The 41st annual JP Morgan Healthcare Conference came and went in this year’s usual flurry of activity, as healthcare and life sciences industry leaders gathered in San Francisco to present the most pressing issues and trends facing investors in the coming year. This is the first time the annual conference has been held in person since the start of the COVID-19 pandemic.

Healthcare and life sciences industries experienced a tough 2022 due to stalled IPOs and falling valuations. Many companies found themselves at the end of their cash runways and were left with the difficult choice of seeking financing at lower valuations or cutting jobs to keep the lights on.

However, 2023 has a bright outlook. Big Pharma is now looking for innovation to replenish IP portfolios, and investors are seeing the promise of M&A and other strategic collaborations on the horizon.

Following another insightful conference this year, these are some of the key legal contract trends to expect from the healthcare and life sciences industries in 2023.

Loss of exclusivity will lead to compromise

Many large pharmaceutical companies face the loss of regulatory exclusivity or patent protection for their most attractive products and will lose significant market share to generic and biosimilar competitors. Pharma companies are pursuing various strategies to fill their stifling revenue gaps, whether it’s rebalancing their IP portfolios or moving new blockbuster products into research and development (R&D) pipelines.

But pharma companies are also moving towards business development. For biotech companies sitting on innovative products and potentially in need of a cash infusion, M&A or other strategic collaborations are also on the table. However, deal terms will likely be determined by how far along a product is in the R&D process. As early-stage product acquisitions pick up steam, risk-allocation will be key. This means we will see more contingent fee structures and contract terms that address potential regulatory and approval hurdles.

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FDA accelerates approval program enforcement

The Federal Drug Administration (FDA) has been criticized for its administration of the Accelerated Approval Program, which allows drug manufacturers to obtain expedited approvals for drugs that meet an unmet medical need. Although confirmatory tests are required to establish a drug’s benefit after initial approval, the FDA has not historically imposed obligations to complete certain tests, nor has the FDA always required drug manufacturers to remove a product from the market after a test failure.

But the winds of change are here. Expect improvements to the FDA’s expedited approval process in 2023, with greater emphasis on timely confirmatory trials of drug indications after expedited approval. And although a failed or inconclusive test may not automatically warrant pulling a product from the market, the FDA can also press for a product recall if drugmakers fail to conduct timely tests.

Focus on health equity and value-based care

If the pandemic has brought one thing to everyone’s mind, it’s how inequities in access to care and other social determinants of health can affect patient outcomes and health care costs. As the market is also shifting to value-based models, organizations are moving toward a holistic, integrated approach to patient care. Investors are seeing the benefits of pursuing health equity and quality, which can ultimately reduce costs, reduce risk and improve patient outcomes.

Life science companies are also moving to a diversity mindset for R&D. For example, recent developments in mental health treatment, such as those targeting post-partum depression and schizophrenia, are filling gaps in care for previously marginalized groups.

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Going into 2023, M&A will begin to shift to organizations that champion quality and equity strategies aligned with investor objectives. Strategic collaboration may be another viable option for organizations pursuing innovative new models and care integration. Health sciences companies and acquirers also need to consider how value-based care models may impact financial risk and the marketability of a product or service as they evaluate the potential of a deal.

Photo: zimmytws, Getty Images

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