The Growing Flexibility of the Pharmaceutical Sector and Its Impact on Investment

Healthcare and health technology can often be thought of as a strong bet when it comes to investment. It has undoubtedly been a difficult couple of years for some venture capitals and private equity firms, with volatile economic environments and extended periods of uncertainty. Meanwhile, it could be argued that the pharmaceutical sector has managed to sidestep the Corona crisis.

Even before the pandemic , the Centers for Medicare and Medicaid Services projected that national health spending would grow at an average annual rate of 5.4 percent and reach $6.2 trillion by 2028. They reported that they expected national health expenditures to rise 1.1 percentage points faster than annual GDP on average. The health-related share of the economy was 17.7 percent in 2018 and was already anticipated in 2019 to increase to 19.7 percent by 2028.

Graph Source — https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/us-healthcare-spending-to-hit-6-2-trillion-by-2028-growth-set-to-outpace-gdp-57739003

Accelerating Innovation in Healthcare

The importance of the health sector in the economy became all the more dramatic with the outbreak of Covid-19. Companies that historically had been hesitant to embrace digital models due to restrictive regulations and red tape were spurred on to become somewhat flexible in their approach to new technologies. Whereas previous upgrades to technology may have been a “nice to have” option, the pandemic made them “must have.” Certain internal policies were potentially amended to allow for digitization as this became necessary. It became very important for firms to place a premium on expediting innovation to the greatest extent possible.

Companies that did adopt these new approaches managed to thrive during the pandemic and received much greater investment. Those that have invested in such companies helped change the world due to the vital research undertaken by these firms. In addition, investing in companies that have embraced these less-than-traditional models has the potential to make healthcare more affordable and to yield more substantial long-term returns.

So, what exactly have pharma and health companies been doing to move the industry forward faster?

The Growing Role of Digital Therapeutics

Pharmaceutical companies have been placing a greater focus on digital therapeutics, which will play a larger role in the treatment of certain conditions that traditionally may have been addressed with just a pill. For example, in the treatment of dementia and Alzheimer’s disease, technology that involves gamification is being made more readily available on tablets, and machine learning is helping customize therapeutic tasks for patients based on their own development and symptoms.

The Impact of Radiomics

In addition to this use of machine learning, radiomics, which are a way of using advanced mathematical analysis to quantify medical imaging processes, are being used to apply personalization to the way medications are developed. For example, patients with tumors will no longer need to be placed in general predictive categories that may not provide the most accurate prognosis. Instead, professionals will be able to have an easier time making specific, data-driven predictions in a more efficient and superior manner.

Precision Dosing

Pharmaceutical companies have been placing greater focus on precision dosing to improve patient drug treatment outcomes. Precision dosing is the process of individualizing medication doses by taking into account factors particular to each patient, such as demographics, clinical characteristics, and genetic data. Formerly, there had been a sort of one-drug-fits-all approach that was made for the so-called average person. Now, there is an ever-growing approach to treating and preventing disease that considers individual variability in each person’s genes, environment, and lifestyle. This allows for better predictions of the best strategies for treatment and prevention of specific diseases in specific people. As a result, we will begin seeing more affordable, targeted, and safe precision drugs as consumer education gets better and out-of-pocket together with R&D costs decrease. One example of such a company is Cingulate Inc:

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Virtual Care Becoming Mainstream

Virtual care has been improving, too. In the past, many a patient and physician may have been wary of conducting visits remotely. However, fueled by the necessities of the pandemic to socially distance or quarantine oneself, virtual healthcare, with all its conveniences and efficiencies, has become more welcome and accepted. This in turn will drive health IT, which can be greatly assisted by the pharmaceutical sector out of the desire to activate new business segments and improve its competitive advantage. Successful implementation of virtual care will result in transformation across four main areas for pharmaceutical companies: organizational prioritization, customer focus, enlargement of capabilities, and uncertainty of revenue streams.

Investment Requires the Right Team

With such an anticipated increase in healthcare demand and the growing relationship between healthcare innovation and information technology, we can expect to see further dramatic improvements in this sector. However, the exact nature of what to focus on requires the right expertise. Investors would do well to consult with a team of experts to ensure they obtain the best returns.