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July 27 — Nine in 10 life sciences companies identify drug pricing pressures as a considerable risk, according to a new report.
Other, more established, issues ranked higher than drug pricing pressures in the 2016 BDO Life Sciences RiskFactor Report, with competition and consolidation in the industry, federal and state local regulations and intellectual property (IP) infringement each being the concerns of 100 percent of the life sciences companies surveyed.
But the professional service firm BDO USA LLP singled out in its report the high ranking of drug pricing pressures. In previous reports, it was lumped in with other issues such as consolidations. But this year the response was such that BDO broke it out separately.
“While investors appear to be more risk-averse than they were during this time last year, breakthrough innovations almost always reap dividends. But, for the time being, drug pricing remains the elephant in the room,” Ryan Starkes, BDO assurance partner and leader of its life sciences practice, said in a statement.
The high cost of some drugs and biologics—the average wholesale price of Astellas's prostate cancer drug Xtandi is $129,000 a year—has drawn increasing public outcries and the attention of Congress (10 LSLR 07, 4/1/16).
However, while some life sciences companies may be worried about drug pricing pressures, some appear to have moved beyond worry and are putting the blame elsewhere.
Matt Gorman, strategic campaign communications director for the Biotechnology Innovation Organization, told Bloomberg BNA in a July 27 e-mail: “Not only is BIO committed to showing the value of biopharmaceutical innovation, but also setting the record straight when politicians, insurers, or the media attempt to distort the facts about our industry. The fact is that the net price growth of branded drugs is on par with inflation and prescription drugs still make up just a fraction of overall health spending.”
BIO represents more than 1,200 biotechnology companies, academic institutions, and state biotechnology centers in the U.S. and 30 other countries.
At the BIO International Convention in San Francisco in June, BIO President and Chief Executive Officer Jim Greenwood said in his keynote address, “During this election season, our industry has become an easy scapegoat for the real and growing problem of patient access to affordable new medications. My friends, we are fighting back. Millions of patients are counting on us to deliver the next miracle drug. If our ability to innovate is extinguished, so is their hope.”
Greenwood added, “You and I know the innovation ecosystem is complicated, but our critics are using this complexity to vilify us. It's time we simplify our case. That means using the best argument at our disposal: We're saving lives.”
The BDO report examined the risk factors cited in the most recent annual shareholder filings of the 100 largest publicly traded U.S. life sciences companies, which BDO defines as pharmaceutical, biotechnology and medical device companies listed on the Nasdaq Biotechnology Index, by revenue. The risk factors were analyzed and ranked in order of frequency cited.
All 100 companies in the analysis cited regulatory concerns as being a risk factor because the rapid growth of the life sciences sector over the last few years has drawn increased scrutiny from regulators. Eighty-six percent called for changes in health-care laws and regulations, which was up four percentage points from the previous year.
Ninety-seven percent cited reimbursement from third-party payers, including payments from Medicare and Medicaid, as a risk factor, indicating that the shift from fee-for-service to value-based care, set in motion by the Affordable Care Act, is forcing life sciences companies to reevaluate how they price their products.
Eighty-nine percent cited drug pricing pressures as a risk factor, and the report noted that these concerns appeared to be seeping into other issues noted in the report.
“Pricing pressures further complicate a sector already under financial strain, thanks to a lackluster IPO [initial product offering] market and market volatility,” BDO said, referring to report results indicating that 94 percent of life sciences companies identify volatile financial results, including stock prices, as a key threat.
Additional findings from the BDO risk factor report include:
“But while the pace of IPO activity remains well behind the average for the past decade, the 2016 BDO IPO Halftime Report found that 66 percent of capital markets executives predict the health care sector, including life sciences, will generate the most offerings during the remainder of this year,” Starkes said.
“Amid market turbulence and a difficult IPO environment, the life sciences sector has also experienced a few bright spots in M&A activity as well as promising research and product developments,” Starkes said.
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The BDO risk factor report is at http://src.bna.com/hcz.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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