Health execs persevere in new policy landscape

Introduction

0:00You're listening to The Top Line, brought to you by Fierce Pharma and Fierce Biotech. I'm your host, Ayla Ellison.

0:21For much of last year, the conversation around healthcare and life sciences has been dominated by uncertainty, tariffs, pricing reforms, shifting regulations, and questions about the future of U.S. innovation. But beneath all that disruption, many health industry executives are seeing something else, opportunity. And in some cases, they believe the pressure of the last several years, from the pandemic to supply chain shocks, has forced companies to become leaner, more resilient, and better

0:56prepared for whatever comes next.

Survey Overview

0:59In this episode of The Top Line, Fierce Pharma's Fraser Kansteiner sits down with Glenn Hunzinger, PwC's U.S. health industries leader, to discuss findings from the firm's latest survey on executive and investor sentiment. The two explore why many healthcare companies remain surprisingly optimistic despite mounting policy and market pressures, how AI is reshaping the industry's approach to efficiency and patient care, and why concerns about tariffs, drug pricing reforms, and the future of U.S. biotech innovation

1:33still loom in the background. Let's get into it. First off, Glenn, thanks so much for taking the time to talk today. Happy to be here. Thanks for having me on. So, you know, the context around this conversation, the last year and a half or so has been, you know, a very unprecedented time for businesses, and especially as we're tracking it at Fierce

2:03for the life sciences and the healthcare industry. We have a bit more perspective now on some of these policy shifts, but with that in mind, Glenn, we thought it would be a good time to connect as PwC has conducted a recent survey addressing some of the C3 sentiment around a few of these issues. I'll kind of jump right into my questions in a moment, but maybe to start us off, I'm

PwC Survey

2:23wondering if you can give us a bit of an overview of what this outlook covered and sort of the motivation behind PwC trying to solicit these responses. Yeah, thanks. And listen, from a PwC perspective, you know, we think sort of America is in motion here. There's a lot happening at every moment in time, and it's really about trying to understand how are businesses dealing with this, you know, across the board. I think, you know, change is certainly the only thing that's constant. And how do we try to get that sentiment of what business leaders are thinking and how

2:56do they feel now versus how they felt, you know, a year ago or two years ago? And what are they focused on? I know. And I think that the broader construct or sort of question of like the business world is moving exceptionally fast on technology and everything else. And so you combine that with sort of this landscape that's ever changing. And I think trying to give insights, you know, to all the executives out there, which is a lonely sort of position sometimes, you know, they're not alone and everybody is feeling a

3:26lot of this. And how do we make sure we do our job to get that insight and to share it with executives? Excellent. Yeah. And, you know, something that I feel like you maybe almost alluded to and we'll certainly touch on later is that amid some of the kind of uncertainty, as I put it, there is this, I think, sense of opportunity right now across multiple industries. And obviously, we're focusing on healthcare here, but PwC did, you know, cover a wide range. So as we kind of dive in, maybe, you know, focusing on the healthcare industry and kind of considering the responses that you got from the survey, I'm curious if you could kind of encapsulate for us

4:00where sentiment is generally sitting regarding some of the policy risk and growth as of maybe, you know, spring 2026 versus last year, you know, maybe even going a bit further than that

Healthcare Sentiment

4:11if it's possible. Yeah. And it's interesting because surprising to me, the sentiment was actually relatively positive. You know, we do a lot of these kind of surveys with executives, consumers, and others. I think there's probably an underlying sort of level of optimism that's kind of always there. I think people do like to see the positives, but I think more broadly, when we think it, when I think about those results as it relates to health, I think the world of health, there's just been so much going on as far as change.

4:42As we know right now, you know, we know more about the human body than we ever have. Technology is ever changing this. And, you know, we do have this cost curve that's untenable, you know, 5 trillion and growing at 8%. So even before all of these changes, it was clear that the world of health needed to change. It was sort of not fit for purpose anymore. You know, there's been changes on top of changes. And I think, you know, really is in need of a transformation. So for the past couple of, you know, I'd say, you know, years, it is clear that, you know,

5:15whatever side of the health you're in, there was this transformation that's needed technologically or otherwise, we knew that there's friction in sort of the patient experience and that needed to change. So I do feel most health executives have been on this journey of transformation and, you know, through that have had to sort of build muscles that they didn't have before that didn't exist. You know, we spoke a lot historically on the pharma side on just, you know, great science just isn't enough. We have to continue to sort of run the business better and tighter.

5:48And part of that is because if you look at health and health companies, it's generally underperformed the market. So we do have sort of this value challenge and shareholder value challenge, which is super important because obviously the capital flow. So I think, you know, we're seeing this companies have kind of been going through this and somewhat are, have a little bit of the muscle to deal with now all these other changes. So I think in that regard, there's a level of optimism because they know that things need to change time and time again.

