How
pharma can win in a digital world
The digital revolution is well under way for
pharma companies. We spoke with 20 leading executives to find out how they
cope—and what they do to stay ahead.
The digital revolution continues to transform
healthcare fundamentally, and many people believe that a tipping point is
finally within reach. In 2014, digital health investments topped $6.5 billion,
compared with $2.9 billion a year earlier.1
The critical question now for pharmaceutical companies is how to
stay ahead of these changes. To answer it, we sought to learn the trends and
implications of digital health by interviewing 20 thought leaders across a
variety of segments, including analytics, biotech, data, pharma, providers,
technology, and venture capital. The consensus is that as healthcare continues
to digitize, pharma companies must transform themselves in basic ways to stay
competitive. Successful ones will rethink their business and operating models,
transform their cultures and capabilities, and adopt a new, longer-term
mind-set that fosters innovation and bold strategic moves.2 These conclusions stem from
three important themes that we took away from our conversations:
1.
Dramatic changes in the traditional roles and dynamics of
healthcare stakeholders have fundamental implications for pharma companies.
2.
It is time to reimagine them as solutions companies, not asset
companies.
3.
The technology is ready, but pharma companies must change if
they are going to enable and harness it more successfully.
These themes
strongly suggest that success in the new digital environment will require three
big shifts: forging ahead beyond the pack mentality and embracing experimentation
and risk taking, developing a collaborative culture and challenging barriers to
sharing, and reinventing companies by building capabilities beyond traditional
healthcare and updating the operating model.
Emerging themes
Dramatic
changes in the traditional roles and dynamics of healthcare stakeholders have
basic implications for pharma companies. The digital revolution has spawned a
consumer revolution symbolized by an increasing demand for connectedness and
information. Consumers with new technology tools are becoming more active and
self-directive, which changes their interactions with providers, payors, and
pharma companies. As a result, new and unfamiliar forms of behavior will
fundamentally affect the pharmaceutical business:
·
Individuals are starting to control their own health
treatments. Patients are becoming more than just passive recipients of
therapies. “Healthcare will be driven much more by consumers than physicians,
with patients increasingly coming to their doctors with more information, parameters
they measured at home, and an informed opinion about how they should be
treated,” says Dr. Bertalan Mesko, medical futurist and author of My
Health: Upgraded (Webicina, September 2015) and The Guide to
the Future of Medicine (Webicina, 2014). Dan Goldsmith, the chief
strategy officer of Veeva Systems, a cloud-based life-science
business-solutions company, takes the idea further. “In the next three to five
years,” Goldsmith says, “instead of patients just being informed and more
inquisitive, they will be actively designing the therapeutic and treatment
approaches for themselves with their physicians.”
As patients
assume greater control over their own health, including the therapeutics they
take, pharma companies must recognize this new decision-making power and
develop better ways to engage them. That’s not easy. Li Ma, vice president of
strategy and investment at Alibaba Health Information Technology, says that
“many pharmacos are trying to engage patients. But it is difficult because they
often don’t know exactly who their patients are and also have a hard time
determining exactly what engagement model resonates with their patients.”
Some pharma
companies already recognize the growing importance of connecting with patients
and are doing something about it. As the customer-experience director at one
top pharma company says, “We use different approaches, depending on the target
audience, to reach patients across a number of channels that relate
specifically to their preferences. We observe patient behavior via online
communities, participate in dialogues on research communities, have in-home
visits, observe patient–physician interactions, and use quantitative methods to
analyze trends and adjust content as needed to drive better engagement.”
If pharma companies
want to go beyond engagement and truly encourage changes in health behavior,
they will need to create different kinds of solutions. Although many solutions,
particularly apps, have been developed in the past few years, not all can be
adopted. As Dr. Todd Johnson, the CEO of Noble.MD, puts it: “Apps that face the
patient but are designed to solve pharma-company business needs should never
exist. Conversely, the market desperately needs apps that focus on patient
and/or provider needs—real needs with a measurable impact on health quality and
cost. If those apps also meet business needs—as a secondary or tertiary
outcome—they have a chance of being adopted.”
