Next in pharma 2025: The future is now

Bold reinvention for the second half of the decade

With many CEOs doubting their business model can survive another decade, it’s time to change the game. Your choices today can position you for success amid the new realities of tomorrow’s pharmaceutical sector. We outline four strategic bets and a suite of capabilities to help you determine how your company can create value in the future.

Sector insights and imperatives for 2025 and beyond

Value in motion
Business model bets
Four essential capabilities
What you can do now

Stuck on repeat: Pharma value hasn’t kept pace

Seismic changes are underway across the economy in areas such as energy, agriculture, mobility and construction. Transformative technologies, a shifting US policy and regulatory agenda and changing societal expectations are reshaping how value is created. The pharma sector is not immune to the forces of disruption. Once again, the sector delivered lagging shareholder returns in 2024. The often-heard refrain of “we just need to execute” falls short of this moment’s demands.

A look at pharma’s recent performance underscores the need for bold action. Our PwC equal-weight index of 50 pharma companies analyzes the sector’s total shareholder returns performance relative to the S&P 500 Equal Weighted Index. From 2018 through November 2024, the PwC pharma index returned 7.6% to shareholders, compared with more than 15% for the S&P 500. Over the last year, this dynamic became even more pronounced with the PwC pharma index returning 13.9% compared to 28.7% for the S&P through November 2024.

Further, since 2018, an increasingly limited set of companies have influenced positive returns in the pharmaceuticals sector. Within the S&P 500, the so-called “Magnificent 7” accounted for 40% of the increase in value since 2018. In the pharma industry, this dynamic is even more stark with just two companies accounting for nearly 60% of the increase in value growth among the 50 pharma companies analyzed by PwC. For those outside of this group, 2025 is the year to consider what changes could finally disrupt this dynamic.

Macro and micro forces are driving a surge in scientific breakthroughs, while innovations and the pace of business is accelerating. Amid these disruptive forces and the ongoing value creation challenges facing the sector, it’s no wonder CEOs are questioning whether their business models are built to last.

The future of health: Value creation moves to prevention, personalization, prediction and point of care

Curing disease will continue to be highly valued. Major advances in our understanding of biology, combined with the explosion of emerging technology, means there are exciting new possibilities as health risks are detected, interventions are personalized and care is delivered. Transformative medicines are making strides in once-challenging areas like obesity, and new approvals in categories like Alzheimer’s disease are bringing hope to patients. However, ongoing affordability challenges and persistent disparity in outcomes can drive the system toward new approaches.

Across the health ecosystem, value creation is moving in the direction of prevention, with more focus on addressing the risk factors of health decline; personalization, with data-driven, customized treatments based on factors like genetics and behavior; prediction, with active analysis of well-being and early intervention to improve health outcomes and point of care, with more accessible and convenient settings for delivery of care.

Meeting the moment: Five transformative trends shaping 2025 and beyond

Industry practitioners largely agree on the key trends shaping the future of pharma. As shifts in the broader health ecosystem unfold, five immediate dynamics stand out in determining the pharma business model of the future:

Exponential impacts of AI. Transform how work is conducted and how decisions are made. Results can include better predictions, faster actions and greater outcomes. AI can help power the organizations of the future.
Rapid acceleration in what we know about human biology. Data plus computing power have unlocked a deeper understanding of the human body. This deeper understanding will enable better understanding of risk factors, uncover new pathways to treatment and can drive discovery of breakthrough medicines.
Continued push to cut drug prices. Around the world, including the premium-priced US market, efforts are intensifying to help reduce the price of medicines. The mechanisms to exert pressure include direct government intervention like the Inflation Reduction Act and competitive pricing strategies in the commercial market, leveraging the increased number of treatment options.
Empowered consumers. Many consumers view their health as a top priority because of its impact on personal finances and quality of life. In the future, consumers will be better equipped with their own data, like genetic history or biomarker data from wearable devices and tools like ChatGPT, to shape their decisions. Their role in decision-making and their expectations for value will increase.
Crisis as a way of life. A next era of volatility in the world unfolds, thanks to cyber attacks, geopolitical unrest, natural disasters and societal polarization among the trends driving a new era of global volatility.

These trends will happen amid a changing policy landscape in 2025, shaped by the new administration. Given the size and profitability of the US market, strategic planners will be well-served by analyzing the policy positions of the incoming Trump administration for the potential of health policies, tariffs, taxes and M&A oversight to accelerate change.