6:18Excellent. Yeah, I think that's a really great point. And, you know, really quickly, maybe just to orient us, I know you can't, you know, discuss a lot about the specific companies you talked to, but Glenn, maybe if you could just kind of give us a sense of the breadth and the type and scale of companies that you were getting these executive responses from. Yeah, yeah, definitely. Appreciate it. So think about the whole kind of world of health, whether it's kind of pharma, pharma services, medical devices, sort of the payers and providers. So all aspects of health. And as you can imagine, with all the regulatory changes and everything else, just a dramatic

6:49impact, both on sort of the provider world and some of the funding that's happened with OVA and everything else, as well as, you know, just the landscape around tariff taxes and everything else and drug pricing. So really the entire health, what I'd say is it's been under focus and it's clear, you know, one direction is cost needs to come out of the equation and it just happened sort of dramatically and companies are sort of trying to deal with that. So all aspects of health, I think, are you're really dealing with the brunt of this ever

7:21changing landscape. Yeah, absolutely. And, you know, obviously with the pandemic recently too, as you've kind of pointed out too, I think this industry has some sort of familiarity with kind of needing to build up this resilience and sort of forward-looking strategy in that way. Yeah, supply chains have been challenged for years. It's a great point. You just mentioned, Rekove. I mean, that's where a lot of this muscle and sort of dealing with, you know, and being agile, you know, it's always been a focus around making sure that every health company can continue to, you know, save lives and help people.

7:52And supply chains are a huge part of that, both from a resiliency and sort of making sure that the products are there whenever you need it, as well as a cost. I mean, there's a tremendous amount of effort that goes into trying to build the highest quality product for the lowest cost. But certainly with the volatility of the market, they had to sort of build a different muscle here. Yeah, absolutely. And, you know, kind of on that same point, I think one of the points noted in the report from TWC was that for health companies in particular, there's this sort of tendency to pursue defensive actions in times of disruption.

8:24I'm wondering if you can maybe illustrate for us sort of what those look like and also if those have changed dramatically over the last year and change sort of given the specific policy considerations we're dealing with, you know, maybe some of the pricing and tariff issues you just alluded to. Yeah, no, it's a great question because ultimately the natural reaction is, you know, the cut things. I think in some regards that is happening, you know, at the end of the day, a lot of companies, you know, have shareholder obligations and they're trying to do their best to achieve that sort of bottom line.

8:54But in some regards right now, people have no choice but to just continue on their transformation journey and investments can't stop because at the end of the day, there is a longer term game. So with all, whether it's tariffs that certainly have hit the med tech industry pretty significantly, whether it's the inflation we're seeing now because of everything that's going on in the Middle East or otherwise, you know, we're just seeing, you know, some companies, if you look at the recent earnings release, just kind of bearing the brunt of it. Earnings are kind of coming down a little bit and it's hard to have sort of quick offsets

9:28for those kinds of bigger things. And we're also finding too on the manufacturing side, a lot of them haven't passed the prices on. I think they're looking at some opportunity to do it, but there is sort of a ceiling here. At the end of the day, you know, the cost of health needs to sort of, the curve needs to bend and there's not a lot of opportunity to just continue to increase price. If anything, the top line pricing is coming down. So it's just really, you know, like anything else, squeezing companies to be able to transform quicker than they thought. And I think that's the thing that's interesting now.

9:59That's why I think we see that level of optimism. You know, there's no doubt companies feel stronger than they were a year ago and two years ago, because honestly, they have no choice. It's part of really transforming and survival. Yeah. And you know, your point about sort of needing to kind of stay the course on these preexisting expansion or investment plans also kind of makes me think about the considerations of the timing of like, if we're thinking about a manufacturing facility and standing that up under a current policy environment when that, you know, oftentimes is like at least a four to five year proposal.

10:30But it's been interesting to watch companies navigate both responding to the needs of the now versus also, you know, trying to make these holistic improvements that will also, you know, provide benefits going out into, you know, a continuing evolving environment. Yeah. And I think that's certainly one aspect, you know, we certainly want more capital to flow, you know, certainly this administration wants more capital flowing into the US. And I think, you know, given where a lot of the, whether it's manufacturing or otherwise, given where sort of technology in these days, you know, we're in a different world where

11:03it's not just about, you know, low cost labor. So I think that's a great thing to sort of think about. The thing to your point on just, you know, what probably gives me pause is as someone that's been in the industry for 30 years, you know, innovation, this has always been the sort of the MECA for innovation. And whether you think about, you know, life-saving medicines, biotech and otherwise, you know, that funding has come down. And there's sort of this way that the model works around, hey, you have a patent for a certain period, then it goes generic.