·
The clinical environment will change fundamentally. As
consumers become more engaged and care environments more complex, physicians
will need new skills and tools. “How doctors spend their time will change
dramatically,” says Vinod Khosla, founding CEO of Sun Microsystems and founder
of Khosla Ventures. “They will shift to spending a smaller proportion of it
ordering diagnostics and interpreting results, and much more on the social
elements of healthcare—helping patients and families think through treatment
options.”
Physicians will
also have to integrate increasingly massive quantities of traditional and
nontraditional health data—for example, hundreds of fragmented electronic
health records, as well as data from thousands of wearable devices and other
“quantified self” technologies. This advance is crucial because “wearable
devices that today are still in the more recreational-grade state are changing
incredibly rapidly into research-grade and, ultimately, clinical-grade” tools,
notes Dr. Eric Schadt, founding director of Icahn Institute at Mount Sinai.
In the near future, physicians may receive a constant, daily
stream of data from some patients. The Diovan hypertension pill, with the
embedded Proteus chip, is already in trials, with stellar patient-compliance
results.3 The chip records the time
when the patient takes a pill and transmits this information from inside the
body to a patch the patient wears. (The patch also captures other physiological
data.) This information can be shared with a smartphone, a laptop, and the
cloud, so the patient and provider can access it. Such developments have
prompted Dr. Krishna Yeshwant, general partner at Google Ventures, to conclude
that “physicians need to operate in a more complex environment with an
ever-growing range of tools. Physicians need a package of solutions to navigate
this environment.”
·
Patients’ brand loyalty dwindles as cost consciousness
rises. People are now much less loyal to brands and
companies—both their insurance companies and the pharma companies that make
their medicines. “The average tenure for a member to be on an individual
insurance plan is now something like two to three years,” says Sanjay Mathur,
CEO of Silicon Valley Data Science. The reasons vary, from more frequent job
switching to employers that adopt new plans to cut costs, he notes. “In the
future, no one will care what brand of drug they will take. And with device,
behavior, and health-proxy data available, their method of selecting drugs will
change dramatically.” The increased cost consciousness of patients exacerbates
this tendency: they compare what they would pay for different plans and the
efficacy and price points of different treatments.
·
Pharma companies will lose exclusive control over
their value stories. As the lines among payors, providers, and pharma companies
blur, carefully controlled trial data will no longer be the sole source of
outcome data. The dynamics between players are evolving: payors are expanding
into areas that providers and pharma companies traditionally owned (for
example, payors are in some cases excluding drugs completely from their
formularies). “With health data becoming more readily available in a more
digestible form, payors and providers alike will have more information to link
drugs to outcomes and inform value-based pricing,” says Amy Abernethy, MD and
PhD, the chief marketing officer and senior vice president of oncology at
Flatiron Health. “The healthcare industry will start to merge, and the lines
across stakeholders will blur very quickly,” adds Dr. Wolfgang Lippert of
Salesforce.com’s Healthcare and Life Sciences Industry Business Unit. “Payors
will become increasingly like providers in offering interventions and home
care, and increasingly like pharma in analyzing data and pressure-testing
value,” he predicts.
For pharma
companies, it will not be enough to accept that they won’t continue to fully
control their product data. To access real-world data from many sources, they
will also need to provide others with more access to their own trial data and
to collaborate as appropriate. As Neeraj Mohan of Blackstone Group says,
“Pharma companies may think they need to keep their data secure, but not being
transparent about clinical trials will in fact put them at a perilous
disadvantage in front of patient groups and, eventually, regulators.”
Reimagine pharma
players as solutions companies, not asset companies
As healthcare
start-ups and technology giants move into what was traditionally the
pharmaceutical domain, pharma companies will need to revamp their value
propositions significantly. Dr. Krishna Yeshwant of Google Ventures pinpoints
the challenge in this potential future: “For pharma, there comes the question
of whether they can tie digital to the assets they have. There is an
interesting broader conversation to have with pharmacos about moving from a
products-and-pills company to a solutions company.” The associate director of
US medical affairs at one global pharma company agrees, adding, “One of the
most exciting values of digital to the pharmaceutical industry is how
technology may be able to supplement or support pharmacological therapies to
more effectively address the problem of suboptimal outcomes.”
