Part II: Beyond the Pill Solutions: Reinventing the Pharmaceutical Business Model

Participants network over breakfast at the “How Far Beyond the Pill?” Workshop.

The Mack Institute’s recent “How Far Beyond the Pill?” workshop examined pharma’s urgent need to develop “Beyond the Pill Solutions” (BTPS) in order to confront the many challenges currently facing the industry. In Part I, guest author Prashant Nikam (WG’11) of Sanofi Oncology enumerates these challenges and defines their solution as “an integrated set of products and services that work across the continuum of care by engaging patients/caregivers/providers to deliver superior health and care delivery outcomes at a reduced cost.” Below, he summarizes the workshop’s discussions around what BTPS might look like in practice.

Among workshop attendees, there was broad consensus that BTPS should satisfy the following three criteria: (1) span the patient pathway, from diagnosis to treatment to routine follow-up care; (2) encompass an ecosystem of products/services to deliver superior health outcomes; and (3) monetize the solution to drive returns and be sustainable.

Larry Huston (Mack Institute Senior Fellow and Founder of 4iNNO) gave a stimulating talk on creating total solutions for patients, and challenged the pharmaceutical industry to move from a product-oriented business to a solutions-oriented business. He shared a case study around building a total solution platform for diabetes patients. Such a platform would encompass the total patient journey from diagnosis to chronic disease management, and touch various facets of the care continuum, like diagnostics, prescription drugs, nutrition, fitness, informatics, preventive services, etc.

The time for Beyond the Pill Solutions has come, and the pharmaceutical industry has to show leadership and courage in innovating its business model.

Huston asserted that the pharmaceutical industry is poised to play a leadership role in creating value beyond the core (i.e. anti-diabetic drugs). In fact, building such a platform would position the company as a partner of choice by providing sustainable benefits to key stakeholders: patients (improved adherence and better care coordination), payers (better outcomes at reduced costs), employers (better employee productivity), and providers (better outcomes at reduced costs and satisfied customer base).

Huston’s talk was followed by an equally charged-up panel with Jim Peters (CEO, Geisinger Medical Management Corp.) and Roy Rosin (Chief Innovation Officer, University of Pennsylvania Hospital System) on “Taking the Provider’s Perspective.” What impressed me the most was the willingness of these health systems to work with various stakeholders, including pharmaceutical companies, to innovate on the delivery side and provide better health outcomes for patients. Jim’s comment sums this up well: “Pharmaceutical companies can use us like an innovation lab, and we can jointly work on ways to provide better and efficient healthcare to our patients.”

Executing on this vision to provide BTPS will indeed require an open innovation model where industry, academia, patient groups, and health systems will have to cooperate, collaborate, and co-create. This will require a significant mind shift for the pharmaceutical industry as it starts going into adjacencies like BTPS and begins to address more holistic issues like health outcomes and costs. Companies will not only have to embrace a model where margin structures will be lower than the traditional model but will also have to invest in building the right capability/infrastructure to execute BTPS . At the same time, the onus is also upon the regulators, payers, and providers to actively contribute in building an execution framework conducive for BTPS so that better patient outcomes and efficient healthcare delivery is achieved.

Pharma Workshop Attendees
Intense discussion followed the presentations and continued into the breaks.

The workshop’s afternoon breakout sessions were very lively as three teams worked through topics around drivers and barriers for BTPS, organizational requirements and capabilities to deliver BTPS, and potential profit models to monetize BTPS. I was impressed by the overall quality of the outputs. Some common themes and open-ended questions that emerged were:

  • What does a clear business model for BTPS looks like?
  • Will customers trust and partner with pharmaceutical companies to develop BTPS?
  • Is pharma management willing to invest, and committed to champion the new business model?
  • Who will pay for the solution?
  • Will shareholders be happy with the margin structure from this new business?

Overall, there was consensus that the time for BTPS has come, and the pharmaceutical industry has to show leadership and courage in innovating its business model. There is clearly an unmet need waiting to be satisfied; if pharmaceutical companies fail to take the role of the protagonist, someone else surely will. This workshop was a great beginning on Wharton’s part to formalize the knowledge around BTPS and convene thought leaders to debate the future of business model innovation for pharmaceutical companies. I personally think that the sun of BTPS is rising over the horizon and will revitalize the patient-centric business model innovation for the pharmaceutical industry.

Author’s Disclaimer: The views and opinions expressed in this post are personal and do not necessarily reflect the official policy or position of my employer, Sanofi.