly edited rendering of the original audio/video content. It may contain errors, informal language, or omissions as spoken in the original recording.

Good afternoon. I'm Tony Lakavage, and I am the Executive Vice President and Head of Global External Affairs at USP. I think there were trends over the last year that could be looked at, some of them were mega trends as a matter of fact, that impact, the innovator industry in particular. But the downstream effects of some of this, especially the pricing trends that we're seeing and the pricing initiatives will have an effect on the generics industry as well, within a period of years. I think the industry has never seen the kind of pricing disruption that it's seeing right now. We had the Inflation Reduction Act and negotiated prices from that begin two years ago with the beginning of negotiations, and those have continued the selection of more and additional, high-cost medicines for mandatory negotiations. Now we also have MFN or the Most Favored Nation initiative where multiple, large pharma companies, innovators, have been negotiating agreements with the administration on the price of their medicines for federal programs. And those are major trends that have broad implications on the industry's R&D budgets and investments and manufacturing. The same time, there's this other mega trend where the administration is encouraging industry, both innovators and the generics industry, to invest more in both manufacturing and R&D in the United States. And we've seen a lot of companies make commitments for significant investments. Most of those commitments have been from innovators, but some have been from the generics industry as well. So taken together, it's been a very disruptive year in the pharmaceutical industry for sure, and I think looking forward, we can see these trends are continuing. They're kind of built in right now with IRA. MFN is going to have some additional initiatives that are part of the broader initiative with CMMI, the Centers for Medicaid and Medicare Innovation, initiating some additional programs. While right now MFN has been voluntary, those new programs are reportedly going to be mandatory, and then IRA will continue as well. Another really important trend, has been a regulatory trend where FDA issued a draft guidance that will change the way, biologic medicines or biosimilars are evaluated. And this is pretty significant because it's while it's not globally new, the US is joining the trend where regulators are relying on analytical data instead of costly clinical efficacy trials to demonstrate, in the case of biosimilars, biosimilarity. And that's important because the business model for biosimilars has been so broadly challenged with pricing challenges, formulary challenges, rebates, IP challenges, that anything that can reduce the cost of market entry and encourage faster, more efficient regulatory review is helpful. It changes the ROI calculation and hopefully should bring more biosimilar medicines to patients faster. So this is something that's really important. At USP, we're really excited about developing standards that can be supportive of this important new regulatory reform.