OUTLOOK 2021
Healthcare and Life Sciences
Digital health will remain top of the healthcare and life sciences agenda
Digital health will remain front and centre of the healthcare and life sciences agenda for 2021, with its importance to the sector being further amplified as a result of the impact of COVID-19. The pandemic has highlighted the need for increased digitalisation across the sector, including the use of AI to facilitate the rapid identification of new and repurposed treatments, AI diagnostic tools, remote clinical trials, remote monitoring of patients and remote healthcare appointments. While the COVID-19 pandemic has helped demonstrate the potential of many of these technologies, many existing challenges with the technologies persist. These include establishing appropriate partnerships to execute and implement cutting edge digital health technologies, managing diverse and complex IP rights in respect of these technologies, implementing data protection compliant systems, controlling cybersecurity risks, ensuring regulatory compliance and managing liability. Data protection and regulatory compliance are likely to be prioritised given the increased focus on health data collection during the pandemic and the convergence of the launch of the EU Medical Devices Regulation and Brexit.
Excessive pricing by dominant companies in the pharma sector
Historically, European competition authorities have been reluctant to sanction high prices in any sector, including the pharmaceutical sector where innovation is key and needs to be rewarded.
However, over the past few years, their vigilance with regards to pricing practices has increased, particularly in the HLS sector. The COVID-19 pandemic has shone a spotlight on these practices.
The few decisions made in Europe so far seem to cover specific fact patterns. Primarily, the practices of generics that have acquired off-patent treatments, to address crucial patient needs, that have then significantly increased the price of the treatment. Ongoing investigations however show that authorities are looking beyond this.
In Belgium, there is an ongoing investigation into the high price of an innovative treatment. Plus recent commitments proposed by Essential Pharma in the UK (in response to a CMA investigation) make us believe that competition authorities will start to initiate investigations. This will be in response to political pressure with the aim of pharma companies voluntarily reducing their prices to avoid bad publicity.
It is important that every pharma company is aware of this trend and takes it into account for any pricing decisions and negotiations with health authorities. Companies should be particularly vigilant with their internal documents and the language that is used both internally and externally to justify pricing increases.
COVID-19: treatments, diagnostics and vaccines - regulatory issues
A significant consequence of the pandemic nature of COVID-19 has been the acceleration of the development and regulatory processes to bring drugs, vaccines and diagnostic tests to market. It appears that it seems feasible, without giving up science and ethics, to propose revisited old and totally new drugs for treatment, different vaccines using very different modes of action for prevention, and various tests for diagnosis. All of this with a new speed of validation to develop and register and able to warrant efficacy, safety and reliability. It’s viable that what has become possible during exceptional times could be implemented when we return to the new normal. This major shortening of deadlines from conception to market launch could be a mega trend bringing a significant benefit both to patients and for companies’ return on investment.
M&A market on the starting blocks, with two companions: agility and responsibility
The pandemic has slowed down and complexified the M&A market, but it is now about to burst. 2021 will be the year of great opportunity for HLS investments and strategic alliances. Throughout the pandemic, the HLS sector is amongst those which remained very active (with multiples ranging sometimes to up to 30x EBITDA). It has also been an opportunity for successful assets to emerge. Looking forward, a gold mine of opportunities has accumulated and is just waiting for the appropriate timing to go to market eager to meet the funds that investors have not used this year. Fierce competition is expected on the jewels. Agility and creativity will be required on more challenged assets (closing accounts, earn outs, strategic alliances, purchase of a stake with call options, etc). Responsibility will be key to the future of M&A transactions. ESG is a must have for all types of investors as the pandemic has certainly boosted responsible investment.
Employment issues: flexibility and innovation for unprecedented levels of disruption
HLS businesses are facing huge challenges and re-shaping for the new normal. We expect significant business changes with the need to address profitability and the new normal. From headcount reductions, divestments to focus on core and new business or activities to the reduction of companies’ real estate portfolios. The impact of outsourcing activities such as manufacturing sites and onshoring, to address non-core activities, consolidation and concerns about global supply chains (and post Brexit) will also create significant disruption.
Many in the sector are dealing with unprecedented and accelerated technological changes and competition, as med-tech and digital health markets expand to create opportunities for growth. The reimagination of the industry with a new patient-centric focus, will require digitalisation, remote patient attention and innovation. These new trends will require new forms of business protection, GDPR, cyber-security and compliance work, new skills and more flexible resourcing.
Implementing restructuring and change management plans, changes to terms and conditions and new working methods, across business divisions and jurisdictions, requires careful planning to mitigate risks and ensure success in 2021. Business leaders will need to consider these work place issues including employee and workforce consultation processes, collective redundancies and collective/workforce agreements, contractual changes and protections (protecting IP, confidential information and collaboration and strategic plans) whilst maintaining high performance cultures.
IP strategies: your innovation’s secret weapon
Protection and the enforcement of IP continue to gain importance both for well-established innovators and for disruptive new companies. For established innovators, their IP rights are key to protecting their market and thereby revenues. For start-ups, a sizable IP portfolio is essential for gaining access to funding. Yet most IP managers are struggling to strike the right balance between managing their time and budgets versus obtaining an optimal protection for the company’s inventions. As a result, we see more demand for strategic IP advice and portfolio management.
Litigation is expected to build on current trends, focusing on biosimilars, innovator-innovator battles and second medical uses. While discussions on compulsory licensing, access to medicines and price control will remain. The latter is expected to result in more litigation both on regulatory aspects and following either violation of competition laws or resulting from the enforcement of patents that are later found invalid. We may also see mass claims initiated by healthcare insurers, patient groups or other third parties.
