What do you think the most critical elements are driving change to a new era in the healthcare industry?
Anne O’Riordan (AO): There are three things really driving change in the new era of healthcare. First, are the fundamental socio-economic shifts globally — the silver tsunami of aging populations, the growth of the global population and the rising cost of healthcare — we are living longer with more chronic conditions and costs for healthcare that are unsustainable in the long run.
The second is the pace and scope of scientific change — with the advent of the patent cliff, many products that have been patent protected for years are now available at affordable prices. The old science is readily available to many. In the shift to the new, companies are applying scientific prowess to much more difficult problems; and they are solving these problems in new and highly differentiated ways. The new science - new therapies such as immunoncology, combination therapies and personalized/targeted medicine - are changing how we diagnose diseases and how we affect outcomes. The bar is being raised on scientific rigor and companies are responding accordingly.
And third is digital/technology — digital is driving a revolution in the consumerization of the patient and the proliferation of data to help patients live better lives. We have/are gathering data on all aspects of healthcare delivery, the patient’s activities, and the social aspects of the patient as a consumer. The proliferation of data, advanced analytics and digital technologies can be leveraged to redefine healthcare and make self-management of health a practical activity.
What are the biggest implications of those changes on life sciences companies?
Jeff Elton (JE): Today, most life sciences companies are product-centric organizations that are reimbursed based on units sold. As product centric organizations, they are focused on developing therapeutic products based around the strongest science, for the most devastating of patient diseases, and successfully commercializing these innovations to the greatest number of patients.
Our research focuses on the accelerating move towards ‘value’ as the prime criteria for the products and services that will be made available to patients and embraced by health systems and health authorities. In the US, health providers are increasingly risk bearers and focused on the health status of a population. Health payers and their service entities are broadening their role into sets of capabilities and services that focus on populations and specific avoidable costs. Both groups are now focusing on successful interventions but with an increase on health. What they once considered their ‘patient’ encountered only episodically, is now a consumer with choice, with whom they need to develop a life-long relationship.
The implication for life science companies is that not only do companies have to find patients who can be beneficiaries, they have to deliver these innovations in a way that assures outcomes for patients are fully realized and that the health systems themselves — which are highly constrained in the resources that they can apply to healthcare — see benefit as well. Without value being realized by the patient and health system, even effective medical innovations may be considered inadequate in the scope of benefit delivered relative to overarching needs.
What are the biggest implications to how R&D is conducted?
AO: R&D is possibly one of the most exciting areas of change here. With the availability of genetic and clinical data coupled with the Internet of Things and the proximity of the relationship to patients, I expect that we are going to have much tighter, much more accelerated R&D processes. We will have a broader space within which to innovate — digital medicines will become capable of delivering therapeutic value akin to what chemical and biological entities did in the past. And, fundamentally we are going to have much shorter R&D cycles. We will see more frequent self-disruptive innovations coming to the market with companies constantly bringing product improvements to the market to meet patient needs.
What are the biggest implications to how sales and marketing works in the future?
JE: Historically, life science companies viewed that commercialization was having sales and marketing focus on physicians as a point of relationship to build and sustain. In a value-centric world, commercialization becomes a business-to-business process with patient outcomes at the core. Highly analytic-driven and real-world data centric life science companies will be interacting with the risk bearing providers, health authorities and payers around how to bring value to specific populations while improving the efficiency, capacity utilization, and overall operating economics of the health system. Collaboration and the shared burden of responsibility for outcomes will become the currency of the future. The siloed functions of individual institutions will need to be challenged and redesigned. Think of this as more akin to how GE and Boeing interact with a major global airline for a large aircraft fleet purchase to be delivered over years. The inputs and measures of performance will completely transform.
In Healthcare Disrupted, you outline four emerging business models. Is there one or two that you think will be more prevalent that others?
JE: Our models represent strategic choices that all life science companies need to make. While they acknowledge where companies are coming from, they are fundamentally focused on where we believe they may need to go. These models acknowledge a solemn and unwavering commitment to the patient and distinct roles companies can play in the emerging vale-centric healthcare ecosystem. While most companies will likely focus on one, other companies will find their diverse portfolios and geographies demanding expertise across models.
AO: The models are directional and demonstrate a set of strategic choices. Value can be unleashed in many forms. The company’s role in releasing that value is predicated on where it has come from and where it wants to be in the future. Some companies are leveraging M&A and divestitures to fundamentally shift their business towards one extreme of innovation or the other. Others are staying the course of a diversified portfolio. In all instances the ability to drive value for the entire system will be the predictor of success.
JE: The challenge for companies through this period of profound change is that legacy models will be coexisting with the new ones. Our view is that the leaders of the future will invest and manage to where they want to go — defining the products and services they will provide, who they will sell to, how they will contract, and the resulting operating capabilities they will need. Leadership rarely comes from ‘acceptance’ but rather is the result of shaping and managing to a desired outcome.
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Healthcare Disrupted is published by John Wiley & Sons (March 2016) and is available for purchase on Amazon.com