Disruption: Use Your Window of Opportunity Wisely
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 (Google’s market cap is >$250 Billion today … 10x Yahoo’s market value)? Disruption can be a threat or opportunity; it is all about how you react to it.
The medicines of today began with innovation initiatives that were started 12 years ago. The success of pharmaceutical companies in five years will be determined by initiatives they start now to deal with this digital disruption. Get smart about the disruption and act, even if it pushes you out of your comfort zone.
Two recurring themes in the failure to turn disruption into opportunity are that 1) incumbents dismiss the disruptive force when it is still small because they use the wrong mental model to assess the disruption, and 2) they chose to take a defensive “watch and wait” approach. In health care the forces of innovation (incl. big data, mobile, cloud, reimbursement changes, patient activism 2.0, etc.) are going to have disruptive effects at an unprecedented pace and scale. And much like the newspapers’ business was not killed by cnn.com but by Craigslist, tomorrow’s winning models are going to come from unexpected corners.
Health 2.0 Advisors helps organizations understand the ripple effects of innovation on their business models, competitive landscape, markets, etc., so that they can smartly navigate the transition to the “new normal” in health. In this series of posts we will share our perspective on different sectors of the health care system that are disrupted and select a few key themes to highlight. The pharmaceutical industry is up first.
More than an Inflection Point
The disruption of the pharmaceutical industry is bigger than a typical inflection point:
- This inflection point will change the entire health care ecosystem irreversibly
- Unlike the targeted therapeutics and genomics disruptions, how this unfolds is not controlled by you. Since it impacts many (payer, providers, etc.), others are trying to shape the future of their role in a patient’s medication choices now
- Change is already happening … and building momentum quickly
Big Data, Big Interest(s)
Pharmaceutical companies used to own the most data and knowledge about medications that they bring to market. This advantage is rapidly vanishing; clinical trial data is an increasingly small portion of all the data that is being evaluated about medication choices for patients. Technology companies like Treato, Castlight, and so many others are making so much more new data accessible (claims data, clinical data, behavioral data, etc.) to evaluate medications and providers. Large stakeholders (incl. payers, pharmacies) have incentives to use this data for their own objectives.
Patient Access and Advocacy
Todd Park’s data liberacion has set in motion a wave of new data-empowered freedom for patients. New Health 2.0 companies are making it possible to make patients better managers of their own health choices, including medication choices. We have heard pharmaceutical companies complain about payers countering the rise of expensive targeted treatments with attempts to put more restrictions on access to that expensive medication. Instead of complaining, it is time for therapeutics companies to start thinking about how to use technology to generate the data that they can use to help patients get all the access they deserve. And how to empower patients to overcome access hurdles.
At the PhRMA Annual Meeting we showed just a few select companies: goBalto, Medikly, Treato, Humetrix, mHealthCoach, HealthExpense, and Sproxil. These are but a few pioneering companies developing innovations that can disrupt the pharmaceutical value chain, from clinical trials to provider behavior and payer decisions. All of them have a growing client base and other success (e.g. cost savings, adherence improvement) already. 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 years and 2011 and 2012 were record years for investment. The key is to realize that:
- The coming years will continue to be record years: we are only in the early days of the innovation adoption / disruption 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 are but a few that come to mind
- We were tracking 1,200 companies only a few years ago and are now tracking 2,700 companies in our market analysis
The time to make the smart moves is now: the disruption of the pharmaceutical industry is here. The forces of change are growing a wave of companies who can become threats if ignored, or opportunities for positive transformation if leveraged well. Use the window of opportunity wisely: get to know more about the disruptive companies and models that can change your industry and get out of your comfort zone, or else you may get pushed out of it.