As the New Year is fast approaching, we asked members of our international Life Sciences team to share their predictions of what will be the key issues facing the industry in 2024. Please find our summary below, including the latest market trends and key innovation, compliance and ESG challenges that could impact your business. We hope you will find it an insightful read over the holiday season.
Show me the money
Venture capital in the life sciences sector is likely to continue although not quite at 2021 rates, with a focus on quality assets. Private equity investors are also likely to remain active in this space especially in areas where they can identify the opportunity for growth and innovation.
Divest to impress
With an increasing focus on core assets, divestures continue to create value and allow large groups to refocus. Recent high profile spin outs include the consumer health divisions from GSK/Pfizer (creating Haleon) and J&J (creating Kenvue) as well as the spin out of GE HealthCare from GE. Sanofi is the latest to this trend, looking to spin out its consumer health division as early as Q4 2024.
Funders fuelling growth in class actions
Class actions continue to grow across the EU and the UK in both product liability and securities litigation, with third-party funding a key driver. In the UK, the PACCAR judgment rendered funding agreements potentially unenforceable but 2024 should see this resolved through new legislation and commercial terms, meaning group actions will remain a challenge for life sciences companies.
Excessive drug pricing
With healthcare budgets under pressure, governments are keen to keep prices of pharmaceuticals low. If a competition authority believes that prices are excessively high and not in line with costs or prices of similar products, enforcement action can be taken. Initially, the authorities’ focus was on rather extreme cases with specific fact patterns, such as monopolist products having gone off patent, the company responsible for the very considerable price increase was not the originator and had not invested in R&D, and this company was threatening to withdraw the product from the market if the price increase was not accepted. More recent activity from competition authorities shows that they are taking a broader approach and are increasingly looking critically at prices set by originating patent-owners for new and innovative products.
Generics and biosimilars beware
Competition authorities across the world continue to look critically at any measure put in place by originators to continue benefiting from protection offered by patents after the patent has expired. Strategies to deal with loss of exclusivity or so-called life cycle management are as such not a problem, but companies should be careful not to deploy any practices that may be seen as hindering market entry by generics or biosimilars in an anti-competitive manner.
Spotlight on supply chains
The last few years have seen supply chain turbulence; a global chip shortage, unprecedented prices of raw materials and more. It has demonstrated the importance of having contractual mechanisms in place to cater for these eventualities, to facilitate business continuity. In a time where supply shortages are highly possible, contractual flexibility will likely be much better than companies having to rely on the more nuclear button of dispute or termination.
A pivotal time for EU pharma reform
On 26 April 2023, the European Commission adopted a proposal for the most significant reform of EU pharmaceutical legislation since 2004. The proposal comprises a new directive and regulation, aiming at profoundly reshaping the existing EU regulatory framework for medicinal products (see our article here). 2024 will be significant as the European Parliament and the Council delve into the approval process.
2024 and beyond in healthtech – where innovation meets regulation
Healthcare companies will leverage AI for a broad range of uses including personalising medicine treatment plans and optimising workflows. Telehealth services will be expanded to deliver end-to-end healthcare for many health issues (including, in time, delivery of medicine via drones, which is being trialled). Also in development are augmented and virtual reality systems for the training of surgeons and other professional health workers. Against this background, companies in this area will have to be mindful of increased regulation, including reforms to privacy laws in a number of countries, the adoption of the AI Act in the EU as well as more comprehensive regulation of aspects of HealthTech, including telehealth.
The global tidal wave of data regulation continues
In Europe, the soup of new laws which have some connection to privacy and data regulation continues to thicken. In 2024 companies will be working on implementation of the Data Act, getting to grips with the final text of the AI Act, and tracking the continued progress of the Health Data Space Regulation. The AI Act will include a transitional period and ultimately apply to the vast majority of AI systems used in medical devices. In the US, new threads are added to the complex patchwork of state privacy laws on what feels like a continuous basis and the deadlock in Washington means the harmonising solution of a federal privacy laws remains unlikely. In other parts of the world, GDPR-inspired data privacy laws continue to take shape, with Saudi Arabia and India being the latest major examples of countries where companies will need to extend their privacy compliance programmes in 2024.
