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Healthcare & Life Sciences

The Rise of BigTech in Healthcare | Blog

By | Blog, Healthcare & Life Sciences

A couple of weeks ago, my colleague and partner-in-crime, Abhishek Singh recapped his experience at HIMSS 2019, healthcare IT’s annual jamboree.

Now, I want to expand on one of them – how BigTech firms are homing in on healthcare (got to love almost-alliteration). Here are my key observations on how different BigTech firms are approaching the business of healthcare, based on what I saw and heard at HIMSS.

Google

The focus for the Mountain View-based company has been to develop a secure and compliant cloud platform, which has tools unique to the healthcare industry. It claims that the Google Cloud Healthcare API has significant momentum in the industry to really bring silos of data together. It has enabled FHIR integration as well. The general release of the platform is still sometime away though. On a lighter note, while Google is using AI to solve complex and messy problems in a range of industries, its HIMSS booth had a demo to help address the much dreaded fax plague in healthcare, allowing users to fax medical information to Google Drive, the company’s cloud storage service (as someone on Twitter pointed out), following Eric Schmidt’s observation that healthcare is still in the “stone age.”

Microsoft

The company, reinvigorated under Nadella’s leadership, is taking a smart approach to healthcare across two levers:

  • Utilizing broader technology bets with healthcare-specific use cases. It launched a service to help healthcare firms move large sets of patient data to its cloud (Azure) and connect with other systems. This is one of several attempts to connect patient health records in the cloud. It announced the availability of its healthcare chatbot in the Azure marketplace, as well as the launch of an API for FHIR in Azure
  • Leveraging a partner ecosystem. Microsoft is taking an ecosystem-based approach to accelerate healthcare adoption, using partners such as CitiusTech, DXC Technology, and Philips, to develop more cases on its technology offerings.

Oracle Health Sciences

Oracle is taking a dual approach – doubling down on a focused play in healthcare data and analytics, as well connecting with its life sciences focus – as the ecosystem converges. It announced integration between Quorum’s institutional review board (IRB) and goBalto, its recent acquisition focused on clinical trial site selection and activation. And it introduced Connected Care, a telehealth and remote patient monitoring tool initially aimed at improving stroke outcomes. Its other big focus was on Oracle ERP Cloud as the single stop solution to help unify a health system’s enterprise systems (HR, financial, supply chain) on an integrated platform.

Salesforce

Salesforce has bet big on verticalizing its CRM strengths to help deliver personalized patient experiences (CRM as the gateway to digital transformation.) It already has a bunch of use cases across the care lifecycle. Its focus is now on leveraging a partner network and adding more healthcare-centric functionality to its core set of products. For instance, it launched a feature to add social determinants of health information to patient profiles to improve outcomes. It also announced Fairview Health Services as a client deploying Health Cloud, Marketing Cloud, Heroku, and MuleSoft to centralize and manage patient touchpoints. Building from its progress at HIMSS18, where it collaborated with Cerner, Salesforce also announced new healthcare solutions using Health Cloud, built by consulting partners such as Accenture, Deloitte Consulting LLP’s Deloitte Digital, Huron, IQVIA, Silverline, Simplus and Torrent Consulting.

Uber and Lyft

Both ride sharing companies had a presence on the exhibition floor, and Lyft made a major splash and co-sponsored the opening reception as well. The common use cases they’re both addressing are around social determinants of health. An example is Lyft’s partnership with Allscripts (Lyft Concierge) to help patients get to appointments and lead healthier lives.

Ever since Amazon formally announced its move to shake things up in healthcare, the industry has been abuzz with an equal mix of anticipation and trepidation. While many are fixated on the idea that Amazon will take a Customer Experience (CX) route to healthcare, similar to its ecommerce disruption, I think this belief is misplaced. Why?

As we noted in our earlier analysis, Amazon is best placed to solve more messy problems in healthcare. Not many people realize how Amazon is already playing a role in reshaping healthcare’s supply issues. For instance, more than half of the products available on the Amazon Business platform are medical commodities such as syringes, IV bags, forceps, etc. It is targeting healthcare organization’s tail spend (typically 20 percent), which is focused on purchasing, pricing, suppliers, etc. This plays into its deep strengths in warehousing, distribution, and logistics.

At the end of the day, Amazon is just one of the growing number of technology companies looking to tap into the $3.4 trillion U.S. healthcare market. If HIMSS19 was any indication, BigTech is only going to accelerate its focus on solving key issues, with an ecosystem-driven approach. My bet for HIMSS20 is for someone showcasing curated Netflix content for improving mental health. One can always dream!

