Price of entry or corporate strategy: how pharma and biotech are approaching digital health

The high costs of drug discovery and commercialization, looming patent cliffs, and increasing regulatory pressure on drug pricing have created a perfect storm of margin and growth pressures on the pharma sector. In an apparent response to these pressures, M&A activity in pharma is back. This month, Bristol Myers Squibb’s announced its $74 Billion acquisition of Celgene, and Eli Lilly did the same with its $8 Billion acquisition of Loxo. (At the recently concluded JP Morgan Healthcare Conference (JPM), the pharma/biotech sector’s biggest event of the year, Eli Lilly’s CEO indicated that conditions are ripe for an M & A uptick in 2019)

Acquisitions may be one way to stay on top of the marketplace changes; however, organic growth pressures remain. One way to address the challenge is through digital transformation. However, digital strategies within and across individual sub-sectors in healthcare may look different depending on what companies want to achieve at a corporate level, at a commercial level, and a technology level.

Digital in pharma: eliminating friction

Healthcare is on a mission to put the focus back on patients, improve engagement levels and achieve better healthcare outcomes, and reduce costs. Digital has become the price of entry into a future state implied by this renewed focus. Digital is also seen as a powerful tool for differentiation.

The most crucial purpose of a digital strategy may be the elimination of friction in the healthcare value chain. There are many areas that are ripe for improvement in pharma. One of them is to enable drug development by being able to measure things objectively to prove drug efficacy and demonstrate value. Another is to accelerate clinical trials through improved ways of recruiting and managing patients. Yet another is to develop digital therapeutic solutions to augment revenue streams.

Greg Silvesti, Head of Digital Health and Innovation at Abbvie, (a $28.2 billion company best known for its blockbuster drug Humira), says that pharma companies are dancing on a pinhead for differentiation today. He suggests that digital itself isn’t a strategy but an enabler to an overall strategy and a tool to unlock value. An overall digital strategy can be a combination of approaches depending on the strategic goals of the company. However, the key is building the approach with digital as an enabling technology for the overall strategy of the company.

The maturing of digital health and its challenges in pharma

The digital health space has matured in the last few years, attracting an eye-popping $8.1 billion in venture capital funding in 2018. There is no question that we are seeing a shift in how healthcare is being delivered through new digital health solutions. Telehealth is growing, as is remote monitoring. Vast amounts of increasingly diverse data sources from sensors and devices can now be aggregated and combined with traditional data sources such as electronic health records. Advanced analytical tools are now available to process these vast amounts of data in low-cost infrastructure on the cloud to develop and deliver insights at the point of care.

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