Revolution often begins quietly, at the edges. By the time the mainstream recognizes what is happening, the change is virtually unstoppable. Only in hindsight can one glimpse the seeds of change taking root in the least obvious places. The Arab Spring that rocked countries from Tunisia to Egypt started years earlier as pent up frustration in the alleys and markets of northern Africa. Apple’s domination of multiple consumer electronics industries began with the beautiful but quirky iPod music player.
Behind the headlines of healthcare reform we see seeds of change taking root that may have a similarly profound impact – changes that will create many new markets and that will potentially challenge the very foundation on which pharma is built.
It’s hard to overestimate the impact of the healthcare revolution that’s coming in the next decade. Let’s look at some of the emerging technologies that could lead to remarkable changes in how healthcare is bought, sold and delivered.
The Advent of Synthetic Genes
I recently met Craig Venter, the scientist who was the first person to map the human genome. His aptly named company, Synthetic Genomics is building on his successful attempt to synthesize a gene. I had the opportunity to visit his laboratory and see a few of his current projects. Craig is forging an intersection between biology and the digital world. He’s not only working on the genome, he’s turning it into digital content.
According to Craig, now that he can synthesize genes, he can turn the genetic instructions embedded in the DNA into a digital file and literally email a gene. “If there is someone at the other end who has a properly equipped wet lab, they can take the digital content that I’ve given them and then turn that back into a biological gene.” This could revolutionize the way we respond to outbreaks of disease, develop tailor-made diagnostics and create targeted therapies.
Globalization and Innovation
Globalization and innovation at the bottom of the pyramid are creating new courses of therapy that are cheaper and that can reach more people than what’s currently available in North America and Europe. The obvious example is the Aravind Eye Care System in India where process innovation means that cataract surgery can be completed at a fraction of the cost in the US. Avarind’s eye surgeons average 2,000 operations a year. In the US, the average is 125.
I have been in conversation with a researcher in Boston who is pioneering the field of nano biophysics. She is literally moving around molecules at the DNA level, with incredible implications for diagnostics, targeted therapies, and even preventive medicine. The costs involved in manufacturing new products using this technology are a fraction of the cost of traditional small molecule and biologic therapies, making it the kind of innovation that could revolutionize the business model of the pharma industry.
Patient Communities and Governments Becoming Empowered
Patient communities around the world are beginning to take charge of their own destinies. They are making demands of governments and pharma to gain access to more efficacious and cost-effective therapies. In some countries, patient and caregivers are forming activist communities, demanding the latest therapies from their governments.
At the same time, budget constraints are leading both patient communities and governments to demand much more attention by the healthcare industry to prevention rather than just expensive acute and chronic care. This is going to challenge pharma’s traditional model. If pharma doesn’t seriously embrace prevention as a part of its portfolio, it will be ill equipped when governments with constrained budgets limit payments for drugs.
The Power Shift Away from the Physician
The growing influence of health plans, both private and government-run, is beginning to displace the primary care physician as the most important decision-maker in choosing a pharmaceutical course of therapy. Internists will find their ability to prescribe certain medications circumscribed by price and even access to certain drugs may be curtailed.
This change in power means that the traditional focus of pharmaceutical marketing – the physician – may not be the most effective target. This has broad implications for how a brand goes to market and how it staffs its sales force.
New Sites of Care Evolving
We’re already beginning to even see small changes in where care is delivered. Clinics at Walgreens, CVS and small, dedicated surgical centers staffed by healthcare professionals are beginning to displace more traditional physician offices and hospitals. Young parents are realizing that they can get their child’s pink eye, sore throat, and ear infections diagnosed and treated in 20 minutes, including filling the prescription a few steps away at the in-house pharmacy, compared to trying to schedule an appointment with their family doctor.
These new clinical sites are providing more efficient care at a fraction of the cost, leading to what I call “new centers of influence.” As these clinics of convenience gain traction and popularity, the world-class doctors who might have directed therapy choices in the past may not have the same level of influence going forward.
More Transparent Outcomes
Technology and “connected health” are making the ability to measure and publish outcomes much more transparent. This will inevitably lead to new models of prevention, diagnostics and therapy.
There will be an ever-growing demand for more targeted therapies. At some point soon, outcomes measurement will allow the FDA to tell pharma, “Your drug is now efficacious for over 80% of the American public, but it’s actually the most effective for 20% of the population. You need to partner with a diagnostics company so that you can do a much better job of identifying which patients will thrive on your product.”
Off the record, senior pharma executives express skepticism that outcomes measurement will ever be definitive enough to influence prescribing decisions, but that it precisely what the private and public health plans are expecting.
Will Pharma make the Necessary Adjustments?
Given these changes that will likely impact this industry in profound ways, what kind of new role does pharma need to play to maintain its relevance and profitability? Should it rethink its very expensive, traditional manufacturing role and move into a health leadership or partnership role? What impact would this have on pharma’s fundamental business model?
An important example to explore is the partnership between United Healthcare, YMCA and Walgreens in which the health plan pays the Y and Walgreens for every type 2 diabetes patient they enroll in exercise, diet counseling, and compliance training programs. Who would have predicted these types of non-clinical payments five years ago? Yet it’s a very strategic partnership for United Healthcare grounded in a different definition of value and the long-term relationship they wish to have with their customers.
What is the right definition of value for pharma for the next twenty years? And what type of relationship do we want to build with our customers that will provide value to both parties?