Is Big Pharma Losing Its Innovation Brand? Not so fast…

File under: Digital Health, Healthcare innovation, Pharma innovation

The list of leading consumer electronics and telecom companies that have embraced digital health this year are all household brands: Apple, Qualcomm, Google, Amazon, Samsung, Verizon and AT&T. Funded startups in the tough guymobile health sector number in the hundreds.

We’re seeing a phenomenon in which the tech industry, specifically tech entrepreneurs, are spearheading health innovation, replacing the traditional players like biotech, pharma and medical device companies. And pharma seems to be acquiescing to these newcomers, despite the fact that there is no other industry player as intrinsically linked to both innovation and the delivery of healthcare as pharma.

Health tech leadership evolving
Pharma has always been a health tech player. But in just the last few months as health tech has been redefined as digital, it’s become blatantly obvious that health technology leadership is now in the hands of big brand consumer electronics companies. And while the focus of companies like Apple, Qualcomm and Samsung has initially been the largely unregulated health and wellness sector, there’s nothing inherently limiting them from moving to the clinical side.

Samsung has already declared that it’s making a two billion dollar investment in building a pharmaceutical company. Meanwhile, other interesting early-stage startups like Trial Fusion, are building the capacity to manage the regulatory approval process for digital health products.

Venture capital jumping in
In terms of investment dollars, there was more venture money invested by mid-year 2014 than in all of 2013. Rock Health has identified at least 11 late-stage, venture-backed health companies ready to IPO, and all of them are new, young companies. Traditionally, investors would shy away from highly regulated industries like health care, but there is a new investment thesis making the rounds. Healthcare is seen as the next huge market overdue for disruption.

Major momentum in a growth sector with enormous inefficiencies. What’s there not to like about that if you’re an entrepreneur or an investor?

The future for pharma
Even with the influx of new companies taking on the innovation role, pharma won’t become obsolete. But a portion of the sector may become more of a utility than a growth sector. The emergence of a handful of expensive niche products such as Solvaldi masks the forces of commoditization of pharma. Pharma may eventually bifurcate into two complementary sectors: a large, generic industry and a smaller, specialized or niche industry.

But are those the only viable scenarios, or is this really a false choice?

Disruptive innovation
There is a real possibility of redefining the role of pharma as disruptive innovation.

Disruptive innovation in today’s environment would bundle breakthrough pharmaceutical products with software, hardware and services and target one of the many costly and still inefficient sectors in health care. How about preventable hospital readmissions? What’s the right bundle of products and services and technology that would disrupt this costly and unnecessary healthcare experience?

New business models, innovative partnerships, and fresh sources of investment capital will help redefine the value proposition that pharma will offer to the marketplace.

Although there are many threats facing pharma, the growing focus on health outcomes and ROI shouldn’t be seen as one of them. Instead, it can play to the industry’s strength in understanding disease pathways and the balance of efficacy and safety in mediating drug therapies.

From paired diagnostics to targeted therapies to patient adherence programs, pharma still has another chapter to write on designing the “whole” health solution. The passion is there to do it. The next step is to take the next step. Begin to frame out the future as innovation. Disruptive innovation.

And retake the mantle as health tech leaders.

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