Pharmaceutical companies in a changing world

WHY

The future of healthcare is led by technologies (i.e. digital, AI, IoT, etc.), financial pressures, a growing competition and market changes that are impacting the traditional linear value creation chain and the established business models. During our next decade, the pharmaceutical industry will face major disruption forces that will inevitably reshape its’ landscape.

A new healthcare playing field is created, with digital technologies bridging industries together and providing for new opportunities. The digital age has created an uncertain, complex and fast-changing environment impacting all functions from R&D, clinical trials, operations to customer relationship, etc. With a differential digital maturity between the multiple healthcare players (such as Medtech, tech giants – the big five, start-ups, pharmaceutical companies, foundations, etc.), it is critical to increase the standards of digital maturity to master and succeed in this new ecosystem.

This new healthcare ecosystem is more complex, less predictable and more integrated than ever. Pharmaceutical companies face the challenge of operating within this evolving value ecosystem and working with various intricately connected players across the conventional industry boundaries.

The 4 major disruption forces faced by pharmaceutical companies are:

Technology

  • The disruptions led by the emergence of new technologies such as VR, AI, IoT, blockchain, 3D-printing, etc. offer new business options for stakeholders. These disruptions are breaking components of the traditional and established pharmaceutical business models. In addition, the lack of digital maturity in the pharmaceutical industry increases the risk of asymmetry between the different players involved.

Finance

  • The financial disruption led by governments and authorities in the aim of reducing healthcare expenditures is driving pharmaceutical industries to explore new ways of growth.
  • Improving the healthcare systems’ financial sustainability is a central goal shared by all governments and industries today to maintain populations’ health at leveling standard and targeting excellent standards. Actions to improve the functioning and productivity of healthcare are mandatory to achieve this goal, for example by redefining payment and reimbursement by disease categories and risk assessments. Digital solutions are also a key capability to enable and accelerate results, such as Haven, Amazon’s, J.P. Morgan and Berkshire Hathaway’s joint healthcare venture to tackle rising health-care costs.

Competition

  • Securing the value proposition in pharmaceutical industries is increasingly being challenged by competitive disruptions from internal (M&As, biologics, etc.) and external stakeholders (tech giants, services providers, etc.).  Avoiding the multiplication of intermediaries and third parties is becoming a priority to master the ecosystem and optimize collaborations.
  • Giant techs, as well as medium enterprises, have increased their strategic initiatives in healthcare by investing in the creation of dedicated structures such as business units, joint ventures, partnerships, etc. Not a day goes by without receiving the news of a new venture, among the most famous:
    • Barco and GE Healthcare Partners highlight the Clinical Command Center solution that aims at streamlining patient journeys by enhancing operational awareness for caregivers.
    • IBM Watson Health, building smart health ecosystems via expertise, data, analytics and actionable insights.
    • Amazon Pharmacy’s Pillpack free home delivered medication.
    • Apple investments in asthma, through apps and the latest start-up acquisition Tueo Health working on monitoring asthma in children.
    • ResearchKit and CareKit, led by Apple, providing physicians with medical insights faster than ever on their iPhones.
    • Philips Healthcare advancing in digital health technologies to increase hospital staff satisfaction and decrease cost of care, ultimately enhancing patient outcomes
    • CVS Pharmacy designing the HealthHUB (health services and wellness products), along with the health engagement engine transforming data into actionable interventions for better patient outcomes.
    • Docapost by La Poste, developing an e-health offering in France.

These examples are only the beginning of how industries and tech stakeholders are reinforcing their capabilities to build a new winning offer with a disruptive value proposition in healthcare.

Market

  • There is no doubt that patients are leading the disruption with a more powerful voice and the emergence of new needs and behaviors facilitated by the internet and social media. This leads to a higher demand of transparency along with the demographic transition and societal changes. The aging population in developed countries and the prevalence increase of chronic diseases such as diabetes, hypertension and respiratory diseases is driving governments and services providers to develop prevention pathways and solutions. This new landscape showcases the importance of population health management by territories, for example.
  • With the complexification of the landscape, the health needs have changed and are leading the way to new opportunities such as beyond-the-pill solutions, wellness programs, insurance-led initiatives promoting prevention and healthy lifestyles, etc.

Companies, all industries combined, have high hopes for their ecosystems with over two-thirds of senior executives (68%) saying that they need to change their business models to unlock growth and expect ecosystems to help their organization grow its revenue by between 11% and 25% over the next two years. However, most initiatives to this day (innovation & access initiatives that are faced with increasing costs and patient demands) have yet to prove their profitability and utility to patients.

To succeed in the next decade, reinventing the next generation of organizations is mandatory to articulate the paradigms of pharma and healthcare. Winning players will be the ones able to adapt quickly and find new opportunities in this continuously evolving & uncertain ecosystem by creating value-driven business models. Stakeholders should connect all the components sowed into the healthcare system, from purpose to strategy, value drivers, innovation, value creation and systems’ capabilities. Leveraging innovation in business models is a priority to allow the creation of better products and services for an optimal patient & customer experience.

Looking to accelerate your innovation by an end-to-end integration in the healthcare ecosystem, leveraging all your current assets and exploring new ones? Don't hesitate to reach out!

Link to second article of the serie: here.

Authors:

  1. Stéphanie Jaalouk, Consultant, Life Sciences
  2. Louis Santos, Manager, Life Sciences

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