Can Innovation Trump Consolidation in Healthcare?

File under: Healthcare Business, Healthcare innovation, Pharma innovation

At the ACA party, there are 15 pharma companies standing around a room with only 10 chairs. Which means that when the music stops, five of them are SOL.Party!

That’s the future for pharma in a world in which all providers are at-risk and outcomes data are more important than volume discount pricing when it comes to therapy decisions.

Right now, the most common business strategy for healthcare companies managing the changes brought on by the Affordable Care Act has been consolidation. Everywhere in the system, players are merging. PBMs are consolidating and health systems are gobbling up every type of healthcare service, from physician practices to labs, urgent care to long-term care facilities and community hospitals in an effort to become large, integrated health networks (IDNs).

And, why? Why are they doing this?

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Big Pharma Makes Moves To Manage Disruption

File under: agile methodology, Digital Health, Global Pharma Marketing, Healthcare innovation, Patient Engagement, Pharma innovation

What I liked most about a recent HBR article was what wasn’t mentioned.

The recent Harvard Business Review article, “How Merck is Trying to Keep Disrupters at Bay,” is all about disruption, and anyone who reads HBR on a regular basis knows that anything written about industry disruption or disrupters owes at least a tip of their hat to Clayton Christensen.

Christensen, a Harvard professor, has written extensively about disruption, innovators and the innovator’s dilemma, highlighting the fact that most large companies, including pharmaceutical companies, are not great at innovation or staying nimble enough to respond to changing customer needs and expectations.

Often it’s the small startup companies who aren’t respected by big companies that wind up disrupting the marketplace. They upend the value proposition in the marketplace, and by the time large and established companies can see what’s happening, they’ve lost market share – or maybe even the entire market.

I think it’s interesting and very compelling that Merck – a large and established company – recognizes this threat and is trying to work from both the inside-out and the outside-in to keep disrupters at bay.

babarThe HBR authors reference another large company, IBM, and how it essentially remade itself 20 years ago under the leadership of Louis Gerstner, who wrote his own best-selling book, “Who Says Elephants Can’t Dance?” on the IBM journey.

The way Merck is doing it really impresses me. Merck recognizes that as a firm it already has certain core attributes, capabilities and priorities that it isn’t going to throw out. But by creating an internal Emerging Businesses (EB) group, it’s also inviting a high level of innovation.

Merck has tasked this small group to look outside the firm, but also, and more importantly, within the firm for new ideas for both products and services. EB created a Strategy & Innovation Council to identify and scale new internal initiatives and a Global Health Innovation Fund to find external partnerships.

Fundamentally, Merck is a products firm. They’re a drug manufacturer, but they recognize that innovation extends beyond new Rx products and into the entire customer experience, which can include other revenue opportunities like services and technology.

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The Last Mile in Healthcare Delivery

File under: Healthcare innovation, Multi-Channel Marketing, Patient Engagement, Relationship Marketing

Lately, I’ve been thinking about the impact of the changing healthcare landscape on the people who actually deliver the healthcare – the healthcare professionals -  as millions and millions of more Americans now have health insurance coverage.

There’s been much written about how there won’t be enough primary care physicians available to handle the increase in patients. Some primary care physicians are overloaded, and in some cases are not taking on new patients because their capacity is maxed out, but so far most practices are handling the increase in insured patients.

Nevertheless, the predictions are that the US will have a shortfall of 50,000 primary care physicians in the next decade.

I’ve already written about the primary care physician as an “endangered species.”

This emerging situation highlights the important role of Nurse Practioners (NPs) and Physician Assistants (PAs), those professions that are often lumped under a category called “Healthcare Extenders” or HCEs. Sometimes they’re known as the “Allied Professionals” within healthcare. There are currently 150,000 nurse practitioners in the US.

city on hill 2The Last Mile in Healthcare Delivery
I often consider these HCEs or allied professionals as providing the “last mile” in healthcare delivery.

Physicians have traditionally done the tasks of diagnosing the illness, writing the prescriptions and monitoring the patients, but as primary care physicians are called on to see more patients, they are able to spend less and less time in the exam room. And that’s where the “last mile” comes into play.

For example, some patients may ask, “Now that I have this disease, how do I manage it?” For them, the last mile is patient education. Others may be encountering drug side effects. For them, the last mile is patient support or discussion about an alternate therapy.

Lifestyle changes? Coaching is the last mile.

All of these support requirements will fall more and more squarely on the shoulders of the allied professionals.

What’s more, the HCEs and allied professionals aren’t just doctors’ helpers – they have the education and authority to prescribe medicine and educate patients.

-       79% of NPs and 69% of PAs provide or recommend patient support resources for patients

-       NPs are able to legally prescribe medications in all 50 states

-       PAs can prescribe in 48 of the 50 states

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Is Your Doctor an Endangered Species?

