If you are a business executive in life sciences and have difficulties resolving recent policy statements, you are not alone.
The problem stems from a seemingly competitive position: the government is proposing tariffs at the same time as the price cap.
Putting aside the politics of this situation for the time being, let’s explore how some of these policies actually work in reality and how they influence industry decision-making.
One prediction: The main factor may incentivize manufacturers to cut down on advertising and field forces, further leaning towards omnichannel audience participation, and further along the path of lifting payers through direct sales.
Situational Analysis
Let's check what drugmakers are facing. In March, President Donald Trump pledged import tariffs on the department. Since then, his tariffs on the industry have increased, which could escalate up to 250% in 12 to 18 months. Reuters reported last Wednesday that the pending results of the government's Article 232 investigation into pharmaceutical imports could continue until “within a few weeks.”
New taxes (if they do come) will reach the following categories:
•More than 60% of drugs imported from finished products
• Nearly 90% of APIs from branded products overseas, including the EU, UK, India, Singapore and Australia
•There is a treatment area with centralized offshore manufacturing, no recent dual procurement
As a result, trading group PHRMA warned that U.S. drug prices could be as high as 13%, thus undermining patient opportunities. Again, any additional costs may also be absorbed elsewhere in the system, such as through copayment limits or patient assistance programs.
The logic is that tariffs aim to incorporate manufacturing into the United States, thus reducing reliance on other countries to supply drugs. Despite the promises announced by several companies, it will take years to build and verify the FDA's new manufacturing plant.
Another White House policy the industry must argue is the most popular country (MFN) drug pricing issued in May. Pharmaceutical companies must lower drug prices by September 29 to be consistent with prices in other countries, the president said. However, it is not clear whether the instruction can be executed.
constraint
There is still a lot of uncertainty around tariffs. Assuming a certain level of tariffs will pass, manufacturers' profits will become lower, perhaps lower, as they absorb a portion of the tariffs through lower gross margins and delayed price measures.
In the past, the natural tendency was to raise prices. However, this increase is severely restricted by government regulations (even before the MFN) and the vast majority of commercial payer contracts that require some price protection. The only unrestricted course of action in price is that for new products, they must be launched at a higher level than comparable precedent brands.
In addition to pricing restrictions, most elements of P&L are included: Pharma p&L are fixed in the short term.
R&D expenditures cannot control business anyway, roughly the same. As for manufacturing, any new factory, even for packaging only, will take at least five years.
Almost all gears (the cost of selling goods) come from overseas and are subject to tariffs. The only important leverage left is SG&A (selling, general and administrative expenses).
resolution
SG&A cuts could result in business executives reducing sales and marketing totals, which could be in line with the quantity of tariff rates and cuts in advertising purchases or on-site investments. However, the best actions seem to be more inclined to omnichannel engagement.
The life sciences field is shifting to omnichannel engagement (with leaner sales power and personalization), which can allow pharmaceutical marketers to toggle and dial down when needed.
Another area where business leaders can deepen their existing commitments involves the increase in “direct action”. The stable pharmaceutical specialist has chosen to sell its drugs directly to patients.
Last month, AstraZeneca said it was weighing plans like this. This is after Pfizer's previous commitments and those of companies such as Eli Lilly and Abbvie.
For prescription and fulfillment, some companies are reaching agreements with Ro and Hims & her telemedicine company. They also launched their own DTC platforms such as Pfizer Forall and LillyDirect.
Selling treatment directly to consumers can bring costs. These services do this by bypassing pharmacy benefits managers (PBMs) and eliminating drug offers (i.e. discounts, discounts and fees) taken by PBMS and other intermediaries such as insurance companies, wholesalers and pharmacies.
The cost of these concessions accounts for about 20% to 30% of the branded drug price. If Pharma Company's other balance sheets are squeezed, it may be a target.
Furthermore, pharmaceuticals feel politically stressed to pursue direct channels. Last month, a letter sent by the government to 17 drugmakers asked them to implement a direct-to-consumer distribution model for large volumes of high rebate drugs.
Next
According to news reports, the company may be ROX's company, whose RX drug portfolio consists primarily of specialized treatments in areas such as multiple sclerosis, eye diseases and cancer. These categories have traditionally been associated with DTC sales.
If Roche adopts direct sales in the United States, it would be an unprecedented move. However, in limited environments, gears will increase with flexibility in price, and if that means capturing an average saving of 30%, the drug CEO may be willing to put precedents on hold.
With the final scope and time of tariffs, the government ended its Section 232 investigation, looking for other pharmaceutical companies to start taking the direct path, reducing fixed costs such as sales forces, and increasing omnichannel use. These will be further proof to show that what may have happened is.
Editor's Note: Neither the author nor her company has any relationship with the mentioned company/product.
As CEO, Adrienne Lovink leads Beghou's next growth phase and works with his reputation as a trusted commercialization partner in the life sciences. She focuses on expanding into new areas of customer needs; advancing company data, AI, analytics and technological innovation; and investing in its people and culture. Adrienne has over 25 years of experience working with pharmaceutical and medical device companies to advance commercialization, market acquisition, forecasting, digital health, real-world data and advanced analytics, including as a partner at Trinity Life Sciences and global leader in real-world data and advanced analytics for DRG/Clarivate.
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