Deloitte 2016 Global life sciences outlook
Moving forward with cautious optimism
by Deloitte Touche Tohmatsu Limited.
Overview and outlook
The life sciences industry has fared well in past economic recessions but how is it performing in today’s volatile marketplace, one characterized by economic uncertainty, reform-driven pricing pressures, increased demand for innovation and value, more focus on the consumer and consumer engagement, and an ever-changing regulatory and risk environment?
The life sciences sector’s growth correlates highly with countries’ general economic strength and health care spending levels, and both of these vary widely around the globe. The Economist Intelligence Unit (EIU) reports that health care spending in the 60 countries that it covers rose by 2.6 percent in nominal U.S. dollar terms in 2014 but that spending is forecasted to dip in 2015, reflecting the current weakness of the euro and other currencies against the U.S. dollar.1 And while spending growth is expected to pick up beginning in 2016, the pressure to reduce costs, increase efficiency, and prove value remains intense. Because of these contradictory trends, global health care spending is expected to increase by only an average of 4.3 percent in 2015-2019, more slowly than it did before the 2009 recession. Spending as a percentage of GDP is also expected to decline, from around 10.3 percent in 2014 to 10.1 percent in 2019.2 Per- head health spending is projected to increase from $1,145 in 2014 to $1,412 in 2019. However, spending levels will vary greatly among developed and developing countries, ranging from $11,038 in the United States to just $58 in Pakistan.
Entering the second half of this decade, most life sciences organizations appear to be adopting an attitude of cautious optimism. Significant opportunities exist in the global marketplace but challenges exist, as well. Spending growth in pharmaceuticals (pharma), biotechnology (biotech), and medical technologies (medtech) is projected to follow an upward trend due to increasing demand, but pricing challenges are still an issue. Industry margins are being eroded by high discounts, retail sector price controls, public sector purchasing policies, and the move to value-based care. Strong economic growth looks hard to come by in many countries; therefore, assumptions on health spending may need to be revised downward. In response to today’s dynamically changing clinical, regulatory, and business landscape, pharma, biotech, and medtech companies are re-evaluating and adapting traditional research and development (R&D), pricing, supply chain, and commercial models.
This 2016 global outlook reviews the current state of the life sciences sector; explores trends impacting markets and organizations; provides regional perspectives; and suggests considerations for stakeholders as they seek to grow revenue and market share.