In today’s venture capital climate, technology for the pharmaceutical industry is recession proof

Of the top 20 global pharmaceutical companies, ranked by 2021 revenue, 19 derive the bulk of their sales from specialty drugs. Overall, 55% of pharmaceutical revenues are generated by specialty drugs. This fundamental fact about how prescription drug companies make money is largely lost to the general public, but it’s instructive to understand how the industry as a whole works and why it’s relatively low. recession proof.

Take Johnson & Johnson. In February last year, the US Food and Drug Administration cleared its Covid-19 vaccine for emergency use. This vaccine accounted for $2.4 billion in sales in 2021, an exceptional figure whatever the year. Still, the vaccine wasn’t J&J’s main driver in 2021; its specialty cancer drug Darzalex generated $6 billion in sales. All of J&J’s oncology offerings have combined to generate over $14.5 billion in sales. Stelara, which is used to treat the symptoms of two incurable diseases (psoriasis and Crohn’s disease, which can sometimes lead to life-threatening complications), alone recorded $9.1 billion in sales. Overall, Johnson & Johnson recorded $93.77 billion in global revenue in 2021, an increase of more than $10 billion from 2020. Its pharmaceuticals division led the way ($52 billion), but not for the reason that many might assume.

Specialty drugs are estimated to have reached 50% of all drug spending in 2020, a figure that has increased significantly over the past decade. Yet it is estimated that these drugs are only used by 2% of the population each year. The gap between usage and revenue is only growing. The rising cost of specialty drugs is at the forefront of this trend, but it is not the only driver.

The role played by pharmaceutical innovation is considerable. In 2020, the Food and Drug Administration approved its second highest annual total of new molecular entities on record. The 53 drugs included treatments for lung cancer, Ebola, HIV and a diagnostic agent for patients with Alzheimer’s disease. According to a 2021 study published in the American Journal of Health System-Pharmacy, as the FDA continues to approve many new specialty drug therapies, we can expect substantial and ongoing clinical and financial impact. Innovation is a constant in medicine, but its impact is felt above all in the specialty drug market.

The result is therefore an incentive for the pharmaceutical industry to ensure that patients have access to the medicine in which they have invested so much time and money. In times of economic recession, this might be easier said than done. Patients’ money is limited. Prescription drug manufacturers are aware of ease of access issues. One recently filed a $100 million lawsuit against a drug benefits manager, alleging he abused a drug financial assistance program for patients. By investing more in patient assistance programs and patient access technologies to ensure that no covered patient gets lost in the mess, manufacturers hope to remove financial barriers to expensive drugs.

However, just getting to the point of receiving therapy requires a long and painful journey for patients, with many opportunities for quitting along the way. Accessing and purchasing life-saving and life-enhancing medicines is a complicated challenge that patients are willing to endure, but a challenge nonetheless. A recent survey found that 84% of specialty drug providers struggle to get patients started on their complex medications. Pharmaceutical companies are estimated to have recorded $76 billion in lost revenue opportunities due to access issues. The specialty drug ecosystem involves an expensive, complex and disjointed journey for patients through their suppliers.

These factors persist regardless of economic conditions. Specialty drugs are effectively resisting the recession. That’s why the influx of venture capital into PharmaTech should come as no surprise. Entrepreneur Mark Cuban created Cost Plus Drugs to “disrupt the pharmaceutical industry and do our best to end ridiculous drug prices.” GoodRx, which operates under a similar mission, went public in 2020 and is reportedly valued at around $15.7 billion. Startups that integrate with providers to drive patient uptake have also secured venture capital funding in recent years. In theory, companies like these can help bridge the gap between patients and the specialty drugs they need.

While the cost of generic drugs is falling, the pharmaceutical industry is seeing a billion-dollar spin-off from its innovative specialty drug offerings. Yet access to medicines remains a major problem. This is a problem that the pharmaceutical technology industry is about to solve.

Photo credit: Eightshot Studio, Getty Images

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