Successful vaccine programs have materially blunted the immediate threat of Covid-19. However, the pandemic has left an unprecedented backlog, not just in elective care procedures, but also in more life-threatening scenarios. The sector’s attractions include exposure to long term demographic trends like growing populations and increasing life expectancies. Complex regulatory regimes and technical complexity often result in high profit margins and daunting barriers to entry.
Companies who develop therapies for rare or ‘orphan’ diseases can enjoy further protections and incentives, and have been able to charge very high prices. But this comes with lots of risk and costs.
Expected US legislation (already ratified by the Senate) means the pricing of new therapies, as well as price rises on existing approved treatments, will come under pressure. The development process is long, expensive and has a low hit rate. Typically, drugs take at least ten years to develop and these costs can push into the billions. Most drugs that make it through pre-clinical evaluation never reach approval.
But the stakes are high. Blockbuster drugs can generate billions of dollars over their lifetime.
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