The
Diovan–Proteus chip combination for hypertension, mentioned earlier, is one
example. Another comes from Google and its partnerships with DexCom, Novartis,
and Sanofi to combat diabetes. Among the approaches is uploading glucose and
insulin levels to the cloud in real time through contact lenses (worn by the
patient) that measure glucose levels in tears; a bandage-sized sensor sends the
data to the cloud. This technology can greatly improve the quality of diabetic
care and help prevent complications through the real-time detection of any
aberrations in glucose and insulin levels, which would trigger the right type
of medical attention.
Beyond
partnering with technology players, if pharma companies provided solutions that
combined different therapeutics from different manufacturers, they could also
add an enormous amount of value. In oncology, there is a growing movement to
combine novel immune and targeted therapies with market-leader PD-1s from Merck
and BMS.
To develop the
most promising combinations efficiently, these pharma companies need to access
and share early data and improve their digital infrastructure to manage complex
trials and submissions jointly. If intercompany combos are to move beyond HIV
and oncology, pharma companies must realize that they themselves, and not only
patients, can benefit from partnering and combo solutions. For example, they
can mitigate the risk and cost of clinical trials for combo therapies and
leverage the strengths of each partner for what it does best.
Chris Geissler
and Sanjay Mathur of Silicon Valley Data Science stated the case for
reimagining pharma companies in even stronger terms: they say it could actually
make the difference between success and failure. Big Pharma, they add, may be
doomed to fail unless it transforms itself, and what such a transformation
looks like is an open question that depends on several factors. For instance,
Mathur argues that pharma companies will have to build “trust and form personal
relationships with the consumer.” Such a transformation may be difficult for
big pharma companies “mired in traditional approaches and legacy organizational
structures.” These companies would not be able to compete effectively with
nimble, small to midsize rivals that “have nothing to lose. Change and survive
or be acquired,” says Mathur.
Finally, certain disease states are ripe for the introduction of
comprehensive solutions or systems. Diabetes, which affects 387 million people
around the world and consumes one in nine ($612 billion) US healthcare dollars
today,4 is
an area ready for an end-to-end solution.
As pharma
companies shape their purpose and future direction, the insights from our
interviewees suggest that fundamental change is needed. Companies must redefine
the space they play in. They must get more specific information about their
customers to identify the solutions and experiences—not just the products and
drugs—those customers really need. They also have to understand precisely how
such solutions will capture the most value. Then they will need to reconfigure
their organizations to capture this value and realize their new approach to the
business.
Technology is ready,
but pharma companies must change to enable and harness it
Our
interviewees agreed that technology itself is not what hinders the pharma
companies’ full-scale adoption of digital health technology. “Lots of people
say there are technical challenges to integrating different medical-record
systems, but I don’t think that’s true,” says Dr. Krishna Yeshwant of Google
Ventures. “I struggle to see what the tactical limitations are from an IT
perspective.”
That said, new
technology often faces strong organizational barriers, such as mind-sets that
resist IT change and conservative cultures that base decisions on perceived
risks. These cultures often lack compelling incentives that reward employees
for behaving in new ways by moving beyond the core. Their business structures
discourage risk sharing among stakeholders. The performance metrics of most
pharma companies connect directly with the bottom line and the current P&L,
not with innovation, customer engagement, and future strategy.
As a result,
these companies generally try new approaches or technologies only when they see
their peers doing so. Most of the digital leaders we interviewed, like Kara
Dennis, managing director of Medidata’s mHealth unit, believe that “every one
of the required technologies exists or is almost there and largely good enough.
The challenge is in pulling the new technologies and processes together for an
integrated clinical trial, and this will require life-science companies to
remove organizational barriers to change.”