File under: Healthcare innovation, Patient Engagement, Pharma innovation, Relationship Marketing

I recently attended the American College of Physicians’ (ACP) Internal Medicine Meeting, the annual national conference for internists and primary care physicians. It was well attended and offered a mix of clinical presentations on new advances in medicine, seminars about the practical side of running a primary care practice, and policy updates on the Affordable Care Act.

Quarterback InternistThe Internist as your Healthcare Quarterback
This group of physicians is arguably the most important in the field. Primary care physician keep our health history, coach us on healthier lifestyle choices, and they are often the first to diagnosis a life-threatening problem.

These are also the clinicians who have to triage the millions of newly insured patients while at the same time dealing with declining reimbursement rates. There is a reason why internists are considered an endangered species.

Yet there was no hand wringing or complaining at the ACP conference.

Given the challenges for this group of doctors, I expected to hear a lot of moaning and complaining, but the reality is that physicians are already moving forward with the new ground rules to build and maintain their practice. They’re embracing the changes despite more complex and tedious record keeping. Ultimately, physicians want to get everything settled so they can get back to their patients.

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Pharma Moves Into Digital Health

File under: Digital Health, Healthcare innovation, Mobile Health, Pharma innovation

digital healthThe announcement that Novartis and Qualcomm Ventures have formed a joint venture to invest $100 million in digital health is significant and suggests that big pharma is transitioning from talk to action in the strategy to “move beyond the pill.”

This new move builds on their ongoing relationship, which includes a partnership to use Qualcomm Life’s 2net technology for Novartis’ clinical trials.

What did Novartis see in Qualcomm and why does this partnership raise the bar for pharma?

First, a little about Qualcomm’s technology and how it is relevant for healthcare. The 2net is a device, about the size of a pack of cigarettes, that plugs into a normal wall outlet. There are multiple wi-fi, Bluetooth and cellular technologies built into the device that are able to connect with dozens of different wireless activity trackers, symptom trackers and wireless glucose monitors and then upload the data to a secure personalized web portal, where patients, caregivers and healthcare professionals can review.

Most of the top medical and consumer devices available right now automatically pair with the 2net, so users don’t have to go through the sometimes frustrating “pairing” exercise. This solves one of the “last mile” user experience hurdles to easy device connectivity, especially for consumers who aren’t mobile savvy.

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The Two-Edged Sword of Healthcare Reform for Pharma

File under: Global Pharma Marketing, Healthcare innovation, Pharma innovation

The Economist recently published a report on the cost impact of healthcare reform in the US.

Healthcare Spending TrendsThe data shows that the fundamental idea of bending the cost curve by changing the way healthcare is reimbursed — moving from a fee-for-service to a fee-for-outcomes — is actually working. Hospitals are actually doing fewer unnecessary tests than they previously did. According to the report, before Obamacare, hospitals did as many tests and procedures as they could, because that’s how they made money.

Now that the focus is on patient outcomes —  keeping patients out of the hospital and feeling better after they’ve been discharged — costs are going down. Bundled payments for procedures is limiting out-of-control expense growth.

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On Creating a (Healthcare) Whole Bigger than the Sum

File under: Digital Health, Healthcare innovation, Pharma innovation

platform, noun 1. A raised level surface on which people or things can stand.

When I think about a platform, especially in business, I imagine a foundation for building an integrated solution or a value proposition.

From an investor perspective, when a private equity firm looks at a market and sees an unmet need, they will develop an investment thesis. And from that, they will build a platform strategy.

Creating a Platform Strategy
The first thing a private equity firm does when executing against an investment thesis is to find and buy what they call an “anchor company.” Then they make a series of smaller, bolt-on acquisitions and integrate them to form an end-to-end solution that’s bigger than the sum of the parts. Efficiencies from the integration, synergies in the collective capabilities and the impact of strong leadership help create this impact.

We need more of this kind of thinking in healthcare.

Healthcare solutions can be more effective when companies partnerIt doesn’t all need to be acquisition-oriented like it is in the private equity world. Healthcare could focus on partnerships, which is often a more nimble approach. For example, pharma could partner with a mHealth app, a data analytics company, a disease management firm and a regional care center or ACO to create an integrated approach to supporting a diabetes or asthma population.

This would create a healthcare whole that is bigger than the sum of the individual products and services.

For example…
For example, four companies recently partnered to win a White House Ebola Grand Challenge to provide a “precision medicine” approach using wearable, wireless health sensors, a wireless vital signs monitoring platform and advanced analytics technology to monitor and analyze multiple vital signs of patients either suspected or confirmed to be infected with the Ebola virus. This wouldn’t have been possible if any of these companies had tried to do this on their own.

My only question is, why wasn’t there a pharmaceutical company in this partnership?

