Part 1 talked about cases where pharma needs to go beyond the pill. In this second part, we’ll look at how pharma/biotech, and others, can go further beyond the pill.
The top line message is that going further beyond the pill, even to outcome-centred integrated care, is fine for pharma if value can be captured or tied through a specific drug brand or portfolio. Within this constraint, pharma is able to manage the move to offering outcomes via an integrated offer of drugs, services, technology etc.
But where programs cannot be tied to the company’s specific drugs for the long term (not just the now), where the integrated care offer eventually becomes agnostic about the brand or drug being used, then pharma companies will face internal challenges in bringing programs to market and maintaining them unless they step outside the management framework of usual business.
The crux of the evolution towards drug/brand agnostic integrated care is that incremental drug innovation in ‘next generation’ drugs will find fewer places to hide in outcomes-driven programs.
These messages are not just important for pharma/biotech companies to know. Drugs are key tools in many of the ecosystems for integrated care. You might come to your target ecosystem from the side of e.g. a diagnostic company, a service company, or a mobile health tracking and decisions support company. But drugs will be a key part of the mode of action, the levers that you are pulling. Pharma could be a competitor, a partner, an enabler, or perhaps a commodity. Hence, knowing where or how a pharma company can and can’t play successfully is important to a wider audience than just pharma.
Integrated care doesn’t fit well with day-to-day pharma business models and value frameworks
There are intrinsic challenges for pharma in going further beyond the pill into outcome-centred integrated care. Many of the problems are well described and are not specific to healthcare*. For example (and not exhaustively!):
- Initial returns will not be at the same level as ‘current business’, so the allocation processes within the company will tend to pull resources back to business as usual. E.g. Christian Isler, former Global Head of Solution & Product Development for Pfizer Integrated Health (which closed after 2 years) noted that “The bottom line was that we weren’t meeting the revenue expectations. We were earning money, but the company expected more”
- Integrated care means getting closer to customers, especially patients, but pharma regulations and internal processes may specifically forbid or avoid getting close to patients. The status quo has huge inertia, resisting the emergence of the new business models that appear unattractive due to their nascent stage.
Integrated care may need to be separated from day-to-day pharma ops
Net-net, pharma companies are at high risk of eventual failure in this field if they try to manage it within their existing operations. One textbook solution is to place such new businesses at arm’s length, where different customers and business models can be managed without internal competition and value chain pressures from the parent. Some approaches of this type are clearly visible, e.g.
- Johnson & Johnson, with Janssen Healthcare innovation, has a separate organisation developing and launching integrated care businesses.
- Merck has its Global Health Innovation (GHI) Fund focused on digital health and integrated healthcare solutions, and its independent Healthcare Services and Solutions group, out of which have come Vree and HMR Weight management, among others.
- Novartis & Qualcomm formed their digital health investment company to back ‘beyond-the-pill’ technologies, products or services.
The temptation to mix integrated care with day-to-day pharma business is high where there is a strong drug component
The difficult spaces will be those where there is strong appeal to mix the current business and the new ventures. This is most likely where the levers used to improve outcomes are the tracking and adjustment of medication use. This touches most closely to pharma and has some intrinsic appeal (who wouldn’t want to improve the adherence and outcomes from their medications), but the threat of drug/brand-agnostic care contains the seeds of future conflict.
Consider the asthma space. Two standout integrated care companies are Propeller Health and Adherium, taking similar approaches to deliver outcomes by improve adherence to and use of asthma meds.
Both make their smart devices to cover a range of proprietary inhalers and medications. Initially, inclusion with such technology will seem advantageous to pharma. The most used current drugs would be boosted by better use, patients and payers would see better outcomes.
But the genie is then out of the bottle. When a pharma company comes with a new product, it would want to package value-added programs preferentially around its new drugs. In the world of integrated care, where someone else holds the ‘beyond the pill’ levers, that is no longer within pharma’s control. Indeed, a programme that uses existing drugs more effectively is now a direct competitor to the take-up of the new drug. Providers and payers will be choosing not just between drugs but between systems of care.
It will be worth watching how models evolve in the asthma space. Propeller Health makes devices for various leading brand inhalers. Adherium’s has a recent partnership to provide devices for AstraZeneca’s own asthma patient support programs. Both Pharma and the Integrated Care companies will be competing to end up holding the valuable parts of the system. Will it be the drugs, the tracking sensors, the algorithms that detect patterns and advise patients or doctors, or will it be in the aggregation and delivery?
Either way, for pharma, the crux is that incremental drug innovation will find fewer and fewer places to hide in integrated care programs where effective use of existing drugs becomes a prime driver of outcomes.
Success requires a realistic long-term view of the potential conflicts with day-to-day pharma business, not just how it looks now
If Pharma is to do true integrated care, which ceteris paribus will tend towards being outcome-centric and drug/brand-agnostic, there will always be tension when this is matched with current pharma operations. Finding an arms-length solution away from current business will be the most likely to succeed for the long term, unless there is enough time to establish a viable and resilient business model before the current ‘drug of the moment’ goes off patent or out of the limelight.
For integrated care companies, pharma companies are superficially attractive partners (your drug plus my system, we’d be great together) and have the deep pockets that start-ups crave, but drugs come and go and today’s partner could very quickly be tomorrow’s competitor. Be aware of this when partnering and accept that unless a potential partner has a strategy to deal with their eventual internal conflict, that a good deal may never happen or go sour.
For patients and payers, transparency and outcome-driven care is exactly what we hope for. Why care if pharma succeeds here, as long as someone does? Quite simply, because we are more likely to get there if major players in the system, which pharma certainly are, can avoid the traps and downfalls that lead to failed programs. Likewise, we are better off if the new players, the technology and service companies, avoid partnerships that tie their hands or lead them up evolutionary dead ends.
* See Clayton Christensen’s “The Innovator’s Dilemma”
Download the PDF click here