Is Pharma really engaging with digital health, or just dipping its toe in the water?
Having recently returned from the Health 2.0 conference in Barcelona, I was left asking myself why over the last few years we have seen a lot of excitement and interest in this new area of digital health. Whilst billions of dollars have been poured into this sector by investors, it is not yet clear if the pharmaceutical industry is truly engaging with digital health or is just dipping it’s toe in the water.
First, it might be useful to define what we mean by digital health. Digital health is not just digital marketing, it covers a myriad of new technologies including telemedicine, apps, big data, Artificial Intelligence, health IT, electronic patient records, medical devices, sensors, wearables, ingestibles, implantables, online patient bookings, patient recruitment for clinical trials, patient adherence and so on.
So what has the pharmaceutical industry been doing in digital health?
Whilst we have seen the emergence of several high profile collaborations (Novartis – Google; IBM Watson – Novo Nordisk; Otuska – Proteus; Sanofi-Verily), several incubators (Bayers Grants4Apps; Leo Innovation Lab; MSD Innovation Factory) and the creation of some investment funds (Merck $500m innovation fund), compared to how much pharmaceutical companies invest in traditional pharmaceutical R&D (2016, the top 10 global pharmaceutical companies invested over $70bn) this is still a drop in the ocean. In my opinion, this raises two key questions. Firstly, why should pharma embrace digital health? And secondly, why is pharma not investing more?
So, why should pharma embrace digital health? I think there are a few reasons. Firstly, it is well documented that the traditional commercial pharma model faces many challenges. For example, pharma companies are under increasing pressure to demonstrate that their products actually work and are worth the money being paid for them, so how will they collect the relevant data to prove this?
Secondly, as we have seen in many other industries over the years, failure of traditional and established companies to adapt and embrace technology has led to them either becoming extinct (Kodak) or being overtaken by new entrants (airbnb, UBER). If some pharma do not want to go this way, they may need to reconsider their business models.
So why is pharma not investing more? In our opinion there could be many reasons. Pharma is nervous of getting involved in an area it does not yet understand; there is not a proven commercial model for digital health and pharma wants to protect its own profit margins; pharma does not have the right people and skills; pharma does not think it needs to change; is there a conflict of interest – i.e., what happens if the new data shows the product is not as effective as first thought. When I recently shared our views with the leadership team of a top 10 global pharma company, a Country Manager commented that for a sector that invests billions of dollars in high risk product development, the appetite for risk in new technology is strangely very low.
For the most part, the pharma industry is a wealthy and profitable sector, and it’s business model is not broken …yet. So what could make pharma embrace digital health? We think there are several growing forces that could be the trigger for pharma to do more in the future 1) increasing pressure to link pricing to outcomes 2) more pressure and demand from patients / consumers 3) financial pain from decreasing sales and harder market access or if 4) a new “disruptive” entrant comes onto the scene.
So each pharma company needs to determine if it sees itself remaining as a provider of products, or do they see themselves becoming healthcare providers, where the pill is just a part of the solution.
What could pharma do?
The worlds of big pharma and tech companies are poles apart, from the pace of product development and regulations to name abut a few, however, digital health has huge potential to be the enabler of change to improve patient outcomes and decrease costs of healthcare. If pharma really wants to engage to deliver this, we will see more and more collaboration with technology firms, increasing influence from the consumer demanding that healthcare becomes more like the rest of their digital world, and new business models will develop.
From the many events we have attended, the hundreds of pharma and digital health companies we have met with, we are convinced that digital health is happening, is disrupting and improving healthcare, and that pharma companies have a far bigger role in shaping a new, better way of delivering tech enabled healthcare.
Darren Spevick is the Managing Partner of Eventum Partners, an executive recruitment company that specialise in senior appointments for the healthcare technology and life sciences sectors.