Pharma: Build “Around the Pill” not “Beyond the Pill”

File under: Healthcare Business, Patient Engagement, Pharma innovation

For several years, pharma has attempted to move “beyond the pill” to offset declining product pipelines. The dream is to find new revenue opportunities. New business models.

But as we’ve seen, these new products and service experiments are rarely commercialized. If you study the revenue mix on any pharma P&L statement, you’d be hard pressed to find any real revenue beyond pills.

So, what’s the problem?

Well, it’s not just pharma. Successful new businesses that launch in the shadow of large legacy product portfolios are rare in any industry.

$100 Million or Bust
A few years ago, I was working with a global CPG company with a vibrant innovation team. But the success bar for moving a new idea or business model out of the lab was having visibility to least $100 million a year in revenue. Soon.

This meant that only the most obvious, non-risky ideas got the capital needed to grow. Promising but speculative projects were left to die on the vine.

So the challenge of commercializing innovation is not unique to pharma, but that doesn’t let us off the hook. There is an urgency to figuring this out.Around the pill

The Urgency has Changed
A few years ago the focus was on finding new ways to backfill declining revenue from the patent cliff. But now the product pipelines for biologics and new orphan drugs for rare diseases could not be more robust. Revenue is growing again.

The real reason for today’s urgency is not revenue, it’s the changing customer environment. We now have the need to not only prove outcomes but to improve the patient experience. Soon.

The New Burning Platform
Patient satisfaction now represents 30 percent of all Medicare incentive payments to providers. And these incentive payments have become critical to hospital revenues.

So how can pharma help hospitals and large provider groups improve their patient experience?

By improving the patient experience with the therapy.

The patient experience with a drug obviously includes the therapeutic effectiveness of the molecule. But now it also includes a new set of expectations. To successfully compete for formulary status and physician preference now requires non-drug support. Everything from patient communication to lifestyle support.

It’s time to focus on building “around the pill” instead of trying to move “beyond the pill.”

  • “Around the pill” thinking will challenge new product teams to consider the entire experience of the therapy. The product touches everyone, from provider to patient to caregiver to patient community to financial counselors. Think of it as the local neighborhood of a drug. A community experience that impacts the ultimate patient experience.
  • “Around the pill” is less about new businesses or new sources of revenue and more about surrounding an existing product portfolio with support services.
  • “Around the pill” even includes finding better ways to identify which types of patients will benefit the most.

This type of innovation won’t develop meaningful new revenue, but it will drive better loyalty and customer satisfaction with existing customers.

Roadside Assistance
When Mercedes Benz was the first auto manufacturer to offer roadside assistance “for the life of the vehicle,” they didn’t do it because it offered a new revenue stream. They did it to back their quality product. The new service offering didn’t change Mercedes’ business model or product – it created more value for their current products by assuring quality.

And that is what pharma’s “around the pill” approach would look like to me. Pharma needs to develop adjacent services to support its current products by creating well-rounded solutions.

Going forward, large providers and health systems payers will focus less on the price of a product and more on total outcomes. In this new environment, attention will be focused on patient satisfaction, one of the three primary legs of the Medicare reimbursement stool.

Role for Pharma
With this in mind, I’ve been thinking about how we can help our pharma clients move forward.

Maybe thinking “beyond the pill” was too audacious and too ambitious. Or maybe it was just wrong.

Building “around the pill” is not only more attainable but will be more valuable to pharma’s primary customers. And that will make it more valuable to pharma.

We need to focus on building investments that support the pill. This will be a much more effective way to help pharma become more valuable – and more competitive in the marketplace.

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  • Rudy Tambala

    surprised no comments on this visionary article. I agree with your positioning – makes perfect sense and the M Benz example nails it so well. Thanks!