An ageing society that is fortunate to benefit from an accelerating flow of innovative therapies must be prepared for an ever-increasing nominal healthcare spending. But can healthcare continue to take a larger share of the economy without starving other essential services for a healthy quality of life? This is an especially sensitive question in the ‘New Normal’ average economic environment of low single digit percent growth rate, when it is difficult to keep the healthcare cost growth rate at less than twice that. With the US healthcare budget already accounting for a high-teens percent of GDP, and most other developed nations at least in double digits, it is no small matter.

The outlook is obvious. , the cost: benefit justification will not be sustainable for long. Some biopharma managers are taking the lead, promising to keep price increases of marketed drugs to around the GDP growth rate. This is a good beginning, but increasingly it is the flow of new drugs that is driving spending growth in the US. And the pace of innovation is only accelerating.

Society’s mandate for its healthcare system, and for the biopharma managers within it, is to deliver sustainable value that enhances quality of life, not to force repeated compromises and polarizing choices in allocating individual and collective resources.

Newcomers’ Advantages

Here, the entrenched systems and decision processes and the resulting cost structures create a dilemma for the established biopharma players, whose spending on the next generation of rational drug discovery is not much lower than the previous two generations of trial-and-error discovery. This is the opening for the non-industry R&D entrants who do not have the legacy cost structures, nor the mindset to rationalize pricing on inherently high legacy costs, nor the same regulatory burdens. We have talked about these non-industry players’ gradual progress before, and are sure to return to new developments on this front.

These efforts by the non-industry entrants is just one facet of a multidimensional shift that is underway. A broad range of new collaborative initiatives seems poised to disrupt the industry structure even further. Consider these recent developments:

Newcomers’ Advantages

Here, the entrenched systems and decision processes and the resulting cost structures create a dilemma for the established biopharma players, whose spending on the next generation of rational drug discovery is not much lower than the previous two generations of trial-and-error discovery. This is the opening for the non-industry R&D entrants who do not have the legacy cost structures, nor the mindset to rationalize pricing on inherently high legacy costs, nor the same regulatory burdens. We have talked about these non-industry players’ gradual progress before, and are sure to return to new developments on this front.

These efforts by the non-industry entrants is just one facet of a multidimensional shift that is underway. A broad range of new collaborative initiatives seems poised to disrupt the industry structure even further. Consider these recent developments:

• KTH-Royal Institute of Technology in Sweden and three Swedish institutes analyzed the transcriptome of 17 major cancer types and identified 32 potential targets that could be inhibited to slow or kill tumor growth. These organizations bring a majority of skills needed to advance these programs through the clinic.
• IBM Corp. (NYSE:IBM) and diabetes research charity JDRF (New York, N.Y.) partnered to identify risk factors for Type I diabetes in children by applying IBM’s machine learning algorithms to data from JDRF research programs. Both have many complementary relationships to take the resulting targets into advanced development.
• Patients For Affordable Drugs called on Novartis to set a “fair price” in advance of the US approval of its chimeric antigen receptor (CAR) T cell therapy to treat pediatric and young adult relapsed or refractory B cell ALL, noting that the US taxpayers “bore costs during the riskiest development phases” of CAR-T science, investing more than $200m “as far back as 1993 when there was no guarantee that the research would be successful.” But what if the future breakthroughs reach the patients with minimal biopharma engagement?
• Dentacoin, an Ethereum-based token for the dental industry, seeks to improve dental care by providing a transparent platform for dental care that empowers patients. An increasing number of clinicians in the not too distant future will respond just as today’s drivers from ride-hailing apps do by active online engagement and being first to tap and respond to a patient in search of healthcare.

Internet Of Value Will Force Radical Change

Internet of Value (IoV), as the next frontier of blockchain is being coined, is poised to build on the foundation that Internet of Things (IoT) has wrought, and promises to further transform our lives. The central tenet of IoV is to take the power of transparent information flow beyond secure transactions to find a superior alternative to centralized authorities. Such concentration of power has been essential for responsible functioning of democratic institutions, from banking regulators to the FDA to doctors, and the healthcare industry players in between. Imagine how the above four data points may converge: As with the four Swedish research institutes and the JDRF-IBM collaborations, key resources of biopharma innovation from target identification to clinical development are evolving in settings beyond the biopharma monopoly—which are usually less encumbered by pharma’s legacy decision making lethargy and cost structures. In these circumstances, associations such as Patients For Affordable Drugs would no longer need to plead with biopharma for fair pricing, as the interests of the developers would be aligned with those of patients.

“Therapeutic options are evolving rapidly and the biopharma industry seems to be short of breath as companies struggle to catch up”

If such a disruptive bypassing of entrenched interests seems far-fetched, just consider how many industries have been displaced just within this decade, from retailing to transportation. And then fast forward to the Dentacoin model to imagine the regulatory shift ahead. before clinicians provide their services the same way as the Uber and Lyft drivers do today.

The US is especially ripe for this disruption, thanks to the way industry participants successfully leverage market forces from behind their regulatory veil. Few such veils will exist as the internet and blockchain level the playing fields, especially for industries that depend on innovation. Deeper and integrated therapeutic options are evolving rapidly, and the biopharma industry seems to be short of breath as companies struggle to catch up. Novartis just announced the appointment of a Chief Digital Officer who will report to the CEO. Most others have yet to elevate this role to the same extent. Given the potential for rapid and radical change across all aspects of healthcare, it is high time they did.This column originally appeared on Scrip Biopharma Intelligence, September 8th, 2017