CVS Health and Aetna. Cigna and Express Scripts. Amazon, Berkshire Hathaway and JPMorgan Chase. Each one of these deals is evidence that corporate America will continue to march into the medical arena, uniting once-distinct healthcare enterprises under one roof. While the long-held divisions between U.S. healthcare stakeholders may be getting hazy, the aim is clear: to deliver convenient, high-quality care to consumers at a lower cost.
With the U.S. Department of Justice’s stamp of approval, the CVS/Aetna partnership is one step closer to taking aim at urgent care centers and hospitals by leveraging the drug chain’s retail locations and using data and technology to improve consumer health and wellness. Industry-wide change of this caliber means that old businesses—particularly ones that resist modernizing their ways to keep up—run the risk of obsolescence. Providers are establishing their relevancy by expanding their services into new points of care including launching telehealth offerings, hiring health coaches to advance wellness efforts, and opening facilities to manage chronic diseases. Payers are similarly shifting their business models to drive wellness. This begs the question, What are pharma companies doing to reinvent themselves and ensure that they don’t become casualties of change?
The Justice Department gave the CVS/Aetna merger the go-ahead with just one condition: Aetna needs to unload its Medicare Part D business to avoid overlap with CVS’s own Part D plan. With a pending sale to WellCare Health Plans, the soon-to-be combined entity can check that regulatory box and turn its attention to securing state approval.
About a year ago, when the CVS/Aetna deal was first announced, we talked about the pressure that these vertically integrated entities would put on manufacturers’ existing commercial models and, more specifically, how pharma companies would need to transform in response. From sharpening their B-to-B selling and negotiating skills to aligning their portfolio strategies with new models of care, pharma companies need to be better prepared to create value for a shrinking number of corporate channels—each with their own complex needs.
But in the time that the CVS-Aetna deal has been sitting on a regulatory back burner, pharma’s commercial model isn’t the only part of the business that’s being called into question. Shifting sites of care, focusing on wellness and advancing health technology are putting manufacturers’ evidence strategies and business models to the test. Pharma is surrounded by industries that are innovating, self-disrupting and integrating, so time is of the essence. Pharma companies will need to carefully plot the right course to reinvent the way that they bring value to their customers—and health tech capabilities need to be at the center of that strategy. Here’s where pharma should focus:
1. Establish an evidence generation strategy. In a world where distribution, pricing, claims and patient data come together under one roof, pharmaceutical products need to secure differentiation. The trick is to establish an integrated process for planning and generating meaningful evidence that’s aligned with payer, provider and patient requirements. Extracting real-world evidence from patient-reported outcomes will be key here. Essentially, that means incorporating value-based thinking as early as possible in a product’s development—and determining how tech tools like monitoring devices can lend a helping hand. This shift raises a few questions for the manufacturer: What sets the product apart from competition—such as target audience, accessibility, mode of administration, durability, etc.? and, How do those differentiators offer value to large, vertically integrated healthcare organizations?
Technology will enable a next-generation evidence strategy. Pharma companies can leverage the vast amount of data created by remote monitors, wearables and technologies connected by the future internet of things. We'll see technologies like remote monitoring in cognitive behavioral therapy change fields that have been qualitatively focused or heavily dependent on the doctor-patient interaction. This will allow pharma to generate novel, real-world evidence in ways previously impossible.
In addition to helping pharma’s case today, it could help companies prepare for a day when humans are not the subjects of clinical trials. Should the industry move away from in vivo clinical trials in favor of in silico clinical trials, what type of evidence will pharma companies need to create to survive these impromptu trials of the future?
2. Embed value into the business model. Other healthcare stakeholders have pivoted in response to evolving changes in the ecosystem: Vertically integrated payers and providers are finding new solutions for patients with chronic illnesses, emphasizing constant patient engagement and prioritizing wellness. Meanwhile, the value of drugs to fix the sick is beginning to wane, and technology companies continue to test the perimeter for a place to enter. As digital print pioneer Benny Landa said, “Everything that can become digital will become digital,” and that notion certainly applies here.
Technology is already in healthcare, with artificial intelligence serving as an assistant to doctors and taking on the routine tasks of billing and scheduling. According to ZS’s 2018 AI in Healthcare study, 66% of doctors approve of using AI to help with workflow management, administrative assistant tasks and patient experience analysis. However, most physicians draw the line at letting AI play a role in actual care delivery.
As AI continues to gain more acceptance with both M.D.s and patients, we’re starting to see more AI-based tools in patients’ pockets. These apps—which can be used in place of and alongside medications—give physicians better insight into patients’ lifestyles, behaviors and adherence rates. One such example is Pear Therapeutics’ prescription digital therapeutic being developed as a companion to Novartis’ medication for patients with schizophrenia. Many of these digital and connected health products look to replace pharmaceuticals through behavior modification and coaching, mirroring an industry-wide emphasis on improved health and wellness.
Large, vertically integrated entities have gone to great measures to reinvent their business models, surpassing suppliers’ efforts to reposition the value that they bring to the healthcare equation. Drugmakers need to act quickly to ward off the technology companies waiting in the wings, aiming to disrupt suppliers with less expensive products (and minimal development costs) that directly compete with drugs. To keep their edges sharp, manufacturers will need to reassess the value that they bring to patients, providers and payers, and use that as a basis for reinventing their business model. It’s time that companies think beyond “beyond the pill.”