Ernst & Young just published its Progressions 2012 report, which focuses upon the continued dialogue about the healthcare changes that are taking place in this decade. The report stresses the fact that we stand on the cusp of the third big wave of improvements in health outcomes, driven not by the new products, but by behavioral change. Pharma 2.0 dealt with diversified product portfolios, while Pharma 3.0 deals with health outcomes. The business model has shifted from product-centric to customer- or patient-centric. Value drivers have shifted the focus from revenue and margins to health outcomes for patients and health systems. Brand value has continued to move from product efficacy to customer experience. Market strategies have shifted from pitching to more customers focused listening and co-creating. The inorganic growth that used to happen through acquisition of product companies is transforming through innovative partnerships. Innovation has shifted from the product focus to the business model. Also healthcare reimbursement is now based on ‘real market effectiveness,’ rather than just approval based on clinical data.
Usage of smart phone apps, sensors, monitors and social media such as Facebook have led to patient empowerment, allowing patients to take a much more active role in managing their health and demanding more from providers. This in itself is a promising change in the game, making costs more sustainable and providing new opportunities for growth and value creation. Patients are becoming more aware of their health through Web MD and other vehicles and are trying to manage it much better. They are also looking at ‘global happenings’ and adjusting the tune to help themselves.
Now, let’s look at the recent landmark ruling, in which India’s Patent Office has for the first time granted a generic drug maker a ‘compulsory license’ to make a copycat version of a patented medicine. The license was awarded to Natco, which can now make a generic of a Bayer kidney and liver cancer medication called Nexavar, although only for domestic distribution. The ruling also calls for Natco to pay 6% royalties to Bayer.
The move was described as a game changer, because the ruling could open the door for other Indian generic drug makers to override patents for all sorts of medicines. Natco had argued that the cost of Nexavar is unaffordable for the average Indian and could be sold for a fraction of what Bayer charges. The decision is expected to lower the price from $5,500 per person each month to $175, a drop of nearly 97%. For their part, brand-name pharma companies rightfully say that overriding patents with compulsory licenses robs them of incentives and rewards for investing in innovative research. The issue has caused high-profile disputes in such countries as Thailand, Brazil and South Africa, predominantly involving HIV medicines. These types of cases are bound to create a tension between patents and patients and certainly could dampen innovation by drug companies. In most of the emerging markets, health insurance is not very prevalent; patients typically pay for healthcare themselves and therefore such issues take the center stage.
According to E&Y’s Progressions 2012 report, the following principles guide the behavioral change for business. These are, I believe, the essence of the changing paradigm that we need to focus upon to be successful:
Communicate clearly: Decision support tools elicit patient preferences and provide them options based on underlying risks and probabilities and not using any complex mathematical model. In simple words, ‘What are you doing to empower patients with relevant and focused information?’
Account for preferences: One size does not fit all. Personalized medicine — which has so far focused on customizing drugs based on genetic variation — may need to be expanded for the variation in individual preferences and behaviors
Learn from behavioral economics: This has actionable insights for life sciences companies. Are you using conventional wisdom or the science of behavioral economics?
Experiment and be flexible: There is a lot to learn about the patient behavior. How are you continuously learning about your customers, and from your own customers?
Extend your Business Model: Based on the enduring relationships one needs to adjust or change the business model mid-stream. How are you extending your business model for a patient-centric future?
All in all, business processes are shifting gears and so is the patient-centric perspective of the healthcare businesses bringing about those positive changes!
Makarand (Mak) Jawadekar most recently served as Director, Portfolio Management and Performance at Pfizer Global R&D, until February 2010, when he opted for an early retirement after 28 years at Pfizer Inc. He currently serves on several companies’ advisory boards and also consults with bio/pharmaceutical companies for global outreach in emerging market regions. He can be reached at firstname.lastname@example.org.