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  • EY Progressions Series

Life Sciences : New Equation for Delivering Value


The question life sciences companies must address is how to seize the upside of disruption in today’s transformative age. The ubiquity of data and analytics continues to blur the traditional boundaries between therapeutics, medical technologies, consumer devices and information technology (IT).

Alex Gorsky, CEO of Johnson & Johnson, reminded investors of the implications of this technological convergence for both traditional health and life sciences leaders at the 2018 J.P. Morgan Healthcare conference. “We won’t necessarily be classifying [ourselves] as just a health care or biopharmaceutical industry, but will be a health care and biopharmaceutical technology industry,” he said. Technology “will touch everything that we do, whether it’s the way we use data to better understand the genome … or as it applies to things like minimally invasive surgery, even the way we talk to consumer vis-à-vis social media.”

Gorsky’s words underscore how technology will help reimagine health care. But technology alone isn’t driving the shift. Budgetary constraints and longstanding inefficiencies in care delivery heighten the need for such a reimagining. Many consumers struggle to afford new medicines or devices. As life spans increase, public and private payers struggle to fund health systems that can provide high-quality care to their oldest and most frail. “We need fundamental, new models of care that challenge the status quo and create opportunities for value-based models that reward the private sector for taking costs out of the system,” says Jason Helgerson, Medicaid Director at the State of New York Department of Health.

To regain power and be recognized for their significant contributions to improving health, life sciences companies must invest strategically in capabilities that create future value based on the broader demands of these different stakeholders. As has been true historically, innovation will continue to be a central component of how life sciences companies create future value. But these innovations will be valued based on their ability to satisfy a common purpose linked to health quality, cost and outcomes. In other words, to create future value, life sciences companies must develop systems that align objectives and share value among stakeholders.

This definition of value has already emerged in other areas of the economy as investors adopt so-called “prosocial” policies that place the rights of employees and the community on equal footing with the rights of shareholders. It’s one reason, for instance, there is increasing demand for electric cars, which can cost more than many gas-powered vehicles. In life sciences, where social consequences and profit are deeply intertwined, the need for a broader, shared definition of value is arguably even more important.

The difficulty of defining shared value across health’s many stakeholders has always vexed life sciences companies. In all likelihood, companies will have to demonstrate that products improve consumers’ quality of life and their health, while also exhibiting a return on spending to cost-conscious governments and commercial payers. At the broadest level, innovations may also need to demonstrate benefits at the population level to satisfy the needs of policymakers.

Over the past two decades, life sciences companies have moved away from off-the-shelf blockbusters to the creation of specialized products that are tailored to the individual based on genetic or clinical evidence. This trend will continue as increased personalization begins to account for consumer preferences linked to behaviour and risk tolerance and drives stakeholder participation. Success will require borrowing user-centered design principles developed in the technology and consumer industries to develop mechanisms of engagement that are easy to use and naturally fit into daily life.

Framing innovation in terms of outcomes and personalization means the product is no longer the central driver of value. In certain therapeutic areas, especially the treatment of chronic diseases, additional services linked peripherally to care (e.g., transportation services to doctor’s appointments), connected consumer-facing devices and digital infrastructure will play increasingly important roles. Indeed, innovation will be powered by an increasingly diverse stream of data that reside outside the confines of the traditional health ecosystem. Life sciences companies need a way to safely and quickly tap into these different data sources to combine and connect them to their deep scientific and clinical data.

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