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European Biopharmaceutical Review

From the Outside

In its report ‘Impact of digital health on the pharmaceutical industry – Will business models be reshaped by digital health?’ Arthur D. Little provided an industry snapshot of the goals of the pharma industry for 2020, and its progress so far in achieving them. The study indicated that by this date, pharma business models would be transformed by digital health. It revealed that managers expect eHealth to significantly extend current business models, or even create completely new ones for their industry.

Non-Traditional Entrants


Many of the innovative solutions that digital health offers are being developed by non-traditional entrants to the healthcare arena. They are now providing new offerings that are very quickly changing the dynamics of how the ecosystem works and, in particular, how the individual patient is engaged. One telling measure is the amount of venture capital that is continuing to flow into the eHealth market. According to digital health startup accelerator Rock Health, $2.1 billion was invested in such startups during the first half of 2015 – up 25% compared to the previous 12 months. The biggest portion, $387 million, went to wearables and biosensing companies, but analytics and big data, as well as electronic health records, are other categories that are seeing significant investment activity and a vibrant innovation environment.

The breakthroughs coming from outside the traditional healthcare industry span a wide spectrum of products and services. From new biosensor technologies and smart devices to portals and physician guidance tools, there are numerous exciting innovations that allow enhanced self-monitoring capabilities and patient adherence – and, ultimately, superior clinical decision-making and treatment success. Add on the data analytics capabilities that are now being put to use by purchasing bodies (payers) and hospital systems, and it is evident that healthcare is in the middle of a profound transformational shift.

It is becoming clear that in order to stay relevant in the future healthcare ecosystem, pharma companies must look to business models that foster much more direct patient engagement than previously. New methods offer significant potential in increasing the quality and efficiency of care. Digital health solutions could therefore solve the major long-term issues of pharma’s most important client groups – patients, providers and payers – all at the same time.


Patient-Centred Care

For a fuller understanding of the disruptive power of digital health and its impact on pharma, one has to take a closer look at the relationships within this well-connected ecosystem. Traditionally, healthcare providers, payers and pharma companies have had a conventional supplier-consumer relationship. However, there are now increasing demands from payers and providers around the delivery of better health outcomes and greater cost-effectiveness. These provide a strong driving force for pharma businesses to more actively engage in the opportunities arising from the digital revolution and patient-centred care. More than ever, regulatory bodies now insist on pharma companies demonstrating benefits and cost-effectiveness, with many countries introducing reforms that aim to restrain overall spending.

Ensuring responsiveness to treatment and patient compliance while minimising side effects are, therefore, key success factors if organisations are to meet society’s demands.

Transformation Process

To achieve these new success factors, pharma needs to begin a process of transformation. The proven traditional, product-centric approach with an indirect value chain (for Figure 1, see full PDF) will not be able to embrace the required speed, new collaboration needs, flexibility and ability to learn quickly. Therefore, as a first step, the company must develop an idea of how it will earn money in the new digitalised world. Will the revenue model stay? Will the business model instead be built around new manufactured products or services? What will the portfolio and customer experience look like? A vision of how a transformed organisation might be structured is shown in Figure 2 (see PDF).

In such a vision, pharmaceutical product offerings can be strengthened through complementary digital software or digital services offerings. These help patients with their treatment, aid practitioners in their work and give them both insight into the success of their treatments, while helping payers and legal entities to receive proof of efficacy. Depending on the pharmaceutical product, medical devices and sensors will measure the consistency of product usage and its success. The combination of all three product groups results in an integrated digital health offering that is able to give a new competitive advantage.

The ‘customer’ is at the centre of this vision. This includes not just the patient/consumer, but also the practitioner and the payer. All products and services, as well as all administrative processes, focus on long-term customer value through customer group-specific journeys.

To coordinate product offerings, the customer-centric view and the multiple contact points, strong strategy and governance are required. Furthermore, big data analytics capabilities will integrate information from R&D, existing products and customers, as well as other points of contact to generate additional value and improve products, services, processes and touch points.

To create action plans and concrete initiatives, the transformational need must spill down to processes, data and technology requirements, as well as management capabilities. A successful transformation programme typically incorporates the major pillars of the new vision within four fields of action, as shown in Figure 3 (see full PDF).


1. Integrated Offerings
To define integrated digital health offerings, we have to set the overall future business model and its components, incorporating existing products and business units. By analysing the current product portfolio and comparing it to the new business model components, gaps become apparent. We can define and decide where to build up skills and capabilities internally, and where to use new partnering models and external interfaces. The overall product strategy is communicated and a product development excellence project is set up, such as enabling an approach to personalised medicine.

2. Customer Management
Customer management is at the core of the transformation program. Here, we define the strategic components, as well as the governance structures for a customer-centric and digitalised pharma company. The different customers – patient, practitioner and payer – are analysed, and highlevel customer journeys are defined. These journeys form the basis for more detailed use cases – experiences with the brand from the customer point of view – such as a treatment process or information gathering across different touch points.

For Big Pharma especially, it is not possible to drive this transformation through a deep-dive, top-down approach. Therefore, we favour a “highly aligned, but loosely coupled” approach in the execution of the program, in which the detailed use cases will be run by dedicated owners who have end-to-end responsibility for both budgets and success. Existing company committees for budgeting and prioritisation will be extended so that top management is able to make decisions based on customer and business value.

3. Customer-Focused Touch Points

As major enablers of customer-focused use cases, touch points and their back-end capabilities need to be built and integrated. Based on the use cases and their requirements, it is important to define and prioritise touch point projects, such as online consumer chat. Overarching capacities for an integrated journey are defined as well, covering customer data and relationship management. Projects to implement these basic enablers are the highest priority as they span multiple use cases and touch points.

4. Big Data Analytics

A digitalised and customer-focused value chain offers new opportunities for gaining insight, measuring success and driving improvements. As a basis, we recommend creating a lean, cross-business-unit, technology-focused big data analytics team that has the technical and consulting expertise (covering data scientists or the provision of a big data cluster, for example) to help business units with the implementation of new analytics methodologies. Within the business units, capabilities need to be created for each purpose, like using the technology in R&D for personalised and precision medicine based on field data. Clear data analytics responsibilities are set for each business unit to enable fast learning, such as touch point analytics to assess how well particular touch points are accepted and how they can be improved.

Setting Priorities

The pharma industry today is facing a complex and difficult situation, in which parts of its business may be disrupted by new market entrants, whereas other areas will be suited to a traditional business model for many more years. The industry therefore needs to avoid introducing immature services too quickly in areas where there is no urgency, and to set priorities correctly.

Reference
1. Impact of digital health on the pharmaceutical industry – Will business models be reshaped by digital health? Visit: www.adlittle.de/uploads/tx_extthoughtleadership/ ADL_HC_2013_Digital-Health_final_01.pdf

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Dr Ulrica Sehlstedt is a Partner in the Stockholm office of Arthur D. Little and a member of the Global Healthcare Practice.

Nils Bohlin is a Partner in the Stockholm office of Arthur D. Littleand leads the Global Healthcare Practice.

Fredrik de Maré
is a Partner in the San Francisco office of Arthur D. Little and leads the US West Coast Healthcare Practice.

Dr Richard Beetz is a Principal in the Frankfurt office of Arthur D. Little and a member of the Global Technology and Innovation Management Practice.

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Dr Ulricha Sehlstedt
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Nils Bohlin
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Fredrik de Maré
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Dr Richard Beetz
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