It seems only a matter
of time that the leaders of established biopharma will need to redefine core
functions such as research, manufacturing and marketing around a new vision.
Consider if every
individual had a laptop and mobile phone equipped with a kit that regularly
monitors vital signs and manages personalized health data under a life-time
health care subscription service, allowing for real-time consultation with
appropriate counselors and coaches from a consortium of providers – who also
have access to relevant information, in a seamless network able to provide the
vast majority of that individual’s healthcare online.
Further consider how
this life-time health care subscription linked to a provider consortium may
include tangible products, such as biopharma drugs and devices, distributed
based on the concept of Quality of Life-time health care cost, not just quality
of life-year cost per drug or another intervention. New health care product
choices would be based on the same value propositions as purchasing a mobile
phone, or an autonomous car, as regulatory systems and payors increasingly
focus on evaluating cost over a lifetime. The roles of doctors, pharmacists,
and other providers; product manufacturers, including biopharma; and PBMs,
wholesalers and other middlemen, are fundamentally realigned. And the patient is
now the consumer –at the apex of the health care pyramid.
As life science and IT
innovations converge to accelerate the flow of curative therapies, and as
digital health tools emerge to empower the patient to take charge of her health
towards better outcomes, the health care industry is being reshaped. And
ever-expanding sources of funding for such innovations are only accelerating
this dramatic drift.
But we have just
begun. It is not if but when we will reach critical mass to be able to treat –
no, cure – a widening array of life-threatening diseases and conditions. Jeff
Bezos of Amazon is fond of saying that we are at Day 1 of the internet. If that
is true, then it is only about a quarter past midnight when it comes to the
potential of curative therapies enabled by the digital health revolution. From
new treatment pathways to new apps, hardly a week goes by without a noteworthy
new and promising way to discover and deliver better healthcare making the
and access are among the most potent outcomes expected of these tools. The
regulatory moat that has insulated biopharma from direct market forces for so
long will crumble and the industry’s fundamental ethical obligation, ensuring
access to its products for every patient who may benefit, will come into stark
relief. The big strategic question is: How can biopharma companies succeed in
such a future?
Two recent merger
announcements illustrate the pace of change: CVS Health Corp. pharmacy
chain and Aetna Inc. health insurance group are planning to
merge in a $69 billion deal that will set the stage where a growing proportion
of healthcare will be delivered online, with doctors practicing more like Uber
drivers in a system that can monitor standard of care and control every cost.
Cigna Corp. Cigna announced
a merger with Express Scripts Holding Co. for $67 billion with
a promise of transparency around the opaque pricing system of PBMs like Express
Scripts, that may further weaken biopharma pricing power. Or strengthen the
combined company’s role across the health care spectrum, depending on the
strategic choices the managers make.
Let us imagine the
future of biopharma by asking how this industry’s critical functions are evolving
in: (1) research, (2) development, (3) manufacturing, and (4) marketing and
sales. Let’s briefly consider each in turn:
Research is already
the province of smaller entrants, as data and networks of a wide array of
organizations, such as Illumina, 23andMe, Verily, Atomwise, and a
host of patient groups, are increasingly able to bring their innovations to
clinical stage. Larger biopharma companies at becoming mostly research
financiers, with a declining share of the innovation upside. Artificial Intelligence
(AI) drug discovery company Atomwise has 50 collaborations, soon to be 100,
with biopharma firms. It also has a 10-million-compound library for nonprofits
and academics, as well as for its collaborators, that will only accelerate the
opportunities for patient groups and smaller entrants in drug development.
These smaller entrants
are not burdened by the legacy structures of biopharma. Could they also find
ways to gain consumer confidence with targeted therapies that may go viral on
the basis of focused yet persuasive data, possibly even forcing regulatory
changes so that the many phases of commercializing development do not take so
much time and money?
Development is where
digital tools are already having a great positive impact in a wide range of industry
activities, from patient enrollment in clinical studies to improving chronic
disease patient outcomes. Regulators everywhere not only recognize that
development processes have become unsustainable, tangible actions are underway,
leading to the prospect that marketing authorization at the earlier post-Phase
II state could become the goal. This could dramatically change the industry
dynamics. One example of cost simplification is Science 37’s plan
to do 10 clinical trials with Novartis AG using telemedicine
and mobile tools, so that patients need not go to a central clinical trial
site. Though impacting just one step of this costly system, this initiative
points to practically every step being similarly reconfigured.
Today, development is
one area where the large biopharma contribute more than just money to the
smaller research collaborators, but how long would these small partners need
such support when the development processes are revamped and costs lowered, or
when marketing and sales become readily financeable.
