Results from a recent study conducted by Arthur D. Little and the Karlsruhe Institute of Technology indicate that by 2020, the business model of the pharmaceutical industry will be transformed by digital health. With this in mind Thilo Kaltenback, Arthur Little Healthcare, looks at the impact of digital health on the pharmaceutical industry.

The changing market environment will come with promising opportunities for established pharmaceutical companies to participate in a highly attractive and innovative segment. Thus far, digital health solutions have not quite delivered on their promise.

Although many companies have not yet formulated a concise digital health strategy, industry executives expect that digital health will enable pharmaceutical companies to activate new business segments as well as to significantly improve their competitive advantage.

The study results indicate that by 2020 the business model of the pharmaceutical industry will be reshaped by digital health:

  • 84 per cent of study participants consider it crucial to have a Digital Health strategy in 2020, compared to 13 per cent who believe it is already crucial today.
  • Whereas digital health programs are today still in an evaluation and piloting phase, 73 per cent of participants are sure those programs will be implemented by 2020.
  • 77 per cent believe digital health will generate new business by 2020, and 94 per cent believe it will either extend the existing value proposition (37 per cent) or even invent a new value proposition for the Pharmaceutical industry (57 per cent).
  • Consequently, all participants believe digital health will have an important (27 per cent) or even crucial impact (73 per cent) for the competitive advantage of their pharmaceutical companies.

One valid answer to the question why digital health solutions have not yet developed to their full potential is provided by Arthur D. Little in a new report on ‘Principles of winning digital strategies’. One of the hypotheses put forth therein is that the approach of pharmaceutical companies and other established healthcare stakeholders and their management of innovation aligned with organisational responsibilities can be seen as a major impediment.

Three elements are prerequisites for a successful engagement in the digital health space:

  • the definition of a digital vision and a comprehensive digital strategy: as long as digital initiatives and prototypes are conceived only in marketing departments and remain in disconnect from the wider corporate strategy, the risk of failure is simply too high;
  • offering real value to the patient: solutions have to target unmet needs and improve the human condition or life with a disease, utilising the full potential and broad spectrum of digital solutions;
  • a tailored approach to innovation: redesign innovation metrics for digital health developments and offerings and no longer apply marketing metrics and company-wide ROI hurdles commonly used to compare and prioritise investments in the healthcare industry.

Principles of winning solutions

A winning digital solution reflects the whole customer journey and targets specific interactions in the healthcare system. By connecting the stakeholders - patient, physician, payer, healthcare provider and supplier - the solution facilitates easier communication and transactions between the parties involved. One of the principal stakeholders for the entire digital health value chain is the physician. Ultimately, in most healthcare ecosystems, physicians could drive the patient behaviour.

Pharmaceutical companies have an inbuilt association with doctors and hence could be in a potentially stronger position to drive the adoption of digital solutions through the clinicians. Provided their offerings address the doctor’s needs.

Medical device companies have not interacted with clinicians as effectively in the past, and hence would have to build related capabilities. There are eight principles to assess whether digital offerings have what it takes to create winning solutions:

  • Value-add:
    The offering addresses the patient’s needs and creates additional value for him or her as a customer. A smart solution improves the quality and outcome of a treatment by simplifying processes and saving time and money. Thus, it is a powerful tool to overcome the gap between healthcare provider and patient interests, which allows building and fostering of customer loyalty. The starting point should be the actual disease - how it impacts the patient’s life and the recommended treatment pattern.

    Digital solutions should support the patient in tracking his health status and sharing data with all involved physicians, renewing his prescription and predicting likely changes in health status based on available data.

  • Platform / connectivity:
    A good solution uses a multi-channel approach to properly satisfy each patient’s demand. Social media, websites and apps offer touch points to the customer, and are embedded in the internal organisation and value chain. Connectivity links the patient’s devices, transports data and allows a view of the patient in real-time. A strong platform that can integrate other applications is of integral value.

  • Data:
    Digital solutions collect and take advantage of comprehensive user data. Electronic health records offer the possibility of tracking and sharing the patient’s health status and customising the treatment. Any offering that does not leverage the patient’s data to track and record what is going on over time cannot leverage the full potential. The data is already there today - why not use it and make it accessible to the involved parties to benefit the patient?

  • Intelligence:
    Superior offerings are going way beyond data collection. Intelligent systems make use of individual and patient group data to identify and track changes to their health status in real-time. By considering external factors, treatments and solutions become predictive instead of reactive. Only when an underlying understanding of interrelated variables exists can the app itself embed the algorithm.

  • Device:
    Winning digital health solutions require a device that collects and analyses the data, communicates with the patient and provides multiple interfaces to other medical devices and communication platforms. It links to the most recent technology standards, and thus allows building of closed-loop systems. The device must be able to become a lifestyle product for the patient.

  • Sensor:
    Sensors enable tracking of a patient’s health status in real-time, and yield precise and continuous measurements. They mitigate the gap between home care and professional equipment. Furthermore, sensors are designed to be convenient for the patient: wearable, inconspicuous and suitable for daily use. One reason patients are non-compliant is that they are too often asked to use a separate and inconvenient device.

  • Pharmaceutical:
    Digital offerings can potentially enhance the value proposition of a pharmaceutical and the related therapy. Technological dimensions can add to the core product and enable a tailored treatment. RFID chips on pharmaceutical boxes, sensors on inhalers, pumps, smart pills, cloud-based patient records, video platforms, patches and implants to track the status - for example - of the cardiovascular system or glucose concentration, learning programs, and many more options are available to enrich the value proposition.

  • Regional:
    Finally, winning digital solutions cannot be developed as one-size-fits-all solutions. In fact, the most successful offering will reflect the regulatory and care environment in each respective region. Not only will it understand, but also accept local pain points and accordingly adjust its value proposition.

Different approach to innovation needed

The approach to innovation of the traditional pharmaceutical industry and other established players in the healthcare industry and that of the digital age are vastly different. A change in the approach to innovation and resulting processes and organisational structures appears inevitable.

The development stages in the digital age are not as clear-cut and can take multiple directions. First of all, prototypes allow reconfiguring or dismantling only for their ideas to be used in other products. Summarising the main differences in the digital innovation process compared with the pharmaceutical approach are:

  • open innovation structure, focusing on partnering concepts and joint platform development;
  • shared learning and cross-functional collaboration between development units and firms;
  • customer-oriented solution design that follows changing consumer preferences;
  • significantly shorter time to market, with the possibility of continuous iterative product improvements over time;
  • flexibility to evolve development to meet the demands of multiple and even future markets with the same product platform.

To tap into the full potential this evolving market offers and avoid the threats outlined above, successful and compelling digital health strategies are needed. These will result in transformation across five areas:

  • value proposition and new types of offerings;
  • customer focus: patients to consumers;
  • new competencies and new partnership formats;
  • organisational structures, risk assessment and externalisation of digital health-related activities;
  • uncertainty / new forms of revenue streams.