Three Digital Healthcare Takeaways from HIMSS 2019 | Blog

By | Blog, Healthcare & Life Sciences

I experienced three pleasant surprises at last week’s Healthcare Information and Management System Society (HIMSS) conference. They were all about a perfect storm that is building to correct all that has been wrong in the digital healthcare space all these years.

Healthcare Companies are Exploring Cures for Their #DigitalHeadache

Payers and providers alike are growing increasingly disillusioned with the outcomes of their digital programs. In fact, 78 percent of the healthcare leaders we surveyed in late 2018 indicated some sort of failure with their digital initiatives, whether big or small. The good news here is that most forward-thinking leaders are going back to the drawing board to redefine their digital strategy. Anthem, Intermountain Healthcare, and New York Presbyterian are great examples of organizations that have taken up the cudgels to fix digital healthcare where it fails – organization and culture.

There’s Increased Focus on “Enabling” the Patient Experience

To make the “patient experience” successful, enterprise leaders are taking a step back and focusing their attention on creating experiences for their workforce, clinicians, and partners (e.g., physician group, CMS, government agencies.) Don’t get me wrong, patients still need to be at the center of our universe. However, the personas that enable and deliver experience for patients need a fix first.

Innovation is Coming from Unexpected Sources

It was heartening to see the likes of Amazon, Google, Microsoft, and Salesforce steal the march from the big boys in the healthcare tech space – i.e., Cerner and EPIC – in asserting themselves as the technology visionaries in healthcare. Their focus on healthcare microservices is a relief for healthcare executives trying to navigate the “all or nothing” approach of the EMRs.

There is one player that seems keen on reinventing itself: Optum. Through a nimble product and services strategy, Optum is touching upon on all the hot buttons – MLR, analytics, PBM, and claims. Optum is the specialist vendor to watch out for when it comes to healthcare.

Last, but not least, what really took the cake were the innovative and exciting POCs related to clinical AI and visualization that Israel and Ireland – yes, the countries – showcased in their booths. These were some of the most fully baked solutions that I have seen in my 10 years attending HIMSS.

Hence, it’s with good reason that I left fairly impressed with the developing ecosystem knocking on the doors of healthcare organizations that are hungry for outcomes.

I will sign off by sharing an illustration from our recent study that analyzed the investments 27 of the leading healthcare payers and providers have made in artificial intelligence (AI), a key marker in the world of digital healthcare. This study objectively analyzed these investments from the perspective of ROI achieved.

Assessing 27 healthcare players (payers and providers) on their Artificial Intelligence investments

As you can see, there is a wide variance even within such a small sample set of healthcare organizations. FOMO (Fear Of Missing Out) pushed a lot of organizations to invest in the flashy new toy called AI. However, not all of them embarked on their investment journey by first enabling the core components of capability.

The difference between the best and the rest in healthcare is simply this: the ones to get the best ROI – those on the top right – are taking their journey through step functions that enable not only technology but also an organizational culture of innovation.

Please contact me at [email protected] if you’d like to hear more about my take-aways from the HIMMS conference or our study, named “Dr. Robot Will See You Now: Unpacking the State of Artificial Intelligence in Healthcare – 2019.”

 

Telematics in Insurance – A Big Opportunity yet to be Fully Explored | Sherpas in Blue Shirts

By | Automation/RPA/AI, Blog, Healthcare & Life Sciences

Price competition used to define the competitive dynamics of the P&C insurance industry. However, as margins started squeezing with low interest rates and rising claims costs, it became imperative for insurers to focus on product differentiation in order to attract new customers and drive premium growth.

This is when usage-based insurance (UBI), an insurance product model where the premium varies according to the risk of claims that the insured’s policy-related behavior poses, started gaining traction. UBI is noteworthy as it offers a remarkable opportunity for insurers to deliver hyper-personalization and evolve from a product-centric to a customer-centric business mindset.

To date, the auto insurance segment has been the most aggressive adopter of the UBI model, which is enabled by the underlying telematics infrastructure. Telematics technology enables insurers to capture each customer’s driving data, which is then used to continually update the customer’s risk profile and compute the payable premium. Data collection devices have evolved from black-box to OBD-II dongles to in-built telematics units in automobiles and smartphones.

