Money and Medicine PresidentDonald Trump's crusade against high drug prices will face sometests in 2019. (Photo: Shutterstock)

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For the biopharma industry, 2018 was a year marked by generallyrobust profits and a handful of superlatives.These include Takeda Pharmaceutical Co.'s $62 billion bid for ShirePlc — the biggest announced drug deal in more than a decade — aswell as a record number of approvals of new and generic medicines by the U.S. Food and DrugAdministration and the most aggressive drug-pricing proposal toever emerge from a Republican administration.

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No promises on another megadeal in 2019, but I can guaranteethat drug pricing will still be a thing. Here are a few areas I'llbe keeping an eye on:

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Closing window? In 2018, strong demand forbiotech IPOs allowed firms that don't even have drugs in thetesting phase to go public at rich valuations. Companies raised arecord $7.8 billion, including Moderna Therapeutics Inc., whose$604 million initial stock sale this month was the biggest theindustry has ever seen. But Moderna has stumbled out of the gate –shares are down more than 40 percent from their offer price – whichis a worrying sign for the year to come. Part of theunder-performance reflects risks specific to Moderna.

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But biotech isn't immune to the broader market malaise, and theIPO environment will most likely be correlated with the industry'soverall stock performance. This will also have implications for theability of already public firms to tap capital markets for funds. Adown year would be rough for younger companies, but it might allowbigger, more established drugmakers to take advantage of cashcrunches and buy up assets at more attractive valuations

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Cancer crowding: The sixth drug in a new andpromising class of immune-boosting cancer drugs was approved thisyear. The treatments, called PD1-L1 inhibitors, are expected togenerate more than $15 billion in sales in 2018 and $20 billionnext year. A series of trial wins has cemented Merck & Co.'sKeytruda as the dominant drug in the class. The next 12 months willtell us if any of the other five medicines can mount a seriouschallenge.

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Investors will also get more information on whether combiningthese drugs with others will be able to expand their use to morepatients and more cancers, an idea that firms have thrown billionsat with very mixed results. And though cancer drugs have beenmostly immune from price competition, this group of very expensiveand increasingly overlapping medicines seems like a pretty obviousplace for payers to apply pressure. Another crowded cancer class towatch is the group of so-called PARP inhibitors, currently mostwidely used in ovarian cancer.

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Pricing pressure: President Donald Trump'scrusade against high drug prices, which reached a fever pitch onTwitter and resulted in some concrete proposals by the Departmentof Health and Human Services, will face some tests in 2019. Many ofthe administration's efforts, most notably its plan to index U.S.drug prices to those of lower-priced medicines in other nations,will either make progress or fall apart in 2019. The drug industryis gearing up to lobby its way to the latter outcome, as it didsuccessfully for similar efforts by the Obama administration.

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The year to come will also reveal how aggressive Trump'shealth-care team will be in its efforts to shake up the businessmodel of pharmacy benefit managers, which negotiate drug costs forhealth plans. They are accused of creating an extra incentive fordrugmakers to repeatedly increase prices. Meanwhile, many of thebiggest pharmaceutical companies are set to hike prices once againin January after a temporary pause, and if they're too aggressive,they may make what's already likely to be an adversarial year withthe Trump administration even worse. On the private side, a seriesof mergers have tied every major PBM with an insurer, and they mayuse that market power to put pressure on drugmakers.

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Those six-figure cures: Intrinsically tied withthe drug-pricing issue is a growing number of incredibly expensivemedicines. Drugs have always been costly, but there are going to bemore medicines priced in the six figures than ever before. Many ofthese are intended to be used just once, including potentiallycurative cell therapies for blood cancers and gene therapies forrare diseases. Gilead Sciences Inc.'s Yescarta, Novartis AG'sKymriah, and Spark Therapeutics Inc's Luxturna are already on themarket, and each costs more than $350,000 for a singletreatment.

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These medicines have yet to make much of a sales dent, in largepart because the system has yet to really figure out how to valueor pay for them. If drugmakers want patients and payers to pony upprice tags edging toward a million dollars, they're going to haveto prove that they are worth it, and be willing to be a bit moreflexible on how and when they get compensated.

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Comeback tour: AbbVie Inc.'s Humira is theworld's best-selling drug, while Celgene Corp.'s Revlimid is thebiggest seller among cancer treatments, and yet the two companieswere among the worst- performing big biopharma firms of 2018. Theyillustrate the perils of success: Both rely heavily on their leadmedicines, and investors are skeptical about their ability to findnew ones to replace them before generic competition arrives. Overthe last year and a half, Celgene saw a once-promising gut drugfail a significant trial and a multiple sclerosis treatment getrejected by the FDA. as for AbbVie, it's become clear that thepharmaceutical giant's expensive acquisition of cancer drugmakerStemcentrx may have to be written off entirely, just as Humirabegins to face competition in Europe. Both companies badly need toprove that they have the R&D and M&A chops to fill a verylarge sales gap.

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Something fishy: Amarin Corp. shocked thepharma world in September with the rarest of breakthroughs, amedicine that could help millions at a relatively cheap price. Thefirm's purified fish-oil derivative Vascepa proved able to reducethe risk of cardiovascular events like heart attack or stroke by 25percent. But a fuller set of results released in November createdsome doubts about the possible confounding impact of the placeboused in the study, hurting the firm's share price. A review by theFDA next year and the early reaction by the market will say a lotabout more about whether Vascepa is going to be a blockbuster thatturns Amarin into a premier M&A target, or remain something ofa niche product.

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These are only some of the variables that will shape theindustry in 2019. With health care still very much in focus and thepossibility of a drug breakthrough always on the horizon, itpromises to be anything but routine.

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Max Nisen is a Bloomberg Opinion columnistcovering biotech, pharma and health care. He previously wrote aboutmanagement and corporate strategy for Quartz and BusinessInsider. To contact the author of this story: Max Nisen [email protected]

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