Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Pharmaceutical Industry
Transcript
- Lucas: Luna, I came across a statistic this week that really stuck with me. By 2025, the global market for drugs targeting age-related diseases is projected to hit one point two trillion dollars. Meanwhile, pediatric drug research and development has actually declined by about 15 percent over the past decade. Luna: That's a massive number. And it makes sense when you think about the demographic shifts we've been covering on this show. But I hadn't really considered how directly it hits pharmaceutical companies' bottom lines. Lucas: Right. Drugmakers are businesses, and they follow the money. If fewer babies are being born, the market for childhood vaccines and pediatric antibiotics shrinks. But the population over 65 is growing rapidly, so that's where the R&D dollars flow. Luna: Can you give a concrete example of a company that's really pivoted? Lucas: Sure. Take Pfizer. For decades, they had a huge pediatric vaccines business — Prevnar, the pneumonia vaccine, was a blockbuster for kids. But in recent years, they've been pouring resources into drugs for Alzheimer's and a gene therapy for Duchenne muscular dystrophy, which primarily affects older populations or has age-related variants. Their 2023 annual report explicitly cited demographic trends as a key factor in their pipeline decisions. Luna: So it's not just about aging — it's also about the sheer number of potential patients. A drug that treats a condition common in elderly people has a much larger addressable market than one for a rare pediatric disease. Lucas: Exactly. And that's reshaping the entire industry. Novartis, for example, recently spun off its generics division Sandoz to focus more on innovative medicines for age-related conditions like heart failure and macular degeneration. They're betting that the demographic tailwind will last for decades. Luna: But isn't there a risk that we underinvest in pediatric drugs altogether? I mean, if every company is chasing the elderly dollar, who's developing treatments for childhood cancers or rare genetic disorders? Lucas: That's the concern. And it's why governments have stepped in. The U.S. has the Best Pharmaceuticals for Children Act and the Pediatric Research Equity Act, which offer incentives like extended exclusivity periods for companies that conduct pediatric studies. Japan has similar programs. But the reality is, these incentives only go so far. Luna: How do the numbers compare? Like, what's the return on investment for a pediatric drug versus an Alzheimer's drug? Lucas: It's night and day. A 2022 study from the Tufts Center for the Study of Drug Development found that the average cost to develop a new drug is about two point six billion dollars. For a pediatric drug, the expected peak sales might be a few hundred million, because the patient population is small. For an Alzheimer's drug that could be taken by millions, peak sales can easily exceed ten billion dollars. So the financial incentive is overwhelmingly skewed. Luna: And that's even before you factor in the patent cliff. A lot of the big pharma companies have blockbuster drugs going off patent in the next few years, and they need new revenue streams. Demographics tell them where to look. Lucas: Exactly. The so-called 'patent cliff' is projected to cost the industry about two hundred billion dollars in lost sales between 2023 and 2028. Companies like Merck, Bristol-Myers Squibb, and AbbVie are all racing to fill their pipelines. And the most promising areas are oncology, immunology, and neurology — all of which skew toward older patients. Luna: So if I'm a smaller biotech startup looking for funding, I'm probably not pitching a pediatric drug. I'm pitching something that targets a large aging population. Lucas: That's the reality. Venture capital in biotech has increasingly flowed toward age-related indications. In 2024, about 70 percent of all biotech venture funding went to companies developing therapies for conditions primarily affecting people over 60. That's up from about 50 percent a decade earlier. Luna: It's a self-reinforcing cycle. The money goes where the patients are, and the patients are getting older. But I wonder — does this mean we'll see a shortage of pediatricians or pediatric specialists in the future? If the drugs aren't there, maybe the doctors won't be either. Lucas: That's a separate but related issue. We've already seen a decline in the number of pediatric residency slots filled in the U.S. — down about 5 percent over the past five years. And part of that is because the reimbursement is lower compared to adult specialties. But the drug pipeline issue could exacerbate it. If there are fewer innovative treatments for kids, the field becomes less attractive to new doctors. Luna: I want to come back to the economics for a second. This shift in pharmaceutical R&D has implications for healthcare spending overall. If we're spending more on expensive biologic drugs for the elderly, that's going to put pressure on Medicare and other public health systems. Lucas: Absolutely. The Congressional Budget Office has estimated that prescription drug spending under Medicare Part D will grow at an average of 7 percent per year over the next decade, driven largely by specialty drugs for chronic conditions. And many of those are the very drugs being developed now to target aging populations. Luna: So the demographic tailwind for pharma is also a fiscal headwind for governments. It's a classic double-edged sword. Lucas: And it gets even more interesting when you think about personalized medicine. As the population ages, we're seeing more focus on treatments that are tailored to genetic profiles — things like immunotherapies for cancer that only work in certain patient subgroups. These drugs are incredibly expensive, often costing over a hundred thousand dollars per patient per year. Luna: But they can also be more effective. So the cost-effectiveness debate gets complicated. Is it worth spending a lot on a drug that extends life by a few months, or should we be investing more in preventive care and wellness? Lucas: That's a question that policymakers are grappling with right now. And it's not just about money — it's about how we value different stages of life. If you think about it, the pharmaceutical industry is essentially a mirror of demographic priorities. And right now, that mirror is showing a very old face. Luna: It's a fascinating and slightly unsettling picture. But I also think it highlights the need for more public investment in areas where the market isn't going to go naturally. Lucas: Yeah. And on that note, I want to take a brief moment to say something. If this kind of conversation — connecting demographic trends to real economic outcomes — is valuable to you, there's a simple way to help keep it going. We keep this show ad-free, and listener support is what makes that possible. Luna: It's true. We don't run ads, we don't have sponsors, and that means we can talk about exactly what we find interesting without any outside influence. If today's episode gave you something to think about, you can throw a few dollars our way at buy me a coffee dot com slash fexingo. Lucas: No pressure at all. But if walking through the economy with us has made something click, that link is there. And now, back to the data — because I want to look at one more number that really drives this home. Luna: Yeah, what's that? Lucas: The ratio of R&D spending on drugs for diseases of aging versus diseases of childhood. A report from the Global Health Research and Development Observatory shows that for every dollar spent on R&D for pediatric conditions, about seven dollars are spent on conditions primarily affecting adults over 65. And that gap is widening by about 5 percent each year. Luna: Seven to one. That's a stark imbalance. And it's not just about the money — it's about the message it sends to the next generation of scientists and doctors. Lucas: Right. If you're a young researcher deciding what to work on, the incentives are clear. But there are some counter-trends. For instance, the rise of gene therapies could actually benefit pediatric populations because many genetic disorders manifest in childhood. And some companies are using the same platform technologies for both children and adults. Luna: That's a hopeful note. But overall, the demographic tide is strong. And I think the key takeaway for our listeners is that the pharmaceutical industry isn't just reacting to science — it's reacting to the age structure of the population. Lucas: Exactly. And that means if you're an investor, a policymaker, or just someone trying to understand where healthcare is headed, you have to start with the demographics. The drugs of tomorrow are being chosen by the birth rates of yesterday. Luna: Well said. And as always, we'll keep tracking these shifts. Thanks for joining us on The Demographics Podcast.