Take data
transparency and data aggregation, for example. Multiple third-party players
are aggregating health data and making the data and insights available to
providers and payors. “If I were a life-science company, I would want to know
what the story about my drug is going to be before it’s told by others,” says
Dr. Amy Abernethy of Flatiron Health. “I would want to know what adverse events
there are before others surface this for me. With constant monitoring, you will
find a lot of signals, and you will need to learn how to handle these signals
with respect to reporting to the Food and Drug Administration. But this is not
a reason to stick your head in the sand; this is how drug development is going
to be done in the 21st century,” Dr. Abernethy predicts. A director at a top 20
pharma company adds, “There’s a lot of alarm around utilizing social-media data
for fear of discovering adverse events. Ignorance is not an excuse. A company
like ours would like to be responsible for understanding what is being said.”
Many companies
come at this issue backward, according to Sanjay Mathur of Silicon Valley Data
Science. The story should be “about the technology second”—not first, he says.
“Companies are so consumed with what technology to use they forget that the
most important thing, to start with, is to ask the right questions. You don’t
need real-time insight if you don’t have a place for real-time action.”
Pharmaceutical
companies must also determine what they will need to uncover distinctive
insights. These insights will drive their technology strategy, which will help
them to integrate vast amounts of data from disparate sources and to use
analytics or other tools that support the entire business.
Three fundamental shifts
To achieve all
of these goals, pharma companies must fundamentally shift their mind-sets,
cultures, and capabilities. Only then can they transform themselves into the
agile, experimentally minded solutions providers they need to be. The themes
emerging from our interviews suggest strongly that companies must make three
strategic shifts to succeed:
·
Go beyond the pack mentality by embracing
experimentation and risk. Pharma companies must now meet the consumers’
higher expectations, which stem from their experiences with other industries.
“We have seen significant evolution in the consumer-electronics space,” says
Dr. Krishna Yeshwant of Google Ventures. “Now if we turn to the
medical-software and device space, we can push more evolution—for example,
user-friendly devices or user interfaces. Users of pharmaco products are
comparing them with those of the best consumer-electronics brands. That’s the
new standard.”
A lack of risk
appetite appears to thwart this evolution. “There is a strong pack mentality.
Organizations don’t change unless they see everyone else change at the same
time,” says Dan Goldsmith of Veeva Systems. “This has resulted in slow advances
and a lack of innovation across the industry for years. In essence, pharma
wants to be in control and avoid the risk of standing out.” Now, despite the
fact that patients are taking back control over their own health, “How many
pharmacos do you see out there engaging with patients?” he asks.
Some
interviewees feel that there will be action if experimentation takes place in
the right place and is both encouraged and rewarded. Today, different
departments in pharma companies have different appetites for “radical novelty,”
says Johan Grahnen, formerly the principal data scientist at Ayasdi, an
advanced-analytics company specializing in machine intelligence. “It is
difficult to encourage experimentation in departments that are driven by
compliance. Strong leadership buy-in and support is required to set a unified
vision,” he adds.
·
Embrace a collaborative culture and challenge barriers
to sharing. A collaborative approach is necessary if pharma companies
are going to stay ahead of healthcare digitization. Significantly, some have
already recognized the need to stimulate, connect, and support innovative ideas
across business units and geographies. “It is critical to have grass-roots
experimentation,” says Bruno Villetelle, chief digital officer at Takeda
Pharmaceuticals. “We set up an internal digital accelerator and innovation fund
to stimulate this, and we run a regular Dragons’ Den competition to identify
and fund development and pilots for the best ideas. The competition helps us
avoid waste and bring speed, focus, and energy into digital innovation. When a
pilot proves its value, we stand ready to put in the resources to scale the
idea up quickly to the rest of the enterprise.”
As we mentioned
earlier, pharma companies should also recognize that they must contribute data
if they want to see what data others have. However, as Sanjay Mathur and Chris
Geissler admit, “no real mechanism or incentives currently exist to foster”
this kind of sharing behavior.
Inder Singh,
CEO of Kinsa, suggests another requirement. Pharma companies must “reimagine
their legal and compliance organizations to work more closely with regulators
as companies creatively think about how to enable new business-model
innovation,” Singh says. “Health information is highly regulated, and the
regulatory context has not always kept up with the pace of innovation.
