Words by Isabel O’Brien
Recession resilience is coveted across all industries, and the pharmaceutical industry is in a stronger position than most to weather economic turbulence. Whether the world is being tested by a housing market crash or a global pandemic, diseases will always exist and patients will always need treatment. But how ‘recession-proof’ is pharma, and what challenges has COVID-19 posed to this famously robust industry?
“Pharma companies might be generally more resilient to this crisis than other businesses, as they are less exposed to the macro economic environment,” says Anthony Bruce, Pharmaceutical and Life Sciences Leader, PwC UK. “Looking back at previous recessions, revisions in earnings for the industry are half of what you see for the rest of the market.”
Since the industry is not affected by typical recession triggers, including changes in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy, pharma often avoids having to perform the same cutbacks as other industries in times of economic downturn.
The pharmaceutical industry is less dependent on typical economic cycles and fluctuations than most sectors
“The pharmaceutical industry is less dependent on typical economic cycles and fluctuations than most sectors because we are serving high, unmet patient needs – a mission to be proud of,” corroborates Andrius Varanavičius, Chief Financial Officer Canada and Europe, Takeda. Although companies may not be at the mercy of the changing whims of external forces, “Instead, the performance of pharma companies tends to be driven by product lifecycles and the breadth and quality of innovation,” says Varanavičius.
Innovation is particularly relevant in the downturn caused by COVID-19, with companies failing to innovate in-house or through partnerships, at risk of being left behind. “Innovation will be particularly key to success. Larger life sciences companies have to be proactive early on in the development cycle, in order to ensure that they’re in a position to support highly innovative companies to maintain the productivity of the industry pipeline,” says Bruce.
Digital health solutions are key to any profitable strategy: “Digital health solutions such as telemedicine, patient-centric apps, and innovative payer solutions will come into their own,” says Varanavičius. If pharma can compete with large technology companies who are rapidly developing these solutions, this could bolster both their short-term and long-term durability.
Beyond increasing capabilities to create the technology itself, the industry will have to make digital solutions work two-fold. “The evolution and innovation of the digital ecosystem provides a unique opportunity to collect real-world evidence to substantiate the value our products bring to patients. This also provides a feedback loop into our R&D engine, which allows us to focus on the future so that we can continue to bring solutions to patients that go beyond treatments,” continues Varanavičius. The value of data insights should not be underestimated, as these will help pharma prosper during these uncertain times and beyond.
While global recessions may provoke survival of the fittest across industries, pharma is often relatively unharmed by wider economic downturns. As Bruce concludes: “The industry still has its issues, but companies have increased resilience through future-proofing and are in a much better place. Regardless, they continue to be attractive for investors, not least because whatever the economy is doing, the demand for medicines does not decline.” Recession resilience is in pharma’s favour, but adaption and innovation are needed to uphold this resilience for the sake of patient populations worldwide.