11:35And that's where prices come down. You know, 90% of all prescription is generic drugs, which is a hugely important stat to think about from a healthcare perspective. But with some of these pricing cuts on the patented drugs and some of the ways that IRA and other things have played out, there is some research cuts because ultimately the returns aren't there and people had to make tough decisions. So those are the things I think the indirect consequences that I'm sure nobody wanted, but where, you know, some of this regulation for short-term pinch will start to reshape longer

12:07term. And we're seeing it now with the innovation coming out of China and otherwise. So, you know, very complicated market, but certainly a lot of the changes are sort of having this effect. And the hope is that it doesn't yield this long-term challenge in the US. Yeah, absolutely. And I'm glad you brought that up. You know, you mentioned IRA. I'm curious as well, sort of how companies are generally strategizing around the Inflation Reduction Act as well as sort of the most favored nation, you know, pricing reform efforts we're seeing now. Because it does seem like we're getting a lot more material, you know, effort to reform

12:39drug pricing after that being sort of a long-term target. But, you know, I'd be curious to hear about more of those potential knock-on effects that you see as potentially coming. Yeah. And, you know, I think, as I mentioned, like companies were focused on it. You know, sometimes new things that happen dramatically, you know, really cause us to do things quicker and faster than we wanted to. But ultimately sometimes, you know, create some diamonds. And I think that's what we're seeing right now is companies really think about how do I go direct to consumer? How do I lower price? How do I think about an offset where if I can get higher volumes and get lower price,

13:14it's a win-win for people? So I think the strategies and pushing really looking holistically, I think the industry has always thought about sort of what's a win-win holistically because, you know, listen, we live in this society and it definitely can never be a one-sided thing. So I think it is causing a lot of companies to continue to think about that 360 view on things. And, you know, we're seeing the offset, which is really trying to sort of bring down prices, think about what's good holistically for everything.

13:44And, you know, as we've seen with MFN, how do we negotiate where it's a win-win for everybody, bringing in manufacturer and otherwise. So, you know, in those situations where we can get to win-wins, I think that's a great thing, super challenging to do when, you know, it is a global market and global landscape, but I commend a lot of the execs for trying to figure out ways to really balance both, right? You got a lot of multi-stakeholders to sort of address, but at the end of the day, I think the singular focus on the patient becomes the most important thing.

14:15And if that's the North Star, ultimately they get the right answer. Yeah, absolutely. And, you know, you mentioned the negotiations around the MFN policy. So I kind of maybe want to circle back to tariffs just once more, you know, as you're mentioning, we've seen a lot of the largest pharmaceutical companies strike these deals where they've, you know, received some exemptions on tariffs and things like that. But I'm a bit curious if you got a sense in the survey how smaller and mid-sized companies are kind of thinking about this. And I know that you mentioned as well, if we kind of go away from, you know, branded pharmaceuticals,

14:45industries like medtech have really faced, you know, a bigger crunch from the tariff situation. Yeah. No, I think, I think you're right. I think for the smaller mid-sized one, you know, the first thing they have to do is figure out, you know, because they had relief in the industry, they just need to go figure out how do they apply certain laws, you know, USMCA, first sale, things like that, that are, they'd never had to think about. I think that's the first thing that every company is doing is now figuring out, okay, how do I apply the laws and the exemptions that may exist out there to sort of figure out how

15:20do I minimize the impact to my bottom line? That's the first thing that every company is doing. And, but, but there's no doubt it's not an easy, it's not easy to address because they just, you know, to some extent won't have the scale of a big company. So certainly from the smaller companies and otherwise, you know, they could get a little bit ahead of that. On the biotech side, you know, it's, you know, if you're developing a drug, it's, you know, a little less on that pricing side, but certainly they're developing into a more challenging market. So it does affect valuations. I think the bigger thing is what you just mentioned on MedTech.

15:51I mean, MedTech, you know, operates on tighter margins as it is, has been really dealing with a lot of challenges when it comes to inflation and costs and the inability on the pricing side to sort of increase price. So those margins are getting squeezed. And when we look at the MedTech market right now, you know, it's trading at almost an all time low when it comes to multiples. And we're seeing a ton of take private transactions by private equity and otherwise because of where they're trading. And a lot of that as a result of sort of the continued challenges, whether it's tariffs or

16:25otherwise, you've got, you know, companies now paying upward of, you know, $500 million annually on tariffs. And that's a number after applying all the rules and regs. So when you think about it, a lot of work had to be done to sort of just apply the rules because they're not accepted anymore, but there's still a sizable impact on the bottom line, which is having a big impact on valuations. Absolutely. So maybe, you know, to move a bit away from kind of the trade strategy and this uncertainty that I feel like maybe I've almost harped too much on. I'm kind of curious if you could just talk a bit more about some of the other big priorities

16:58that healthcare companies are looking at right now, sort of thinking about near-term planning. Yeah.

