Pharma Outlook 2025

One might think things are going well for the pharmaceutical industry: Hemgenix for the treatment of hemophilia B came onto the market at a launch price of $3.5 million, securing the title of the most expensive drug ever. GLP-1 appetite suppressants, known as weight loss injections, are selling like hotcakes and generating billions of dollars in sales for manufacturers. And high-priced drugs costing more than €3,000 per pack account for almost €15 billion a year in Germany, nearly a third of all pharmaceutical expenditure by the statutory health insurance system.

$350 Billion Patent Cliff

Indeed, many pharmaceutical executives are quite optimistic about their business expectations in 2025. However, it cannot be overlooked that industry in Europe and the US is facing challenges that have never been seen before in this combination. In its report “Biopharma trends 2025” the Boston Consulting Group (BCG) points out that pharma is fast approaching a steep patent cliff, as drugs representing some $350 billion in annual worldwide revenues will lose their exclusivity (LoE) from 2025 through 2030. Within this, the top 20 pharma companies account for 80% of this revenue loss.

This includes several mega blockbuster brands losing exclusivity by the end of the decade, e.g., Keytruda, Gardasil, Eliquis, Jardiance or Opdivo. Markus Gores and William Harries, Vice President and Engagement Manager at IQVIAs EMEA Thought Leadership team, predict that further LoE events in the early 2030-ies are expected to result in another $200 billion of revenue exposure for the industry: “This imminent patent cliff creates an imperative to start replenishing revenue now.”
In addition, many pharma managers view competition from generic drugs and biosimilars as a top trend. Furthermore, the period of market advantage for new drugs is shortening as rapid innovation fuels heated competition in key disease areas, says BCG. “Treatment paradigms are evolving quickly as new therapies with varying mechanisms of action (MoAs) come to market in rapid succession.”

Rethinking R&D Strategies

In this environment, however, the question arises as to whether biopharma development departments can bring new active ingredients to market quickly enough and in sufficient quantity and quality. In its “2025 life sciences outlook”, accounting and consulting firm Deloitte points out, that declining R&D productivity is a significant industry concern. 56% of biopharma executives that have been surveyed by the company said their organizations need to rethink their R&D and product development strategies over the next 12 months. Nearly 40% emphasized the importance of improving R&D productivity to counter declining returns.

Concern about US Regulations

And the list of challenges continues: C-suite executives identified pricing and access to drugs and medical devices as significant issue facing the life sciences industry. Bill Coyle, author of the management consulting and technology firm ZS, sees pressured health systems, demographic shifts and hostile policy as a potential burden for the industry.  
Fittingly, according to the Deloitte US Center for Health Solutions, about one-third of life sciences executives expressed concern about potential changes to US regulations in 2025, while 37% are apprehensive about global regulatory changes and geopolitical uncertainties.
Indeed, the unpredictable policies of the Trump administration are a big unknown for pharma and biotech. According to IQVIA experts Gores and Harries this has the potential to create significant headwinds for dealmakers, for example, the exact details of future health policies; a shakeup of the FDA — at the beginning of April, the US government laid off 10,000 employees from the most important health authorities, including FDA — ; US drug pricing, including possible amendments to the Inflation Reduction Act (IRA) or the introduction of new measures to bring down the cost of medicines for Americans. Also worth mentioning here are tariffs and their impact on global trade, economic growth and inflation. Furthermore, the US-China strategic rivalry or the wider deglobalization might be a challenge.

On the other side, these US political changes are not necessarily negative, argues the research firm Evaluate Pharma. “A less hawkish Federal Trade Commission should inject life into a moribund M&A market, hence the expectations for a pickup in dealmaking. … More IPOs and M&A are good news for venture investors, and private financings are also seen rising in 2025.”
In addition, China is rapidly emerging as an innovation hub, posing opportunities for sourcing innovation. At the same time, seizing its potential as a commercial market is becoming more challenging because of the potential introduction of new tariffs and trade barriers.

Germany — a Special Case

If we look at the German pharmaceutical market, there are some special features. “Like the rest of the economy, the pharmaceutical industry is also suffering from the structural problems in Germany as a business location”, says Kai Joachimsen, Managing Director of the Federal Association of the Pharmaceutical Industry (BPI). “We currently have a bad quartet of excessive bureaucracy, a shortage of skilled workers, high energy costs and a crumbling infrastructure. In addition, pharmaceutical policy needs to become much more innovation-friendly again. Generics production in Germany must also become worthwhile again.”

AI Likely to Drive Changes  

Despite these challenges, there are also bright spots on the pharmaceutical horizon. Industry experts largely agree that technological advances, most notably Artificial Intelligence (AI) and new translational models, will accelerate drug discovery in coming years. For example, Deloitte points out that digital transformation remains a key focus in the life sciences industry, driven by advancements in cloud computing, generative AI, and other digital technologies. “These innovations provide companies with new opportunities to enhance their products, services, operations, and strategic decision-making, according to survey respondents.”

BCG says: “The ability of AI to analyze vast data sets quickly, screen compounds, and design potential drug candidates could help shorten timelines and reduce the cost of preclinical activities, giving companies with strong AI capabilities an edge over those using traditional methods.”
In this context the World Economic Forum points out, that by 2025, it is estimated that 30% of new drugs will be discovered using AI. “AI is not just another tool for data analysis; it holds the potential to completely transform the drug discovery and development process by identifying potential drug candidates and understanding efficacy. We are moving towards an era of personalized treatment which will be greatly facilitated by AI.”
Spending on AI in healthcare is projected to reach $188 billion by 2030, representing a 37% compound annual growth rate from 2022. Bill Coyle, ZS: “It’s hard to argue with investing in gen AI when you see it can diagnose cancer with 96% accuracy or that it outperforms nurses on critical tasks at a fraction of the cost. While more needs to be done to ensure patient safety and enable broad adoption, AI’s potential is incredible.”