Pharmaceuticals will need to actively work with regulators to find a path
forward.”
Kristy Junio,
senior director of Healthcare & Life Sciences for Oracle Marketing Cloud
Industry Solutions, argues that pharma companies need to build novel,
trust-based personal relationships with consumers. These ties “replicate the
experience and trust that providers were able to build with patients.”
Technology, she says, is one way to create this bond—for example, by providing
patients with more personalized information about their health and treatment.
Finally, pharma
companies have a choice between developing digital solutions in-house or
through partnerships. Some of our interview subjects, including Dr. Todd
Johnson of Noble.MD, believe it would be better for these companies to partner
with third-party technology providers through innovation funds or joint
ventures. “With pharmacos’ solutions often offered and marketed in providers’
offices, third-party partners offer more objective, unbiased representation,”
Johnson observes. He believes that objectivity and a lack of bias are critical
for providers to build relationships of trust with their patients.
·
Reinvent companies by building nontraditional
capabilities and embedding them in new operating models. Attracting,
engaging, and delighting consumers requires a deep understanding of how to
deliver a customer experience—far beyond just selling a product, pill, or
diagnostic test. The problem is that “most healthcare innovation gets smothered
in preference for something that drives the bottom line immediately,” says
Aimee Jungman, who has worked at companies including Frog Design, Genomic
Health, and Pfizer. “There’s a lack of commitment to building something new,
which could disrupt current cash flows, and something lasting, for the patient and
physician to improve care,” she says. Neither of these aims will be realized
unless pharma companies build new capabilities and revitalize their existing
business and operating models to foster greater experimentation and bolder
strategies.
Going from selling
products to selling digital solutions demands completely new processes and ways
of working. As Dan Goldsmith of Veeva Systems says, “In some ways, it is easier
to talk about the technology, data, and analytics aspects of the digital
revolution. But the harder question is, really, what are the fundamental
organizational changes that will need to occur? With great advances in
technology over the past five years, technology change is the easy part.”
Our
conversations and client experience reveal a widespread perception that C-suite
executives have not fully embraced digital. Their incentives typically reward
them for taking a “wait and see” approach, which can stifle innovation and
hinder change across the organization.
Nevertheless,
virtually all of the thought leaders agreed that pharma’s old model must change
and new blood must enter the system. The good news is that they see some pharma
companies starting to value nontraditional skill sets—hiring marketers from
other industries, such as retail, and building strategic relationships with
creative agencies.
Dr. Amy
Abernethy of Flatiron Health says that pharma companies need to double down on
talent that truly understands science and health data. Some examples? “People
like clinical informaticists who know how to work with electronic health-record
data, clinicians who understand the science and didn’t just drop out of
academia, or data scientists who aren’t just the IT guys in the basement but
are business partners with the senior leaders.” Whether pharma companies choose
M&A, strategic partnerships, or organic incubation and experimentation,
they must find a way to adapt and evolve quickly. If they don’t, third-party
players more willing to take risks, chart the course, and listen to consumers
could supersede them.
The
digitization of healthcare, even in the early stages, is having a real impact
on how not only doctors but also patients manage those patients’ health and how
pharma companies need to do business. Digital innovation still faces
challenges, such as the lack of clarity about who pays for digital solutions,
but digital and data analytics should certainly be high on the C-suite agenda.
Pharma companies that want to keep up—or move ahead—must be bold and adopt an
act-now mentality. They must build innovative business models, invest in new
capabilities, and transform their organizational cultures.
About the authors
David Champagne is an associate principal in McKinsey’s
London office, Amy Hung is a specialist in the New Jersey
office, and Olivier Leclerc is a director in the Southern
California office.
The authors wish to thank Micah Bregman, Ting Guo, Helen Ma, and
Shelley Vamadevan for their contributions to this article.
http://www.mckinsey.com/insights/pharmaceuticals_and_medical_products/how_pharma_can_win_in_a_digital_world?cid=digital-eml-alt-mip-mck-oth-1512
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