These five trends will force changes in the pharma market

The five trends above will force fundamental changes in the pharmaceutical market, along with expected policy and regulatory changes instituted by newly elected governments around the world. Leading innovative pharmaceutical companies can expect the future market to include:

A race to commercialize science. More medicines, more competitors and faster changes to standards of care mean speed will matter. While good news for patients, this has the potential to create more distance between those pharma players who execute with urgency and those who can’t keep up.
A decline in the economics of the typical pharma business model. Pricing power falls as governments intervene directly (e.g., Inflation Reduction Act negotiations) and commercial payers use the increasing number of therapeutic choices as leverage to require more discounts. Meanwhile, precision health advances are likely to produce smaller patient populations.
New value pools are being created around the consumer. Consumer spending and demand related to health and wellness are expected to increase. This will vary by healthcare consumer, and segmentation will matter more than ever, as will navigating healthcare inequalities.
Organizational agility emerges as a differentiator. Going fast while still looking around the corners and fighting off threats will be more important, as will recovery from crisis — meaning those who can navigate, pivot and bounce back should have an edge.

We already see capital markets casting doubt on whether pharma’s strategies will hold through these trends as the median enterprise-value-to-EBITDA multiple for our index of pharma companies has declined since 2018 (from 13.6X to 11.5X). This decline in outlook has appeared during a time of multiple expansion for the broader S&P index. Investors seem to recognize that many pharmaceutical business models are wearing thin.

Given the size and profitability of the US market, strategic planners will be well-served by analyzing the policy positions of the incoming Trump Administration and the potential of those policies to accelerate change

Place your bets

Four choices to change the model

Faced with ongoing pricing pressure, continued cost increases and growing head-to-head competition, something needs to give. While there are exceptions, 2025 should be a year for serious review of the value creation model for many pharma companies. We see four options that could help reshape where and how a company invests to drive economic returns. C-suites should consider which of these four strategic bets can help shape their business model for the future and what they stand to gain from each model:

R&D disruptor
Asset-lite scale optimizer
Patient-centered revolutionary
Therapeutic model captain

R&D disruptor

While virtually every company is working to improve R&D productivity, companies in this model can fundamentally reinvent how drugs are discovered and developed. These companies can make investments necessary to onboard new talent and create new platforms to use AI and other emerging technologies to change how we connect biological targets and new molecules to disease outcomes. They should be relentless in harnessing digital agents to greatly reduce work, increase precision and accelerate timelines throughout the drug development process. They should adopt strong venture-capital-like disciplines in portfolio management to confirm their R&D dollars are focused on products that can move the needle for both patients and investors. As a result, they can help change fundamentally the cost and timeline for bringing new drugs to market while expanding the possibilities to address unmet medical needs. Companies that make the investments and do the work to reinvent R&D will be shaping a fundamentally new outlook for the company and its investors.

Asset-lite scale optimizer

In a world of declining market economics, competitive advantages become even more important. The way to drive outsized returns shifts from showing up in the right markets to truly being better than competitors within those markets. “As the tide goes out, the rocks are exposed” in this context means tougher economic realities may reveal parts of the company that are diluting returns. Companies in this model make bold decisions to exit markets, functions and categories where they don’t have differentiators that provide an economic advantage. They will win through capital allocation linked to competitive advantage and are relentless about scaling in those selected spots. Other areas are deprioritized, exited or outsourced. They drive continuous process improvement, excel at sourcing and partnership management and build in-house functions that are core to their differentiators. This could lead to increased margins and ROI, and partnership opportunities leveraging their true advantages.

Patient-centered revolutionary

Companies in this model can succeed by changing the relationship with the patient. They go long on patient experience, disintermediating channels to play a more direct role in the patient journey. They make big investments in consumer-oriented assets and capabilities, such as personalized content, direct omnichannel engagement platforms, behavioral economics and cutting-edge experience design. These investments mean increased ability to drive volume via patient acquisition and retention, while also decreasing reliance on intermediaries (and related costs with those channels). The result is a company that is better positioned to win market share by winning over patients, while helping reduce the costs of complexity associated with the traditional model.

Therapeutic model captain

These companies are likely leaders already. They could extend that leadership position by leveraging scientific strengths and deep market knowledge to help deliver an expanded set of products and services to support the patient. These solutions could include scientifically based, connected health solutions that help to detect disease or companion diagnostics that help monitor treatment success. While there are many potential monetization paths (prevention, diagnosis, treatment, monitoring), what’s essential is leveraging the pharma company’s true advantages (for example, scientific knowledge, patient journey expertise) to truly impact health outcomes in the category. In addition to opening new revenue streams, success with this model could open the door to new pricing arrangements in those markets where value-based arrangements are compelling.