UBI’s Business Case is Strong; however, Sourcing Gets Complicated for Insurers

We expect the market for UBI to grow substantially at a CAGR of ~40 percent during 2018-2020, with an estimated 35-40 million UBI policies in force by the end of 2020. This is certainly impressive growth.

However, to launch UBI products, insurers must make substantial investments in connected devices and data infrastructure. Moreover, not all insurers have the scale, risk-appetite, investable capital, or technology expertise to make significant inroads into UBI. Thus, insurers are leveraging third-party vendors to support their telematics journey.

Yet, the vendor ecosystem is fragmented, making it challenging for insurers to determine what organization to partner with.

Here’s the breakdown of the three major categories of telematics vendors:

Telematics Service Providers (TSPs)

These have the capability to manage the entire value-chain, from telematics device sourcing to device deployment and maintenance to end-customer engagement to telematics data management. However, as a single TSP might not be able to provide access to all the underlying connected devices, insurers must pre-strategize their requirements for data depth and breadth. There have been cases where insurers have entered into partnerships with multiple vendors with varying competency to leverage connected devices and technology maturity.

Data exchanges

The core value proposition of this class of vendors lies in their access to huge volume of data and their data handling capabilities, which reduces the burden of data management at the insurer’s end. Players that have entered this market also have developed a modest understanding of the insurance sector, which enables them to provide risk assessment support to insurers. However, while data exchanges typically can augment insurers’ telematics journey, they cannot provide end-to-end support.

OEMs

OEMs have emerged as significant competitors to the other classes of vendors due to their direct control of the point-of-sale. As the telematics unit is prebuilt into the automobile, insurers do not have to worry about the entire infrastructure management of telematics devices. However, partnering with an OEM could also mean loss of revenue from value-added services.

Telematics in Insurance – A Big Opportunity yet to be Fully Explored - potential impact

Service Providers as the Orchestrator – Big Opportunity Waiting to be Capitalized

With each of the categories of vendors specializing in specific parts of the telematics value-chain, insurers face a big challenge in connecting with different parties for different values, and in managing the multi-vendor ecosystem.

This is where IT/BP service providers can enter the picture. To date, they have failed to establish a competitive differentiation for themselves in this market. However, considering they have a sound understanding of insurers’ businesses, operations, and IT systems, they could provide significant value as the orchestrator of this branched ecosystem.

They could look to source the best value from different classes of vendors by tying partnerships with select technology vendors across the ecosystem. Then, they could serve as a specialist to help insurer wrap their operations around telematics technology to drive product differentiation.

In this model, service providers could – potentially – offer an integrated value proposition that would involve: owning the implementation risk; providing value-added services such as risk assessment and customer management support; managing the complexity involved in coordinating with multiple classes of vendors; and assuming responsibility for the risks (e.g., business risk, technology lock-in, etc.) associated with engaging with niche firms.

This could be a win-win-win scenario, for insurers, end-customers, and providers.

How service providers ultimately decide to capitalize on the telematics opportunity remains to be seen. However, they should be cognizant of not frivolously trying to compete where their expertise does not lie, and instead leverage their strengths to make themselves most relev

The Future of Life Sciences Clinical Trials: Take-Aways from Medidata NEXT | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences

Now in its 12th year, Medidata NEXT brings together several thousand life sciences professionals across seven global events to discuss the future of clinical trials. Here are my take-aways from the New York City edition, which occurred over two days in late October.

