Marco Smit is President of Health 2.0 Advisors, Health 2.0’s innovation analytics & acceleration arm. Health 2.0 Advisors scans, analyzes, and catalyzes the adoption of innovation in traditional and non-traditional health care markets. Health 2.0 Advisors uses its uniquely deep and broad intelligence and connections to help organizations navigate the rapidly evolving health care landscape. Health 2.0 Advisors organizes White House Innovation Roundtables and provides (custom) Matchpoint and strategy consulting for companies, providers, investment firms, and foundations.
What would Detroit look like today if the Big Three had responded earlier and differently to the disruption caused by Japanese import cars? What would Yahoo’s future look like if it had not considered $5 billion an absurdly high acquisition price for Google in 2002? This time it is the pharmaceutical industry that is facing a similar disruption: it is here, it is impacting all elements of the value chain, it is only going to pick up steam, and many other stakeholders are trying to use this disruption to shift power and future value toward themselves.
More than an Inflection Point
The disruption of the pharmaceutical industry is rooted in the unprecedented scale and pace of change in the broader healthcare sector. Most important for the industry to realize is that:
- This is an inflection point that will change the healthcare sector for years to come
- The disruption cannot be ‘contained’ or managed by pharmaceutical companies: since it impacts many (payer, providers, etc.), many are reacting to it, trying to shape the future of their role in a patient’s medication choices
- Change is already happening…and building momentum quickly
Data Asymmetry No Longer
Pharma’s data asymmetry is gone. Pharmaceutical companies no longer own the most data and knowledge about the drugs that they bring to market. Clinical trial data will be an increasingly small portion of all the data that is being evaluated about medication choices for patients, because technology is making so much more new data accessible (claims data, clinical data, behavioral data, etc.). And large stakeholders (many, not just payers) have incentives to use it to optimize choices.
Innovative entrepreneurs are finding solutions to traditional healthcare challenges. At the PhRMA Annual Meeting we showed just a few select companies: goBalto, Medikly, Treato, Humetrix, mHealthCoach, HealthExpense, and Sproxil. These are pioneering companies developing innovative products and services that can disrupt the traditional pharmaceutical value chain, from clinical trials to provider behavior and payer decisions. All of them have a rapidly growing client base and other success (e.g. cost savings, adherence improvement) already. They are small because they are young, but that is how disruption starts. And they are indicative of a new wave of companies coming into the market.
Coming at you fast
We have been tracking funding and M&A in digital health innovation for the White House and commercial clients for years and 2011 and 2012 were record years for investment. The key is to realize that:
- The coming years will continue to set funding records, because we are only in the early days of the innovation adoption cycle
- Large companies acquire young upstarts and can scale-up their market impact at a highly accelerated pace: United Healthcare’s acquisition of Humedica, Aetna’s acquisition of iTriage, to name just a few.
The disruption of the pharmaceutical industry is here. Even though current disruptors – and enablers of the disruption - are not yet billion dollar companies, the forces of change are growing a wave of companies who can become threats if ignored by pharmaceutical companies, or opportunities for positive transformation if channeled well by pharmaceutical companies. The latter will be hard and push companies out of their comfort zones, but it is necessary for the industry to do in order not to become another Detroit. The opportunity is here and now. The medicines of today began with innovation initiatives started 12 years ago. The success of your company/companies in 5 years will be determined by initiatives you start now to deal with this digital disruption. And even though getting this right can be complex, opportunities to use this change to your advantage do exist. So, use the window of opportunity wisely.