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 headlines.
Greater transparency 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. Second,
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.
Digital’s Four Functional Impacts
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 care subscription.
Manufacturing remains 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 interlopers will.
Biopharma company 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 progress.
This column originally appeared on Scrip Biopharma Intelligence, March 28th, 2018