Rx Marketplace Quarterly - Q4 2020

The latest accounting and reporting developments in the pharma & life sciences (PLS) industry

Did you miss our first virtual hot topics webcast on December 16? Watch the webcast recording today.

Spotlight: Industry update

Q4 Spotlight: The new administration’s health agenda

In many ways, President-elect Joe Biden is expected to propose a return to the Obama administration’s approach to healthcare by:

  • building on the Affordable Care Act (ACA) through incremental expansions in government-subsidized coverage;

  • continuing CMS’ progress toward value-based care;

  • bringing down drug prices; and

  • supporting modernization of the FDA.


What could this mean for the players in the healthcare industry?


For more information refer to the following resources: 

The results of the 2020 election and what policy might look like for tax, trade, and regulation

Rohit Kumar, Co-Leader of PwC’s National Tax Office, joins host Heather Horn, to provide his perspectives on recent election developments. The Post-election outlook: Policy, initiatives and business impact podcast includes discussion of:

  • a COVID-19 relief bill, the federal budget, and extension of certain tax provisions;

  • potential changes in tax policy, tariff, and trade; and

  • the dynamics for how Congress and a new administration will work together.

PLS companies will want to consider planning for the potential impacts of tax legislation that may arise over the next two years.

Hacking the vaccine: Three questions that boards and CEOs should ask to help prevent successful attacks

What’s needed for the United States and other countries to fight their way back to good public health and an economic recovery? Short answer: Develop enough doses of vaccines that can be distributed and administered to millions of people without a hitch.

That’s the ideal, but the SARS-CoV-2 vaccine supply chain is rife with logistical complexities. What’s more, the enormously valuable intellectual property and data on the vaccines, components, and therapeutics are relatively easy for bad actors to illegally obtain. In fact, nation-states are already attempting to steal vaccine formulae and disrupt operations.

A company is a potential target if they’re in the business of researching, developing, conducting trials, manufacturing, or distributing the vaccine against SARS-CoV-2, the virus that causes COVID-19. Companies that participate in the intertwined network of big pharma, biotech, contract development and manufacturing organizations, and health and clinical research institutions can take a number of steps to help prepare for potential attacks, including evaluating the following questions:

  1. What are the evolving threats from nation-states and resulting risks to vaccine development and supply chain?

  2. How well can the company defend against the threats?

  3. In the event of a successful attack, does the company have a response plan in place?

Refer to Hacking the vaccine: Three questions that boards and CEOs should ask to help prevent successful attacks for more details.

Regulatory update

Updated SEC comment letter trends 

Our analysis of SEC comment letters identifies the top ten topics included in comment letters to Health Industries companies, details key themes, and includes examples of comments within the sector for each topic. Observations from the data are:

  • Comment letter trends within the Health Industries sector have remained relatively consistent, with revenue recognition remaining at the top of the list.

  • There has been an increase in letters related to contingencies, specifically related to the timing of loss provisions, the quantification of amounts for contingencies, if any, and disclosure of the possible loss, range of loss, or why an estimate cannot be made.

We have also observed that the staff has started to issue comments related to COVID-19 disclosures; however, clear trends have yet to develop. These comments have focused on company-specific disclosures of pandemic-related risk factors and the discussion of known trends and uncertainties in MD&A, including expectations of the impact on operating results and near- and long-term financial condition, with references to CF Disclosure Guidance: Topic No. 9 and Topic No. 9A for guidance.

In addition, refer to our 2020 comment letter trend podcast for further discussion on top areas of interest and best practices for responding.

Non-GAAP measures continue to be a focus of the SEC staff. Listen to PwC’s podcast regarding key takeaways from the FASB and SEC sessions at November’s FEI’s 2020 Corporate Financial Reporting Insights Conference, which includes insights on what the SEC staff may be looking for when reviewing non-GAAP disclosures.

For additional information on non-GAAP measures, refer to Non-GAAP disclosures and COVID-19: What you need to know.