  1. Clinical + commercial data is the future: As the life sciences industry moves toward outcome-led business models, companies can unlock significant value by collapsing the silos between clinical and R&D and sales and marketing. Bringing together commercial and clinical / R&D data allows them to generate more meaningful insights into patient behavior and preferences, and spark the discovery process for newer therapies and approaches. A number of life sciences firms have already begun tapping into this powerful data combination. For example, Medidata earlier this year acquired SHYFT Analytics, the maker of a cloud data analytics platform specifically designed for the pharma and biotech industries. And IQVIA started down this path with the OCE platform after the merger of Quintiles and IMS and subsequent company renaming.
  2. Platforms are becoming mainstream: Everybody’s jumping on the platform bandwagon. Examples include the Accenture-AWS-Merck research platform, ZS’s REVO Analytics, and Medidata’s Intelligent Platform for Life Sciences. The hallmarks of these and other platforms in this space are the combination of products and services in a utility-based construct, where customers can plug in and plug out based on need. Customers at Medidata’s NEXT event voiced a pressing need for technology partners to underwrite the risk of innovation by orchestrating the ecosystem (aka guaranteed outcomes).
  3. Moving from real world data to real world evidence: Life sciences enterprises are starting with low hanging fruit such as EHR-to-EDC integration through various sites to unlock value from data. To truly move the needle from data to evidence, and thereby help life sciences firms navigate outcome-based contracts, ecosystem participants – including enterprises, technology vendors, service providers, data providers, intermediaries/brokers, and patient advocacy groups – need to put more skin in the game and focus on end outcomes, such as patient experience, satisfaction, and clinical/health impact.
  4. CROs Are A-Changing: The CRO market is at an interesting inflection point as the traditional model has a limited runway for growth. The IQVIA model of combining clinical and commercial expertise is a sign of things to come, and CROs are doubling down on technology adoption to navigate this change. Another example is Medidata’s announcement of a five-year agreement with Pharm-Olam to unify operational systems to support study executions on the Medidata Cloud, providing a single, unified view of clinical trials to all stakeholders.
  5. Crowdsourcing clinical trials – are we there yet?: The industry is abuzz about the possibilities resulting from developments that aim to advance patient engagement, such as ePRO and advancements through Apple Watch and ResearchKit. While a crowdsourced clinical trial is some time away, several important steps have already been taken to help bring patients to the center of the clinical trial design and process, and assume greater ownership of their health outcomes. One particularly interesting use case is that, following GSK’s and its partners’ Patient Rheumatoid Arthritis Data (PARADE) study, Apple has obtained FDA clearance (not approval) to investigate the feasibility of using a mobile app to recruit and enroll patients in a study and gain insights about rheumatoid arthritis in a real-world setting.
  6. Accelerating cloud adoption: While life sciences firms have been putting an increasing number of enterprise applications and data on the cloud, they have been hesitant to do so with R&D and clinical data. However, the recently announced Accenture-Merck-AWS research platform signaled a changing wave of initiatives. For example, AWS and Google’s and Microsoft’s cloud platforms were prominently present at Medidata NEXT. We expect these lead steers in the market to accelerate the cloud movement in the life sciences industry.
  7. Partnerships are key to unlocking value in the digital ecosystem: Life sciences firms need to forge closer bonds with payers, providers, patient advocacy groups, etc., to truly bring the vision of a converged ecosystem to life. Several prime examples of this shift have emerged in the past year or so. One is the outcome-based contract struck between Amgen and healthcare services company Harvard Pilgrim for the cholesterol drug Repatha. Another is Medidata’s work with the Biden Cancer Initiative (BCI) community to coordinate a consortium of clients to share IoT data in order to analyze determinants such as quality of life and disease progression.
  8. The pivot to patient-centricity hinges on trust orchestration: While life sciences firms have been trying to become more patient-centric, there’s a sizable trust deficit with their core constituents. In fact, as the following exhibit illustrates, the pharmaceutical industry ranks at the bottom of the perception scale among adults in the U.S., second only to the federal government. As life sciences companies collaborate more closely with payers and providers, the ecosystem needs to reaffirm trust with patients and other stakeholders. Trust assurance is going to be key for the future of a converging healthcare ecosystem. In this context, how life sciences firms coordinate care with payers and providers will be crucial in reinstituting trust with patients and enabling care coordination.

The life sciences industry stands at the cusp of change. To truly move towards a patient-centric and outcome-based ecosystem, stakeholders need to collapse the traditional stack, break through silos, and embrace collaboration.

Market stakeholders, including Medidata, have made an interesting set of investments, on a platform of growth, in these areas.

Check back here often to see our analysis of how various life sciences stakeholders are collaborating to coordinate care and assure patient outcomes, ultimately to advance the future of life sciences.

The Digital Health Unicorns Are Proving Their Value | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences, Mergers & Acquisitions

In August 2016, Everest Group published an analysis of hot digital health startups that were disrupting the status quo of the industry landscape. It ended becoming a unicorn-spotting analysis…cut to February 2018, and by healthcare and life sciences organizations have acquired three — Flatiron Health, NantHealth, Practice Fusion — and among the top 25 players. While we speak, there are multiple conversations around the others as investor interest peaks.

HC startups Blog

What are the key business reasons behind these three acquisitions?

