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.2These
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.3The
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 medical 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,4is 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.
By David Champagne, Amy Hung, and Olivier Leclerc
http://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/how-pharma-can-win-in-a-digital-world?cid=other-eml-alt-mip-mck-oth-1702
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