Biotech companies should work more closely with payers to demonstrate the value of new drugs, in order to reassure nervous investors and pave the way for future growth, EY said in its annual industry report released today.

Beyond Borders: Returning to earth noted that the biotech industry generated record revenue, net income, financing, and deal value last year—but that many of these measures grew more slowly than in previous years, suggesting that the industry’s fortunes have reached a peak.

Biotech growth, the report added, is increasingly being challenged by numerous pressures on the price of medicines. Key among them is growing pushback by insurers to paying what drug developers are seeking for new and existing treatments. Payers are among stakeholders in healthcare—along with governments and the public—to which biotechs must do a better job communicating the value of their drugs, EY said.

A potential solution, according to Beyond Borders, is for biotechs to negotiate more contracts with payers in which reimbursement is tied to data on outcomes data. Such contracts have until now been more common in Europe, where single-payer state-run healthcare systems have long clashed with developers over drug prices.

Drug companies will increasingly move beyond the defensive posture of settling for such agreements, toward actively seeking agreements with payers, Glen T. Giovannetti, EY’s gGlobal life sciences leader, told GEN.

“As we look at this becoming more of the norm, we think companies will end up looking at this more strategically and playing offense, and saying, ‘we need to have a strategic relationship with a payer,’” Giovannetti said. “This will be more long-term, and less transactional, because this is the reality companies face: ‘We’re going to have to justify on a real-world evidence basis the value of our products.’”

While the healthcare system has yet to catch up to outcomes-based contracts being the norm, Giovannetti predicted that reforms toward encouraging such agreements will continue: “They’ll have to, because of the unsustainability of the current economics.”

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