  • Flatiron Health by Roche: Flatiron Health has an end-to-end cloud-based EHR platform (OncoEMR) exclusive for oncology that curates the evidence-based drug development process. As oncology is one of Roche’s major focus areas, this is extremely valuable for the company while devising cancer drugs. No wonder Roche agreed to a US$1.9 billion acquisition price, in addition to its existing stake in the company. Flatiron Health also has a OncoAnalytics module that leverages big data analytics for better diagnosis and treatment.
  • NantHealth by Allscripts: NantHealth is a cloud-based healthcare firm that aims to improve patient outcomes and personalized treatment. Its proprietary learning system, CLINICS, utilizes machine learning and cognitive computing to provide information for better care delivery, tools and insights for efficient care financing, and wellness management programs for enhanced patient engagement. NantHealth fits well within Allscripts’ ambitious plan to build a healthcare company that drives innovation in patient care and improves evidence-based research in R&D processes.
  • Practice Fusion by Allscripts: Practice Fusion is a web-based cloud EHR platform that also provides patient engagement and practice management assistance. Unlike traditional EHR platforms, Practice Fusion provides a simple and intuitive user interface. Beyond these capabilities, this acquisition also adds ~30,000 ambulatory sites to Allscripts’ client base in the hard-to-crack independent physician practices segment.

What’s working with these healthcare startup acquisitions

Here’s what is common among these recent acquisitions:

  1. Data is the new oil: The real asset is access to critical healthcare data. Companies that convert the data into actionable insights, resulting in better patient care, emerge as clear winners.
  2. Uberization of everything: Healthcare enterprises have struggled with huge fixed investments in EHR platforms, on-premise infrastructure, etc. This has created a deep dent in their profitability numbers. Because Flatiron Health, NantHealth, and PracticeFusion and are cloud-based companies, there are no more fixed costs, everything is demand-based. Clearly, the as-a-service model has become the choice for healthcare firms.
  3. Care – of, by, and for the people: Accelerated R&D cycles, augmented physician capabilities, and improved precision in diagnosis and treatment all ultimately result in improved patient care, enhanced clinical outcomes, and boosted patient engagement. All three of these acquired companies focus on improving at least one of those factors. And they all allow the acquiring companies’ patients to take center stage.

Digital moves from pilot to program

At a broader industry level, these acquisitions mirror the change in sentiment around digital initiatives. Our research shows signs that enterprises are moving beyond proof of concept to proof of value. While digital, as a market, lends itself to smaller deals with focuses on design thinking, first principles problem solving, and business model redesign, we see these initiatives now scaling up.

Digital HC blog
As the digital marketplace matures, investment activity is only going to intensify. While early adopters are reaping rich rewards, valuations and competition for viable targets are likely to skyrocket. It’s clear that healthcare enterprises see significant business value, and are willing to put their money where their mouth is. Stay tuned to this space for more analysis of what’s happening in the healthcare and digital spaces.

IT Services Opportunities with the NHS: Patient Care and Advanced Technologies | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences

It should come as no surprise that global services activity in the U.K. has dropped significantly in all sectors in the aftermath of the Brexit referendum. Indeed, according to our Transaction Intelligence database of sourcing deals, in the healthcare space, the U.K.’s National Health Service (NHS) awarded 13 outsourcing deals in 2015, 11 in 2016, but only four in the first half of 2017.

However, our research indicates that the policy of patient-centric care introduced by the National Institute for Health and Care Excellence in 2012 is likely to drive ample long-term opportunities for innovative IT service providers that offer technology enablers.

EG KTFor example, under the NHS’s RightCare initiative, the NHS may look to accelerate the adoption of value-based care. Funding is focused on allocative value (how well assets are distributed to different areas of healthcare), technical value (how well resources are used to achieve valid outcomes), and personalized value (determined by how well an outcome matches patient expectation). Additionally, with increasing demand for telemedicine, NHS trusts will be on the lookout for providers that develop mobile applications aimed at remote healthcare management to support the growing importance of care at home for chronic conditions.

A robust cybersecurity network is equally imperative in the wake of recent instances of data breaches such as the March 2017 WannaCry attack, in which the medical records of 26 million NHS patients were hacked. Service providers can help the NHS protect its IT infrastructure from malicious cyber attacks by offering threat intelligence solutions, threat detection and mitigation applications, Blockchain-powered Electronic Health Records (EHRs), and persona-based security platforms.

While third-party providers can profit from these long-term opportunities, they need to be cognizant of the changing competitor landscape, particularly from tech start-ups that are testing the waters to realize potential demand in the U.K. healthcare sector. For instance, DeepMind, a London-based artificial intelligence start-up, worked with the NHS in 2016 on technology to improve care coordination.