AI and Healthcare

17:04Biggest thing, how do I use AI to transform my business? I mean, it's the number one thing, everything, every company is trying to figure out. And the most important thing is how do I scale? That is the number one question. And listen, in a regulated environment, you know, it's, you know, you have to do it with caution and people say, why doesn't it happen overnight? Why can't we do quicker and everything else? And, you know, I think that complexity of a regulated environment is an important one to realize because it's not just easy to change things, but we have seen changes over time

17:37just in certain parts. So whether it's the initial stage of R&D and sort of setting up a trial, how do I use AI to design a trial? Whether it's submitting to the FDA, you know, would be a better, faster with higher quality data using AI for that. But now what we're really seeing is across the organization, both from an enterprise level, how do I change my functions? How do I change my processes? How do I use AI to enable it? But more importantly, from a citizen side, how do I empower my people to do their job faster,

18:10quicker, and easier with better insights? So, you know, huge changes that are going on, not just on the clinical front end side, but also just on running the business more effectively, better insights than otherwise. And I think like the biggest thing that we always talk about is it's really, we have these bookends in the world of health. Like there's this incredible innovation and things to be excited about, you know, life-saving medicines, minimally invasive procedures. You know, you go get a hip replace, you're out the same day. It's just incredible the amount of innovation that's happened.

18:42You know, the flip side, the sentiment around health is low because there's a ton of friction. And where that friction tends to be is around a lot of the admin side. You try to get an appointment, you can't get this, you know, you're trying to get prior authorizations. And so, and so those areas, at least the optimism I get, those areas of friction are the areas where AI can change right away. And we're already starting to see that change. Same thing with doctors, right? Doctors used to be sort of healthcare, you know, providers for you, for your life.

19:13You know, a lot of times you're though there, they're, you know, their backs it to you, type it into the computer. Now with ambient listening, they can actually pay attention to you. The experience is different. And so I think a lot of these technologies are here and now. And the great thing is it'll be used and they will scale. So in the next couple of years, all these things will continue to scale. I do think that'll help the cost side of the equation. When we look at the cost of healthcare in the U S 5 trillion, you know, there's about 20 to 25% of that is admin related.

19:44So just think about that. It's a staggering number, a trillion dollars of costs really in the admin. And some of that is just because of sort of the legal landscape we deal with, you know, you get to document everything otherwise, which is not to say we shouldn't have it, but I think the ability to administer that using technology has just never been better. Yeah, absolutely. I mean, I think the idea of eliminating that friction, as you put it, between sort of the incredible innovation we're seeing, and then, you know, some of the barriers that keep, you know, these treatments and other innovations from, you know, reaching the full swath of patients

20:16that they showed as a good example of that, and maybe just a good opportunity, Glenn, as we close out here to kind of refocus on the, the opportunity piece here that was highlighted in the survey responses, you know, sort of how companies are looking at how they can capitalize on this current moment. Yeah. I think this idea of, you know, win now, build for tomorrow, urgency, you know, I think companies always had a sense of urgency, but I think now there's a real sense of urgency. And I, and I do think, you know, going back to the view of ever the optimist that we all

20:48are, I think sometimes challenges allow us to be our best self. And I think what we're going to see in the health industry is everybody rising up to that challenge and really trying to address the urgency of it and really trying to win now, right? Like we can't wait years for things to change. It has to happen now. And I think the good thing for me, I know, and for us at PwC, every day, every way we do something, we question and rethink, can we do it better, faster, more efficient?

21:20Because ultimately, you know, we're helping our clients in the market trying to transform. So we have to be sort of company number one, and that's what we're trying to go through. And that hopefully will enable, and we're seeing it and doing it, all of the health clients we have to transform. And ultimately, at the end of the day, it leads to, it will lead to a better patient experience, better quality of outcomes, and really a better, you know, a better cost curve. And so that's the thing I think we leave on is this really sense of urgency.

21:51And I know I feel it in a day-to-day basis. Excellent. Yeah, no, I mean, I think that's a great note to end on, especially after I feel like there had been, you know, some tendency to doom and gloom at some points last year. But, you know, it seems like there is, as you said, a lot of inertia here and a lot of opportunity to make some really great changes. Glenn, I just want to thank you so much for taking the time and, you know, would love to chat again in the future. It's fantastic. Thanks for having me on. Pleasure.

22:19That's it for The Top Line. I'm your host, Ayla Ellison. You can find out more about this topic in our show notes at fiercepharma.com. Look for podcasts. And that's the bottom line from The Top Line.