Read our Therapeutics Market Update for our insights on the sector this quarter.

In our view, the pharma industry is under increasing pressure to accelerate organic and inorganic innovation in the face of heavy sales headwinds in the coming years. There is a looming “patent cliff” with the top 20 biopharma companies collectively facing as much as $180 billion of potential revenue headwind over the next five years. Also, we see an ongoing downward pressure on drug pricing from the Inflation Reduction Act (IRA). And, in our view, any downward pressure on Medicare pricing could have a ‘ripple’ effect on commercial pricing as well.

Key Takeaways

• The passage of the One Big Beautiful Bill (OBBB) Act in July 2025 has expanded the existing favorable regulatory treatment of “orphan” drugs. Previously, the IRA exempted orphan drugs with a single indication from the IRA Medicare price negotiations. Now, under the OBBB Act, all orphan drugs are exempted, regardless of the number of indications. This is highly relevant in growth areas like oncology where drugs commonly have multiple indications.

• President Trump continues to talk about potential tariffs on pharma imports. However, media reports suggest that the administration is still “weeks away” from announcing any details on a pharma tariff plan. We are hopeful that any pharma tariffs would be structured in a way to avoid disruptions for patients. We are particularly concerned about potential shortages of generic drugs since generic manufacturers are already operating with razor-thin margins and are heavily reliant on foreign raw materials.

• We have heard a mixture of excitement and concern about the news that the U.S. Food and Drug Administration has launched a new generative artificial intelligence (AI) platform (called Elsa). In our view, this could change how the industry interacts with the FDA in positive, negative, and unexpected ways going forward.

We hope you find this information valuable. If you’d like to discuss further, please reach out to our Research team.

Compare to our Q3 2024 Pharma Market Update here.