To take advantage of growing consumerism in the U.K. healthcare space – e.g., e-Referral and e-Consult services – we recommend that IT service providers increase their investments in growing technological areas such as security, mobility, analytics, and IoT. But first and foremost, they must offer services that focus on patient care. Doing so would help the NHS avoid a repeat of its failed National Programme for IT, which was aimed at cost savings and efficiency, but was abandoned after nine years at a cost of £10 billion in 2011.

We will continue to watch this space and actively share our thoughts and perspectives. In the meantime, you can stay up-to-date on our latest insights in the healthcare domain through our dedicated research on the Healthcare & Life Sciences sector.

Pharma Service Providers’ Role in Tempering Pricing Wars | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences, Outsourcing, Pricing

Shortly after the U.S. Food & Drug Administration (FDA) approved Novartis’ CAR T-cell drug, Kymriah – which is used for pediatric B-cell Acute Lymphoblastic Leukemia – last month, Novartis announced its price…a whopping $475,000 per patient. This is certainly not the first market instance of highly expensive drugs (see below.)

But it might just be the tipping point for stakeholders – including regulatory bodies, payers, physicians, advocacy groups, and patients – to start having constructive discussions with drug manufacturers on how to make drugs that treat extremely rare diseases more accessible to the very small share of the population that needs them.

eg13
It is certainly time for pharma companies to overhaul their operations in order to mitigate price anger and get such drugs into the hands of those whose lives depend on them.

One way they can do so is by employing pay-for-performance, or outcome-based, contracts, wherein the manufacturer charges for the drug once it proves effective, say one or two months into treatment. Note that this pricing model hasn’t yet really taken off, especially in the United States, where the fragmented multi-payer environment acts as an added roadblock. Indication-based pricing, wherein there are different prices for different conditions, is another model that biopharma companies can use, but the U.S. market does not have mechanisms in place for it, at least as of now.

Other ways of ensuring patients are able to benefit from such critical drugs are through mixes of personalized offline and online marketing campaigns directed specifically to the relevant patient and physician pool, and improved and comprehensive patient support programs to help in solving “last mile connectivity” issues.

But at the end of the day, stakeholder backlash might – and should – force pharma companies to drive down their own costs to make these expensive, personalized medicines more affordable. And this is where outsourcing service providers can help.

The third-party service providers that are already servicing the pharma industry need to prepare or bolster solutions and capabilities around areas including patient and market access, data analytics, omnichannel marketing, IoT, automation, portals, applications, customer support, pricing analytics, infrastructure modernization, and cloud orchestration. Service providers that are struggling to enter the life sciences space should view this as a window of opportunity to get a foot in the door of these companies. Doing so will mean additional business for both these types of vendors; it could also mean reduced pricing pressure for the patients who need such vital treatments.
The future of personalized medicine depends a lot on success of such drugs, and biopharma companies can no longer afford to sit back and operate like they always have. For a detailed discussion and analysis around these solutions, and to learn about other trends in the life sciences market, look out for our soon-to-be-published State of the Market Report.

Outcome-Based Contracts in Life Sciences – An Age-old Idea Taking a New Avatar | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences, Pricing

Outcome-based contracts in the life sciences industry are essentially a risk sharing agreement between a drug manufacturer and its consumers, which include healthcare payers, healthcare providers, and physician groups. The agreement guarantees that if defined care outcomes are not achieved, the drug manufacturer is liable to pay compensation.

This type of contract is not a new concept in life sciences. For instance, money-back guarantees from snake oil liniment companies and for products such as Emerson’s Bromo-Seltzer have been advertised since the 1800’s. However, the idea is getting a makeover, thanks to value-based healthcare, Medicare Access and CHIP Reauthorization Act (MACRA), falling R&D productivity, and the slow death of the blockbuster drug discovery business model.

outcome-based contracts

Comparing volume versus value

Given the push for value-based healthcare, outcome-based contracts in life sciences are gaining momentum. Leading life sciences companies are making a transition from volume-based contracts to outcome-based contracts to drive higher accountability and ownership, better quality of care, optimized R&D costs, and competitive differentiation.

Outcome-based contracts

Indeed, many pharma companies, such as Amgen, Merck, and Novartis, are already experimenting with outcome-based contracts for areas such as cardiovascular treatments, diabetes medication, and cholesterol cures.

Operationalizing outcome-based contracts

To operationalize outcome-based contracts, drug companies, consumers, and technology-providers must work in tandem.