Four capabilities for any model of the future

Some executive teams may decide to go long on one of the bets above, while others may place multiple bets or perhaps none at all. Those decisions are impacted by factors such as the company’s unique starting point, its own view of the future and its differentiated strengths. Regardless of which path you choose, we see four important capabilities to consider for any scenario and model:

NextGen portfolio management
Digital-first, lean operating model
Eco-system orchestration and deal making
Integrated risk management

NextGen portfolio management

Today’s pipelines are chasing too many of the same things and are likely missing the reality of tomorrow’s commercial markets. Anticipating more head-to-head competition, portfolio management should reassess the value of pivoting to more white spaces. Industry leading data and analytics are needed to bring an investor’s view to stage gate decisions and simulations of portfolio value.

Digital-first, lean operating model

Improve your understanding of AI and how it can reshape the costs of doing business. Leading companies in the future can be world class at adopting a digital-first approach to reimagine the big processes that help drive company operations such as procure-to-pay, hire-to-retire and order-to-cash. They can be excellent at extending use of this digital-first approach into shaping a leaner, more efficient operating model (e.g., AI agents, fewer human resources involved in processes that are digitized).

Eco-system orchestration and deal making

As science advances and value pools shift, the ability to find assets and secure partners faster will become even more valuable. Ecosystem plays are likely to expand beyond scientific collaborations and product partnerships to include closer connections with technology hyperscalers, AI disruptors, value-chain solution providers and patient-focused innovators. Capabilities to identify relevant ecosystem plays and structure new types of partnerships will be relevant in any of the strategic bets described above.

Integrated risk management

The ability to pursue new strategic bets and invest behind new capabilities while also managing global volatility and an increasing threat environment means companies need an integrated picture of risks. While excelling in the traditional risk domains –– such as cyber, financial controls, healthcare compliance and quality –– remains important, industry leading companies can look across these silos to help create an integrated understanding of risks across the enterprise. This means connecting data, enhancing analytics and leveraging global risk technologies in new ways.

The wild cards to watch

There are a number of wild cards for executives and strategic planners to consider in 2025. These surprises could create large-scale disruptions, but the likelihood and magnitude remain uncertain. They need to be understood, followed and analyzed as a serious endeavor within ongoing strategic planning processes:

GLP-1 impact. PwC research shows GLP-1s are influencing consumer behaviors in categories like food, beverage and fitness. Will GLP-1s have a transformative effect on other disease categories, rendering some current medicines irrelevant? What market events (for example, the approval of a transformative oral weight loss medicine) might drive a reevaluation of this risk?
Geopolitics with China. How will diplomatic relations between the US and China unfold, especially under the new presidential administration? What will it mean for how pharmaceutical companies see China as an end market and as a part of the global supply chain?
US health reform system changes. Will the newly elected US government reform aspects of the pharmaceutical supply chain (so-called “‘middlemen”) and/or physician incentives?
Low- and middle-income countries prioritization. Is the quest for drug volumes sufficiently acute, given price reductions in the US/West, to move low/middle income countries higher on the priority list for investment and focus?

2025 Agenda: What can pharma executives do now?

Now is the time to position your organization for success in 2025 and beyond. Four actions can help pharma leaders and their teams accelerate change:

Codify your view of the future and stress test the business model. Update and quantify the impact of market dynamics, apply investor analytics to current plans, align on future competitive advantage and value upside/downside drivers.
Set future business model direction. Analyze strategic bets for your portfolio, align on where to place bets and create a reinvention roadmap, including scale-up plans for new businesses.
Accelerate new capability building. Align on new capability blueprints and investment plans, launch a capability modernization program, execute design and build (people, process, technology).
Strengthen change readiness and agility. Identify behaviors to dial up in this new environment, strengthen communications and employee engagement, determine Key Performance Indicators and pivot points.

Analyze strategic bets for your portfolio, align on where to place bets, create reinvention roadmap, including scale-up plans for new businesses.

This is your moment. Will you seize it?

The time for incremental change has passed. While the sector continues to deliver innovative medicines to patients, the sustained underperformance for investors calls for a new approach. The end of the decade is already in sight and the leaders of 2030 will take bold actions to position themselves for success.

By accelerating capability-building initiatives, making new strategic bets and preparing for industry wild cards, pharmaceutical companies can not only survive but thrive in 2025 and beyond. The future demands bold leadership, strategic foresight and a commitment to transformation — those who rise to meet these challenges can shape the next era of healthcare innovation.