A more complicated
straw in the wind is the attempt by Rational Vaccines, a Peter
Thiel-backed company, to develop a herpes vaccine with unregistered and
unmonitored trials offshore, though with claims that the studies comply with
global standards. Perhaps a clumsy first attempt that seems to have stalled,
but it is unlikely to be the last challenge to the FDA and regulators globally.
Precision medicine with companion diagnostics yield predictable and monitorable
data that educated patients may choose to take calculated risk with for
life-threatening illnesses, especially when there are few alternatives, and
robust, well-designed studies yield results that neutral experts endorse.
Online resources will make such options accessible, especially as the social
sentiment is shifting to allow such options, leaving the final choice to the
patient and her team of counselors and coaches, as part of her lifetime health
valuable for only unique molecules for a finite period, with the rest of the
processes having become commoditized. Understandably, innovation focused
biopharma companies have never made manufacturing their core competency, though
greater acceptance of biosimilars gives select companies the option to deploy
their experiences and excess capacity during a transition period until these
too are commoditized.
Marketing and sales is
changing at its core, as selling is being made obsolete with targeted drugs
that practically sell themselves, and only a core marketing function remains to
be funded. To the extent that large sales forces are still a part of many big
pharma reflects their relatively mediocre, previous generation products that
would not fetch even a fraction of their price in a free market status.
So, in recapping the
evolution of the four critical functions, it seems only a matter of time that
the leaders of established biopharma will need to redefine these core functions
around a new vision.
Digital Disruptors: No
Time for Complacency
Two additional forces,
new therapy modes and new competition, must be noted where a wide range of
technologies and experiences will accelerate the impact of IT on the biopharma,
further calling for a fresh vision.
Gene therapy is
already shifting the landscape with a single dose curative options that will
only hasten the arrival of a lifetime healthcare subscription model. Perhaps
not as dramatic but no less important, the digital pill age, pioneered by
Abilify for improved compliance, will change the way therapies are dispensed,
administered, sustained, monitored, and recharged. 3-D printing for a wide
range of offerings, from artificial organs to cost-effective manufacturing of
personalized medicines based on big data and computational modeling, promise to
make personalized medicines for more targets more common. When big data is
combined with AI, such as an array of nanowire artificial photoreceptors to
restore vision, which has been brought forward by China’s Fudan University
shows a way forward for a host of currently untreatable maladies.
The other force is the
imponderable power of potential new competitors with extraordinary skills and
resources drawn from their IT successes. The list is growing as a handful of
Asian IT powerhouses join the ranks of Amazon, Google, Apple, Facebook and
Microsoft. Even there, lesser known but more agile and focused IT innovators
are likely to surprise the biopharma managers.
Biopharma managers are
surely watching these developments closely, appointing CIOs who report to the
CEO, and funding incubators and testing various mobile health tools in addition
to the obvious range of powerful tools being deployed in their R&D,
manufacturing and sales and marketing functions. But industry observers do not
see a sense of urgency that these shifting sands call for. Perhaps there is
continuing comfort that the regulatory moat that has protected the biopharma
industry will continue to keep these upstart competitors out, current
managements believing that these tech firms fail to understand what they would
face at the FDA or EMA, let alone the aggressive gaming that bundled pricing
and back-door PBM rebate negotiations entail.
But biopharma managers
should not be so sure, as the tech business has a history of ignoring
traditions, business practices, and regulations that don’t fit their
clean-slate thinking directly aimed at the restive, disenfranchised consumer.
Building something too compelling for the market or patients to do without,
will force regulators to adapt, in the process changing the way we live.
So, as the first order
of business, biopharma managers need to ask what will the critical mission and
operational functions of biopharma evolve into, if those R, D, M, M and S
platforms, as traditionally practiced, fail to keep the lights on as this stark
future unfolds over the coming decade. The latest Centers for Medicare and
Medicaid Services (CMS) forecasts point to US healt hcare spending rising to
20% of GDP by 2025, a trend that is unsustainable, especially when biopharma
alone contributes to one-half of the healthcare inflation rate. Yes, innovative
drugs continue to save lives, but it all will be for naught if such therapies
cost so much that they are priced out of the reach of most patients. The bottom
line is if biopharma managers do not redefine their vision, those non-industry
managers will succeed by aligning their vision, their strategy, and their
operating teams to this new consumer-driven world, where patients are no longer
passive, but willing to pay a fair price for value offered, rewarding
innovation pragmatically amidst the exciting scientific and technological
This column originally
appeared on Scrip Biopharma Intelligence, March 28th, 2018