In the year ahead, the three main "developments to watch" in the branded pharmaceuticals sector will include COVID-19 vaccine scale-up and distribution, continued legislative and regulatory pushback against high drug prices, and robust levels of merger and acquisition activity, according to a new report from Moody's Investors Service.
Regarding vaccines, Moody's noted that Moderna Inc. as well as Pfizer Inc. and its partner BioNTech will continue to ramp up production of their COVID-19 vaccines and distribute them widely throughout 2021.
However, the vaccine race isn't without drawbacks. Merck & Co., Inc. recently said it would discontinue two vaccine-development programs after Phase I clinical trials revealed that they produced an underwhelming immune response to the novel coronavirus, representing a major setback for the manufacturer. The Moody's report also advised that "there remains execution risk in the scale-up [of successful vaccines] given the size of the undertaking."
Meanwhile, "legislative and regulatory risks focused on lowering drug prices will remain elevated" for pharmaceutical firms now that Democrats have gained control of the White House and Congress, the report predicted. In particular, there might now be enough support to enact changes to the Medicare Part D program.
As for the recently finalized rule that effectively eliminated rebates in Medicare Part D — which PBMs have already challenged in court — Levesque says it’s also not particularly good for the pharmaceutical industry. "Rebates have long been used as a tool to drive market share through formulary negotiations," he says. "Some products have market shares that benefit as a result of successful rebate strategies. Hence within any category there would likely be winners and losers if the rebate system is eliminated."
Finally, the report predicted that the "brisk pace" of pharmaceutical sector M&A seen in late 2020 will continue in 2021, highlighting the most likely acquirers as Merck, Amgen Inc., Johnson & Johnson and Bristol-Myers Squibb.