A year ago, the healthcare industry was in a defensive posture. A volatile regulatory landscape, reimbursement uncertainty, and margin pressure posed formidable challenges.
We predicted that this environment would change in 2026. We expected more firms to utilize M&A as an answer to margin compression. We said that firms would need to revamp legacy business models to navigate policy shifts such as Most Favored Nation (MFN) and Inflation Reduction Act drug pricing, value-based care, and pharmacy benefit manager reform. We also projected AI adoption to accelerate as firms scaled AI pilot programs into real-world deployments.
More than halfway through the year, we take a look at how these predictions fared. Below, we explore the key themes shaping healthcare and life sciences in 2026, powered by insights in AlphaSense.
Related Reading: Healthcare 2026 Industry Outlook: A Year of Necessary Transformation
Accelerating M&A
At the beginning of 2026, we identified M&A as a near-term priority as pharmaceutical firms would need to replenish their drug pipelines ahead of a looming patent cliff. With more than $300 billion in annual revenues set to lose exclusivity through 2037, organic R&D alone was moving too slowly to offset incoming generic and biosimilar competition.
Pharma is running into a patent cliff. That's why there's so much M&A activity going on right now… . All of pharma is pretty desperate to try to squeeze the next fruit to find the next drug.
M&A activity has ramped even faster than expected. Year-to-date deal values have eclipsed $100 billion, closing in on 2025's full-year total of $120+ billion in just over six months. Four therapeutic areas in particular have anchored this deal-making: precision oncology, genetic medicine, metabolic health, and autoimmune disease. These areas have attracted investment because for a variety of reasons — large addressable markets, strong pricing power, the potential for longer patent protection, the ability to target multiple conditions, or some combination of these characteristics.
The same patent cliff pressure fueling M&A in these areas continues to support a parallel trend: Western biopharma firms out-licensing drugs from Chinese biotechs. China-to-West licensing is on a record pace, with $87 billion in total deal value year to date. This has occurred even as U.S. regulators remain skeptical of Chinese clinical trial data and as U.S.-China geopolitical tensions remain high.
One surprising 2026 development: the strong rebound in biotech IPOs following one of the driest years on record. The number of biotech offerings we have seen so far in 2026 has already surpassed the total for all of 2025. And these new deals are priced higher on average, as institutional investors unlocked a backlog of late-stage, near-commercial biotechs that had been waiting to go public.
Why does this matter? The dynamics at play create a virtuous circle: Big Pharma M&A drives higher IPO valuations, which, in turn, gives biotechs leverage to command higher prices from acquirers. Altogether, this activity generates liquidity that can be funneled back into early-stage biotech investment. Deal-making is once again proving to be the lifeblood for the industry.
[L]arge pharma, they don't do as much drug development or they don't do as many launches of products.They invest in biotech companies because they can do it faster, and then they go in and acquire them and spend a couple billion dollars. Large pharma is using the biotech industry as just an extension of their drug development and pipeline.
Reinventing Business Models
At the beginning of the year, we expected the industry to reinvent its business models to ensure long-term success in the wake of 2025's regulatory shocks. Specifically, we predicted a stronger push for value-based reimbursement, alongside newer plays such as direct-to-consumer (DTC) sales models and supply chain onshoring.
I think a lot of the plans are shifting away from [a] heavy focus on rebates to more of a GPO fee-based model.
Progress in these areas has been measurable, but uneven. Value-based care has seen genuine momentum, with 15 national health plans, including each of the Big Five major payers, adopting new CMS risk-sharing models.
CMS is imposing more of these types of [value-based] programs and you're starting to see the commercial payers follow suit with that. By the end of this decade, 2030, all Medicare lives in one way, shape or form are going to be in a value-based program — every single patient.
However, progress on DTC and onshoring has been more tentative: While 17 pharma firms have joined the TrumpRx DTC platform, actual product commitments have fallen short of expectations so far. Top drugmakers’ $500 billion in U.S. manufacturing pledges have yet to translate into capital on the ground.
Ramping AI Adoption
Coming into the year, we also expected companies to lean on AI as a productivity engine amid intensifying pressure on profit margins. Specifically, we flagged three areas where firms would likely invest the most in AI to slash time and costs: accelerating R&D and clinical development, supporting new biopharma business models, and improving operational and clinical efficiency.
This is largely playing out as expected. Lilly’s AI supercomputer, developed in partnership with Nvidia, is now supporting active drug discovery workflows. Direct-to-consumer platforms like LillyDirect and PfizerForAll are using AI to accelerate patient intake and keep patients on track with their prescriptions. In administration, UnitedHealth is using AI to cut prior authorization time from eight hours to under 30 seconds. On the care delivery side, Mayo Clinic launched an AI nursing documentation tool that achieved 80%+ voluntary adoption within days.
These examples show that AI adoption has shifted from experimental pilots to core execution. While biopharma builds high-end tech for longer-term R&D payoffs, every sector is capturing immediate ROI by replacing manual, paper-heavy tasks with automation.
Across R&D, regulatory, safety, medical and commercial functions, leading companies are moving from isolated AI pilots to embedding AI into the core operating fabric of commercialization: running trials faster, preparing submissions in days rather than months, keeping content compliant at scale, and engaging healthcare professionals through intelligent, omnichannel experiences.
Looking Ahead
Healthcare has entered an era where execution on M&A, business model reinvention, and AI adoption will separate the leaders from the laggards. How these three themes continue to evolve in the second half of the year will shape the healthcare landscape for years to come.
Dealmaking: In H2, we are watching two mega-deals announced in H1. Sun Pharma's definitive agreement to acquire Organon for $11.8 billion, which is the year's largest biotech deal to date, signals India's arrival as a global acquirer and a shift toward production of biosimilars.
Meanwhile, Merck KGaA's $11.3 billion purchase of Bio-Techne appears to have marked the bottom for the beaten-down life science tools sector. With Big Pharma still holding plenty of dry powder and public market appetite returning, we expect M&A and IPO momentum to persist through year-end and likely beyond.
Business model reinvention: As H2 compliance deadlines for value-based care contracts and MFN drug pricing policies take effect, we expect pressure will intensify on biopharma companies, payers, and healthcare providers alike to further restructure their business models.
One of the arguments we were trying to make internally is, let's contract. Let's pay for performance. That's a narrative that payers, healthcare, and practitioners can see that's fair. If the drug works, you pay for it. If it doesn't, then we have to lower the price.
AI implementation: We expect AI momentum to continue and even accelerate through the rest of the year. The central challenge for healthcare leaders will be balancing the use of AI to automate routine tasks for quick wins with sustained investment in long-term AI breakthroughs. Moving completely past surface-level use cases is key to unlocking AI’s full ROI potential.
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