  • Life sciences firms must have a risk appetite to share the financial burden with their consumers
  • Consumers must be willing to appreciate and reward innovation provided by drug companies
  • Technology is the key catalyst in accelerating an outcome-based contracts model. In fact, it becomes the key pillar in risk analysis, value analysis, and reward analysis. Technology providers must co-innovate with pharma firms in identifying and measuring care outcomes. For example, they can provide cloud-powered IT infrastructure to enable clinical trials orchestration across multiple trial sites, and implement predictive modeling techniques to help drug companies understand consumers’ unmet needs.

Outcome-based contracts challenges

Although outcome-based contracts open new vistas for drug companies, significant challenges hamper adoption. A study conducted by the “American Journal of Managed Care” indicated that incremental investments – in both money and time—is the biggest hindrance, and pharmaceutical firms mention they are not yet witnessing evident RoI from these investments.

Stakeholders’ reluctance and regulatory restrictions are also deterring outcome-based contracts adoption.

outcome-based contracts implications for stakeholders

Implications for stakeholders

Life sciences firms
With outcome-based contracts gaining momentum, life sciences companies should be more accountable for their products. They should interact with healthcare entities and consumers to understand the efficacy of their products, and work towards improving care outcomes.

Payers
As life sciences firms embrace outcome-based contracts and providers embrace value-based care tenets, payers will have a direct financial impact. They can derive breakthrough value from their operating costs as any medication or procedure charges are directly linked to the drug quality and/or quality of care. This, in turn, optimizes claims costs and reduces fraud and abuse incidents.

Technology partners
Technology vendors and IT service providers that are struggling to open new business arenas with life sciences companies must see this as a lucrative opportunity to propose high-value technology services. Example opportunities include infrastructure modernization, cloud orchestration, a data analytics suite, interoperable API creation, customer experience management solutions, pricing analytics, etc. Overall, developing outcome-based contracts can not only create market success with life sciences clients but also help technology and IT service providers cross-leverage these capabilities in other industry verticals.

Has your company ventured into or fully-embraced outcome-based contracts? What successes and challenges have you experienced? Feel free to contact the authors (either Nitish Mittal or Chathurya Pandurangan) and let us know.

Technology is the Key to Innovation in Pharmacovigilance | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences

The critical nature of Pharmacovigilance (PV) is obvious. For patients, it can mean the difference between better health or death from an Adverse Drug Reaction (ADR). For pharma companies, it can mean the difference between a profitable, life-saving drug, or multi-billion dollar fines and loss of reputation and revenue.

Although global PV spend has increased from 0.3 percent of total sales in 2003 to 1 percent (the equivalent of ~US$15 billion) in 2016, some of the pharma industry’s most expensive drug recalls/fines/lawsuits occurred during this timeframe.

Everest Group does not think that a further increase in PV spend is the best way for pharma companies to curb safety breaches. Rather, we believe the answer lies in creating a more effective PV process through use of technology, including analytics, automation, cloud, and mobility.

There are some well-publicized technology use cases in the pharma industry. For example, led by a consortium of world-leading experts from industry, regulatory agencies, and academia, the Web-RADR project will deliver an EU-wide mobile phone app that enables users to report adverse drug reactions directly to their National Competent Authority (NCA). And the U.S. Food and Drug Administration (FDA) has launched Sentinel, a distributed data system through which it can rapidly and securely access information from large amounts of electronic healthcare data from a diverse group of data partners.

And there are myriad ways in which technology can support pharma companies’ PV initiatives. For example:

 

 

eg pv

 

 

Digitized medicines: Smart pills with ingestible sensors can be used to track and collect patients’ health data, which can be used to run analytics for Adverse Event (AE) detection.

Mobile apps: These apps can enable pharma companies to collect ADR data much more quickly.

Cloud-based solutions: Cloud-based databases can enable pharma companies to collect data from multiple stakeholders to build an integrated ADR repository – even at a global level.

Artificial intelligence (AI): AI can help pharma companies to move beyond basic automation by identifying patterns in unstructured data.

Automation: RPA solutions can help pharma companies process structured data much more rapidly than via manual efforts.

Big data analytics: Analytics can help pharma companies use the vast amount of digital data available on the Internet (e.g., on Facebook and Twitter, and in patient forums such as Doctissimo) to supplement traditional data sources such as primary calls, EHR data, and claims data for AE detection.

Proactive PV: Robust IT solutions and advanced systems can help pharma companies monitor drug safety during the research and trials process and post-launch.

