While the Covid-19 crisis has crippled sectors such as transportation and non-food retailing, the pharmaceutical sector has been cashing in on continued demand for the development and supply of treatments by healthcare systems around the world. Even before the crisis, the drug industry benefited from strong government support and this has actively boosted global drug sales. We expect them to hit USD928bn in 2020 and USD985bn in 2021, representing a growth rate twice as high as the average of the market over the last decade.
However, the Covid-19 pandemic has changed the way that healthcare is delivered as lockdowns brought about a surge in online healthcare adoption and remote consultations. As rules about these new practices still need to be issued by regulators, it might take some time before governments and insurers allow any physician - except perhaps for a patient’s regular general practitioner - to offer telehealth services. An additional hurdle for the sector is related to the rollout of the (future) Covid-19 vaccines and rethinking global supply chains as the pressure to ‘reshore’ drug production has risen during the pandemic, which unveiled the world’s reliance on China for many active pharmaceutical ingredients (APIs), including paracetamol, due to its cost-competitiveness. There is actually a growing risk that governments could try to reduce medical imports using trade barriers, regulations and incentives to encourage the development of domestic pharmaceutical supply chains in the years ahead.
Moreover, drug makers also have to cope with governments’ tightening cost controls over drug price-fixing. This is especially the case for the ongoing Covid-19 vaccine(s) as Big Pharma struggles relentlessly to overcome political hurdles related to drug price gouging. On top of drug makers’ reluctance to discuss how wide Covid-19 vaccine prices might range, the pricing of all vaccine – medicines incl. - deals has always been shrouded in secrecy. The price of a future Covid-19 vaccine may range from USD3 to more than USD30 a dose, depending on where and how it is manufactured and by whom - either private groups or state bodies - it is bought. As higher production costs are no longer the only argument to justify the price difference between a Western drug maker and that of a low-cost country, pharmaceutical groups have been under growing pressure to work with wealthy countries on a cost cap for the less well-off, even if some vaccines cannot be sold too cheap. For example, mRNA vaccines for Covid-19 such as those from Moderna and the Pfizer and BioTech partnership are more expensive to manufacture than vaccines based on an adenovirus vector, such as the shot developed by AstraZeneca and Oxford University. So the pharmaceutical sector could become uncomfortable with spending high amounts on R&D if its enviable pricing power is dealt with by legal regulatory frameworks rather than by laboratories themselves.