As the life sciences sector, and the world, embraces AI technologies (see our recent article), there will be a sharp increase in patent applications in which AI has made an inventive contribution to the claimed invention and/or is referred to in the patent application, whether in the body of the specification or its claims. We also expect to see a rise in decisions from patent offices and courts around the world reassessing many fundamental patent law concepts, and clarifying the metes and bounds of patentability, both for inventions in which AI has played a role, including those flowing from the worldwide DABUS litigation and decisions regarding the patentability of computer-implemented inventions, as well as for inventions in which it has not, due to the growing prevalence of AI in the life sciences sector and beyond.
Strategise your patents
The UPC is now just over 6 months old. In that time, over 16,000 requests for Unitary Patents have been received by the EPO with 11.5% relating to medical technology and 3.6% to pharmaceuticals. Ratification by further Member States and development of UPC case law (for example, the appeal of the 10x Genomics PI decision) should increase predictability and dependability of the Unitary Patent system and clarify the tests, thresholds, and approaches that will be applied by the UPC (see, for example, our recent article considering experimental evidence before the UPC). This in turn will lead to creative and novel approaches to patent portfolio management (both in litigation and commercially) through its use in combination with the EPC and national patent and court systems.
Data discovering drugs
AI has massive potential for accelerated scientific discovery. Drugs can take a decade to commercialise, cost USD billions and succeed only 10% of the time. The data handling power of machine learning could improve success rates and decrease time and cost exponentially, especially in the treatment of chronic and preventable global conditions such as obesity and Alzheimer’s which the World Health Organisation believes could cost more than USD 41 trillion by 2035. The logic for data driven drug discovery is compelling and capital flows are underscoring that: venture funding for healthcare AI solutions is set to reach over $10bn this year.
CRISPR causes a stir in the patent world
There has been a rapid expansion in the field of gene editing technologies, such as CRISPR, around the world over the last few years. This expansion has resulted in a significant increase in commercially viable therapies and patent applications. As a result, we expect to see a sharp increase in oppositions before patent offices and claims for patent infringement before courts relating to gene editing technologies and therapies, and in commercial transactions relating to the associated patents. Indeed, a string of recent patent cases relating to CRISPR technology has already occurred in the US and Australia, with those cases giving a clear warning that an early priority date will be critical for patent validity and enforcement, while a number of significant commercial transactions involving patents relating to these technologies has occurred recently.
The riddle of secondary use of data
Driven in no-small part by the increasing adoption of AI enabled technology, healthcare and life sciences will increasingly have to grapple with the challenge of how to lawfully re-use data, and in particular health data, for secondary purposes such as product development and the training of AI models. This can be a complex proposition in the face of data privacy laws. Long awaited guidance from the European Data Protection Board of the processing of health data might be part of a solution to this in 2024.
Compliance and ESG
EU Drives Healthcare Accountability: CSRD
The Corporate Sustainability Reporting Directive (CSRD) will impact 50,000 businesses in Europe by 2026, with a substantial impact on healthcare firms. To comply, companies must identify the impact of corporate activities on the environment and society and report relevant sustainability data across own operations and value chains, increasing transparency, promoting accountability and reinforcing sector commitment to societal well-being. Healthcare and life sciences companies will, indispensably and urgently, need to reassess how they drive essential changes to strategy, business model, governance, operations and data, to secure alignment and ensure compliance.
Whistleblowing continues to be a hot topic
Recent reforms include the EU Whistleblowing Directive and regulations in China which financially incentivise whistleblowing. Potential reforms are also on the horizon in the UK. We have seen a surge of whistleblowing activities on social media against healthcare corruption in China. Whistleblowing should therefore be high on the agenda in 2024. Healthcare and life sciences companies should ensure they have implemented robust whistleblowing programmes and that investigations into complaints are fully compliant with recent legislation.
ESG on the rise in Life Sciences M&A
In 2024, we expect ESG to become more relevant in the context of M&A transactions. In the aftermath of COVID-19, many life sciences companies have already adjusted their corporate and M&A strategies to use strong balance sheets to address imminent strategic ESG topics such as focusing on the security and resiliency of supply chains. We expect this trend to accelerate and for life sciences companies to increasingly use M&A as a tool to enhance overall performance from an ESG perspective as well as to add environmental expertise and capabilities. Aside from ESG’s impact on M&A strategy, it will also become more important when executing deals in the life sciences space. This particularly concerns the identification of the ESG impact of a transaction on the purchaser from a corporate strategy and capital structure perspective as well as the mitigation of risk in the due diligence phase, especially regarding crucial ESG topics like waste reduction, energy efficiency and the reduction of carbon emissions.
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