 

How Pharma companies capitalize on technology?

To fully capitalize on the benefits technology can deliver to the PV process, pharma companies must begin with establishing a clear and robust strategy for what they want to achieve and how they should progress along the technological curve. For instance, if their end-goal is to implement an AI-based solution, they should first invest in basic automation, analytics, and cloud. As pharma companies tend to lag behind those in other industries in terms of adopting new and innovative methods, they may find it valuable to partner with a third-party advisor to assist in the development of their strategy.

Next, they should proactively identify opportunities and partner with specialized technology vendors to fill technology gaps. For example, while many pharma companies are investing in the development of mobile-based adverse event reporting apps, they will not be able to realize their full potential until all the apps are connected with a common platform that precludes patients from having to download apps for each drug.

Finally, they should strongly consider partnering with outsourcing service providers that have a proven history of supporting the delivery, technology, and regulatory reporting requirements of the PV process. Call center, case entry, literature review and insights mining, aggregate reporting, and PV quality assurance are some of the areas in which outsourcing service providers can of great help.

Pharma companies have long been slow to adopt technology in PV. However, the time has come for technology to play a greater role in delivering solutions, with technology vendors and outsourcing service providers serving as force multipliers.

For detailed insights on new technological innovations in the PV market, please refer to Everest Group’s viewpoint: Innovation in Pharmacovigilance (PV): How to Spend Smarter Not Higher?

The Wide-Ranging Impacts of a Single Payer Healthcare System | Sherpas in Blue Shirts

By | Blog, Healthcare & Life Sciences, Outsourcing

On June 1, 2017, the California state senate passed the “Healthy California Act (HCA.)” The bill (SB 562), which is now in the state assembly for further action, aims to replace all private/government insurance plans in the state with a single, government-run insurance plan.

There are numerous reasons the bill will likely not pass. For example, the California state government would need to spend US$400 billion per year (more than twice the current spend) to fund the proposals in the bill, in turn requiring a massive increase in taxes, including a 15 percent payroll tax increase (source: California Senate Appropriations Committee). There’s limited political support for the bill, even among Democrats. There’s also minimal popular support, per a Pew Research Center poll, which concluded that only 30 percent of California residents prefer having the government be the sole payer. Previous similar attempts at a single, state-run payer system have failed due to the expense involved.

On the other hand, there are voices of support for a single payer system, including Bernie Sanders, the longest serving independent in U.S. congressional history, and Mark Bertolini, Aetna’s CEO, who in May 2017 asked the nation to ponder such an arrangement.

If a single payer system were ever implemented, sweeping changes would impact multiple parties.

How would a single payer system look if it were ever implemented?

Healthcare Payers:

  • If the government was the sole provider of health insurance, commercial payers would get absorbed into the government-run business
  • If the government expanded Medicare coverage to all citizens, commercial payers would die out due to strong competition from government plans
  • If the government sublet to a single commercial payer to handle the insurance market, there would be large-scale consolidation in the payer market

While there are many ways in which this could play out, a move to a single payer system would in most cases be a bane for the payers.

Healthcare Providers:

  • A commercial payer-controlled single payer system would severely undermine providers’ negotiating power. However, a government-controlled single payer system would give them some negotiating leverage
  • They would experience significantly reduced administration costs, as everything would be sponsored by the single payer

Thus, healthcare providers would experience positives as well as negatives in a single payer system.

Outsourcing Service Providers:

A single payer system would bring many opportunities to outsourcing service providers. For example:

  • Payer consolidation would require third-party support across system integration, consulting, process expertise, BPO, and many other areas
  • A government-run consolidation would lead to new areas of investments, similar to the Medicaid Management Information System (MMIS) that the states currently run
  • Integration of everything, including clinical data, under one umbrella payer would enable service providers to develop much more powerful analytics and insights

Single payer system’s governmental requirement for service providers

Of course, not all would be rosy. As a single payer system would require service providers to work with the government instead of commercial entities, they would likely face slower processing, a smaller appetite for innovation, and bureaucratic red tape. Additionally, payer consolidation would lead to outsourcing industry consolidation, likely putting some service providers out of business.

We don’t mean to spook outsourcing service providers with our views. Nor are we encouraging them to start investing in expanding their offerings. But we are recommending they keep an eye on the progress of the HCA and other similar acts around the country. Doing so might just save them from the same fate Nokia suffered at the hands of Google and Apple.