I attended the J.P. Morgan Annual Healthcare Conference a few weeks ago. Think of it as the CEO version of SXSW for all things big pharma, biotech, health insurance, health tech and large healthcare providers. In four days you drink a fire hose of 30-minute reports from CEOs and their CFOs that together paint a detailed portrait of the financial and scientific outlook of the industry. (i.e., many “forward-looking statements.”)
The Solvadi Effect
As I was listening to the executive presentations, I began to pick up on three important trends. First and perhaps most importantly, I sensed that the industry is really committed to finding cures. Call it the Solvadi Effect.
Historically, the objective has always been to delay death, but now everyone seems inspired by the power of Gilead Science’s new product to cure hepatitis C. This is a much better clinical outcome than the generic alternatives with their nasty side-effects. Pharma leadership, particularly biotech executives, used the conference venue to declare their commitment to finding cures for diseases, with special attention placed on Alzheimer’s, Parkinson’s, MS and hepatitis.
Business Model Flip
One reimbursement policy implication is that over the next 5 to 10 years we could potentially see the pharma/healthcare business model flip from delivering moderately priced drugs that chronically-ill patients take for the rest of their life to a new model in which therapies might cure a disease in a short period of time, but with a very high price tag. For example, the business and social contract is already changing from supplying a generic drug that someone with hepatitis C would take for the rest of their life to a drug can cure the patient in 12 weeks, but will cost $86,000.
Going forward we will see more and more drugs in development with the goal of a cure, along with a commensurate hike in pricing. Public and private payers and large employers are beginning to wrestle with these new economics of short-term pain for the promise of long-term gain.
Biotech is the new black
Secondly, it’s interesting to watch pharma try to talk more like biotech, even as the biotechs start to look and act more like pharma. Typically, the business model for pharma was to become a large, global, well-capitalized company (with the inherently structural challenges to bringing new drugs to market). Biotech was typically underfunded but it was where the innovative science was happening. Because of its cash flow constraints, biotech often was compelled to partner with big pharma to bring their compounds to market for clinical trials and eventual commercialization.
This balance of power is changing. There is so much excitement in the biotech space right now that raising money is no longer an issue. Investor dollars are pouring in from every direction, including foundations, states, pension funds and even generalist investors. This is giving biotech companies more freedom to remain independent from large pharma. Some of them are beginning to think, “I’ve got a lot of reserves here. Maybe I’ll keep the molecule to myself, hire a sales force and go to market on my own.”
Small is beautiful
Regardless of the business model changes and where the money is coming from, both pharma and the biotechs are looking to “disrupt the clinical care pathway” by finding cures and bringing innovation to market. There’s a lot of chatter about the industry being done with “me, too” drugs because of the heightened challenge in getting them approved and reimbursed in the US.
Now, everybody is beginning to look to address overlooked and unmet needs, particularly around some of the smaller, rare diseases. This confirmed my third observation that everybody is moving into specialty drugs.
More than once it was predicted that in the coming years 50% of the branded drugs on the market will be specialty drugs rather than general chronic illness drugs like statins or drugs for diabetes. Everybody it seems is moving into the specialty arena of much smaller doctor and patient populations. If you can make an impact here you have the opportunity to create a lot of value, both for patients and for the pharma investors.
In Summary
Three major trends:
- An evolving value proposition (drugs that cure)
- New power players in the marketplace (well-funded biotechs)
- A shift in the product mix (specialty drugs)
What does this mean for marketers?
This is both an exciting and challenging time to be in the healthcare industry. As marketers, it becomes even more important for us to have deeper intelligence and insight into what doctors are thinking and to earn the right to broader access to when and how doctors make decisions. I spent time at the conference with executives of a few of the large, vertically integrated health systems like Geisinger Health and it’s clear that the legacy pharma marketing practices of traditional market research and large pharma sales forces will not be adequate for this new world.
Adapting to change and overcoming long-standing practices in pharma won’t be easy, but it’s necessary. This is an opportunity for innovative agency partners who can provide better intelligence into the needs of physicians and patients and then offer better means of getting access to those decision makers.