Pharma Innovation moves to Business Innovation

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

The need for innovation within pharma now goes beyond just product R&D. Innovation today must include business model innovation.

road2This could lead to an unexpected left-hand turn in your near future…

Moving beyond the pill?
It has become de rigueur for pharma executives to talk about “moving beyond the pill,” something closerlook has been championing for several years. This new way of thinking includes offerings like disease management, patient engagement, companion diagnostics, etc.

That’s all well and good. However, a critical part of this discussion, especially in light of healthcare reform changes in healthcare delivery and payment, is how pharma will get paid for all of this. Paid for the “value-add” investments, yes, but even paid for the core product if and when it becomes commoditized.

Another way to ask the question: Who will be the buyer in five years?

More and more health systems (buyers) are becoming vertically integrated. These vertically integrated systems are achieving the most productive and most streamlined patient experience and the best outcomes at the lowest cost. Given these results, the trend of provider consolidation will continue across the country. Numerous health systems and policymakers are advocating this integrated approach.

Who is the real buyer?
Over the next five to ten years as this trend takes hold, the buying process for pharmaceutical products is going to become more centralized. It’s going to be less and less the purview of the physician working in private practice to say, “Hmm, I think I’m going to write this for this patient.” Many physicians whose practices were purchased by a hospital group are learning that they are no longer expected to practice medicine. They are expected to follow protocol.

Blame the data. Integrated health systems are getting much better data on patient outcomes, and because they’re on the hook now for positive outcomes to get reimbursed by Medicare, doctors will become restricted on what they can or can’t write.

What does this mean for the independence of the practicing physician? The relationship between pharma and whoever is writing the script may evolve to a B2B sale between a chief medical officer at pharma and a chief medical officer at a health system. The physician is going to become less and less influential in the success or failure of pharmaceutical products, and the traditional sales channels such as sales reps will become more irrelevant to the growth of a brand.

This will require a rethinking of the pharma business model. And for marketers, a rethinking of what it means to practice marketing innovation.