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Three pharma trends from the 2015 J.P. Morgan Healthcare Conference

File under: Global Pharma Marketing, Pharma innovation

I attended the J.P. Morgan Annual Healthcare Conference a few weeks ago. Think of it as the CEO version of SXSW for all things big pharma, biotech, health insurance, health tech and large healthcare providers. In four days you drink a fire hose of 30-minute reports from CEOs and their CFOs that together paint a detailed portrait of the financial and scientific outlook of the industry. (i.e., many “forward-looking statements.”)

JPMThe Solvadi Effect
As I was listening to the executive presentations, I began to pick up on three important trends. First and perhaps most importantly, I sensed that the industry is really committed to finding cures. Call it the Solvadi Effect.

Historically, the objective has always been to delay death, but now everyone seems inspired by the power of Gilead Science’s new product to cure hepatitis C. This is a much better clinical outcome than the generic alternatives with their nasty side-effects. Pharma leadership, particularly biotech executives, used the conference venue to declare their commitment to finding cures for diseases, with special attention placed on Alzheimer’s, Parkinson’s, MS and hepatitis.

Business Model Flip
One reimbursement policy implication is that over the next 5 to 10 years we could potentially see the pharma/healthcare business model flip from delivering moderately priced drugs that chronically-ill patients take for the rest of their life to a new model in which therapies might cure a disease in a short period of time, but with a very high price tag. For example, the business and social contract is already changing from supplying a generic drug that someone with hepatitis C would take for the rest of their life to a drug can cure the patient in 12 weeks, but will cost $86,000.

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Wrapping Services Around Products: The New Pharma Model

File under: Digital Health, Healthcare innovation, Patient Engagement, Pharma innovation

“The home is ultimately going to be the major site of care for all but the sickest patients.”

This from an interview with George Halvorson, CEO of Kaiser Permanente, in which he expounds about healthcare reform and the vertically integrated model that is Kaiser.

Essentially, he’s saying that we will move from the traditional office-centric model to a new approach using technology like e-visits, e-connectivity, remote patient monitoring and smart phone apps to support home-based healthcare. Technology will be the backbone of patient care in a world in which more people are covered by health insurance and there is a shrinking population of primary care physicians

Technology and Patient Empowerment

Halvorson’s remarks suggest that the trends we’re seeing in patient empowerment, like The Quantified Self and websites like Patients Like Me, are all part of a future in which we won’t spend time in a hospital unless we are really sick. And we may actually be spending less time in a doctor’s office, too.

This brings up many questions. What does this mean for prevention? For treatment? How do we use technology to enable people to live healthier lives so that they don’t even need to use the healthcare system? And, ultimately, when we do need the healthcare system, how do we support the home environment to provide for effective treatment?

And what role will pharma play in an integrated healthcare delivery model?

prod serv 2The New Reality for Pharma
This comes back to a theme that I’ve talked about in the past. There is an important role for pharma in this new reality, but it means a change in identity from product manufacturer to healthcare services. Pharma has an opportunity to play a larger role in health services that enhance the value of the products it already provides.

Examples of Products + Services
For example, Google’s basic product, online advertising, provides most of its revenue. But they’ve surrounded it with all kinds of free and interesting analytical, coaching and survey tools. Google offers many of these services for free, like Google Analytics. These aren’t simple “freemium” products, however. They are serious tools. But Google knows that offering them for free enables adoption by the very people they want as customers, thus enhancing the value of their core business.

Brokerage firms make their money on investment products and trading. But they often offer free advisory services and retirement counseling to help clients build retirement models.

Banks are another example. I had a meeting a few weeks ago with a banker who was an also expert in health insurance plans. He had been hired specifically to advise the bank’s clients on innovative health insurance plans and models – advice that I would have had to pay for had I gone to a consultant. But the bank felt this was a service that they should offer their customers, wrapped around the core banking products where they make most of their money.

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The Four Cs of Customer-Centric Marketing Culture, Part II

File under: Big Data, Digital Health, Multi-Channel Marketing, Relationship Marketing

In the last blog post, I covered the first two Cs of Customer-Centric Marketing for pharma, Commitment and Courage. We need to make a Commitment to building a data and insight culture. This begins to build the foundation of customer understanding. But as we soon discover, not everyone appreciates this level of transparency, even in your own company. We need Courage to counter the various hurdles and vested interests that stand in the way of an open and transparent marketing culture.

4cs2The next step in building customer-centric marketing is to build the technology platform to integrate every customer touch point and marketing tactic. The project involves integrating every sales and marketing tactics into a Relationship Marketing (RM) platform. We call it “RM-enabling” each tactic. This is hard work and requires an investment in new Capabilities.

Capabilities
The job of RM-enabling every tactic to bring customer data and insight back to a centralized database is a simple idea to articulate but it’s complex to execute.

Moving to outside-in, customer-centric marketing will need new RM capabilities. Capabilities is the third C.

Seldom are marketing organizations or traditional agencies equipped to RM-enable every tactic to capture that outside-in insight, and they will need to develop or hire new capabilities to do it.

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