Amended Regulation S-K rules include new human capital disclosures

The SEC’s amended disclosure requirements relating to the description of business, legal proceedings, and risk factors, as summarized in our In depth, are effective for filings on or after November 9, 2020. One key change was requiring, if material to an understanding of the registrant’s business, a description of the company’s human capital resources, including any human capital measures/objectives that the company focuses on in managing its business (e.g., those that address the development, attraction, and retention of personnel). Refer to our In the loop, New human capital disclosure rules: Getting your company ready for more information on preparing for these new disclosures.

I am particularly supportive of the increased focus on human capital disclosures, which for various industries and companies can be an important driver of long-term value.

Jay Clayton, SEC Chairman

SEC adopts amendments to modernize and enhance management’s discussion and analysis and other financial disclosures

On November 19, the SEC adopted amendments to modernize and enhance management’s discussion and analysis and other financial disclosures. As detailed in our In depth, key changes include:

  • eliminating Item 301 (Selected Financial Data);
  • replacing the current Item 302(a) (Supplementary Financial Information) requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes; and
  • modernizing, simplifying, and streamlining Item 303 (MD&A). For example, these amendments:
    • add a new Item 303(b)(3), Critical accounting estimates, to clarify and codify SEC guidance on critical accounting estimates;
    • replace current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A; and
    • eliminate Item 303(a)(5), Tabular disclosure of contractual obligations

The amendments will become effective 30 days after publication in the Federal Register with a mandatory compliance date beginning with the first fiscal year ending on or after 210 days after publication. Once effective, voluntary compliance prior to the mandatory compliance date is permitted as long as disclosure is responsive to an amended item in its entirety.

Accounting and financial reporting

PwC’s Accounting Podcast Series

Are you interested in receiving your quarterly financial reporting and accounting hot topics in audio form?

We are excited to announce our first Quarter Close podcast. Hear PwC discuss the key financial reporting and accounting hot topics that may impact PLS companies as many begin their year-end reporting processes.

Whether or not you were able to attend the AICPA conference, let us share our perspectives with you

In the AICPA Conference podcast, we discuss the points of focus discussed at the AICPA conference, as well as what they may mean for companies as we move forward into 2021 and beyond. 

Navigating the accounting for payments to a customer and from a vendor can be challenging

The accounting is relatively straightforward when cash is received from a customer or paid to a vendor. But what if you receive cash from a vendor or pay a customer? When everything is reversed, the accounting is not as easy, and for PLS companies, it may be more common than you expect. In the Payments to customers? Receipts from vendors? Help! podcast, Heather Horn is joined by PwC partners Angela Fergason and Jay Seliber to help you think through the accounting implications of these types of transactions.

PwC’s recently updated Reference Rate Reform Guide

The sunset date for LIBOR is quickly approaching. Learn how this can impact PLS companies and how to apply the FASB’s relief standard in our updated Reference rate reform guide.

Environmental, Social, Governance (ESG) oversight: The corporate director’s guide

Your company's board plays an integral role in ESG oversight. But what exactly are they overseeing? And how can they do so effectively? As a member of the management team, you can expect that questions are likely headed your way. Check out our new guide to learn how boards should be thinking about building a compelling ESG story and bringing it to life.

Looking for resources to help evaluate Research and Development (R&D) funding arrangements?

R&D funding arrangements between PLS companies and financial investors are often complex and can last for many years. Arrangements may extend over different phases of a product’s life cycle—from early stage development to the marketing of a finished product. Different levels of risk and reward may be transferred between parties depending on the stage in a product’s life cycle in which an agreement is established. At one end of the spectrum, an arrangement might involve only the provision of debt financing for R&D with a well-defined obligation for repayment. At the other end, a transaction might involve R&D risk sharing between the parties and encompass complex components, such as new legal entities, put and call options on an entity’s equity or intellectual property, debt or equity instruments, and royalty arrangements. There is no “one size fits all” solution. Rather, each arrangement needs to be evaluated considering its unique facts and circumstances to determine the accounting impacts.

The following resources can be helpful in evaluating these complex transactions:

For a deeper discussion on items included in this edition of Rx Marketplace Quarterly, please contact: Josh Herron

Contact us

Josh Herron

US Pharmaceutical & Life Sciences Assurance Leader, PwC US

Follow us