ioBigPharma and the Digital Revolution
Big pharma and traditional medical device companies have been steering the ship towards digital health, some with more success than others, for a few years now. Companies like GE Healthcare have made very explicit steps, whilst some others are yet to face in that general direction. The “transformational strategy” involves the process of digitization – but this process needs to be more than just a token gesture or a temporary measure if the big pharmaceutical companies are to make real headway within the industry.
It was not until 2014 that the Big Pharma companies started gaining pace over and beyond the “product management” level of old. As recently as 2013, according to a report based on interviews of 50 pharma executives from around the world (a report by the Central Europe Healthcare Practice and Karlsruhe Institute of Technology), two thirds of the companies interviewed didn’t have an active digital health strategy in place. The authors of the report stated:
“Digital Health will transform the business models of the pharmaceutical industry. Although many companies have not yet formulated a concise digital health strategy, industry executives expect that by 2020, digital health will enable pharmaceutical companies to activate new business segments as well as to significantly improve their competitive advantage.”
Of the specific findings from the 50 execs:
- 84% considered it crucial to have a digital health strategy in 2020, compared with 13% who believed it was already crucial today.
- 94% believed it would either extend the existing value proposition (37%) or even invent a new value proposition for the pharmaceutical industry (57%);
- All of the survey participants believed digital health would have an important (27%) or even crucial impact (73%) for the competitive advantage of their organizations.
One of the authors, Dr Kaltenbach, suggests:
“Any pharmaceutical company wishing to remain profitable and at the forefront of life-saving innovations beyond 2020 must act now to be in a position to make the most of the digital health revolution.”
According to the writers of the report, the successful implementation of digital health strategies will result in transformation across four main areas:
- Organizational prioritization;
- Customer focus;
- Enlargement of capabilities;
4 Uncertainty of revenue streams.
Outside of this, a number of key external drivers giving impetus to the digital revolution were identified as the:
- Increasing health awareness of consumers;
- Technological progress;
- The expectation to reduce healthcare cost.
As we’ve mentioned a lot on Salus Digital, all healthcare initiatives will have to pay attention to these external factors, not just the Big Pharma companies.
In conclusion, Dr Kaltenbach offers advice for pharma companies seeking to compete in the new digital landscape:
- Make digital health a company-wide priority. Not a tacked-on gimmick
- Look out for new partnerships in unlikely places. This is already happening with mergers and acquisitions (M&A) between Big Pharma and agile start-ups.
- Find ways to monetize digital health networks and outcomes. There has to be evidence of ROI but by viewing it with a “risk-management” perspective, otherwise the industry will not be able to make the necessary transformation toward digitalized healthcare.
Of course unless Big Pharma leads in the ever forward movement towards more transparency, companies like AdverseEvents, a California-based start-up, will take the lead to deliver openly accessible databases reporting on adverse drug events and interactions for anyone with an interest. This drive for a more open healthcare will force all of The Healthcare Industry to open up their processes to patient scrutiny, but this can only be a good thing overall.
Moreover, there is a new boss in town with the growth of Biotech companies into the Big Pharma space as there are 17 biotech companies in the US that turn over more than $500 Million in revenue, such as Celgene and behemoth: Gilead. They behave simultaneously as innovators, acquire smaller agile start-ups rather than innovate themselves and/or even cross directly into the realm normally occupied by the big pharma companies by more traditional drug developing activities such as AbbVie. However, the move in the direction of Big Pharma does not seem to produce as big a ROI as moving away from the traditional business model.