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The Rise of Digital Health and Need for Partnerships in the Asian Pharmaceutical Industry
By Dr. Joseph Mocanu, Managing Director, Verge Capital Management
I spent about seven years in management consulting, ending my career as the Life Sciences practice leader for Oliver Wyman across APAC. Our region, densely populated with over 3 billion people and wildly heterogeneous healthcare systems, is experiencing a fundamentally insufficient supply of healthcare resources and a significant gap in the affordability of healthcare services, most notably ethical pharmaceutical products.
A significant part of my work focused on large multinational pharmaceutical companies looking for guidance on non-traditional market access routes—this meant creating innovative business models and building successful partnerships with insurers, providers financial institutions, and even startups, that could overcome some of the financing, education, and delivery challenges that prevented the success of both traditional and novel market access approaches. We also helped our clients develop strategies to generate the right kind and level of evidence conveying the value of their medicines and how to engage critical public and private sector stakeholders to best deliver said evidence.
As a part of my client engagements, I discovered many entrepreneurs working towards improving their local health systems yet struggling to find the capital to do so, even with a clear business case and strong technology foundation. I started investing in these companies in a personal capacity, and very recently left Oliver Wyman to start Verge Capital Management to do this full-time with a couple of likeminded partners. Our mission is to extend healthy life spans of all people and we are doing this by providing capital to early stage companies focused on disease prevention, health system efficiency, and curative therapies.
Trends Transforming the Pharmaceutical Industry in Asia
While the pharmaceutical industry might be under constant internal transformation and consistently at the top of biomedical innovation, the business model itself has not changed very much in the past decades. However, with the increasing veracity, velocity and ubiquity of information, and the accompanying exponential changes in technology powered by it, they will soon need to rethink the way they work, prioritize and conduct research, innovate, manufacture and meet stakeholder expectations. I say stakeholder as it is no longer a monologue with physicians as key decision makers but rather full conversations with public and private payers, other healthcare practitioners, health system administrators, service partners and most importantly, the patients themselves.
As such, I have seen three major trends rise here in Asia in response to some of these looming changes. Firstly, pharmaceutical companies have finally started to realize that digital health is an important enabler that overcomes some of the traditional limitations on providing services ‘beyond the pill.’
Secondly, there is the growing awareness and importance of compelling clinical outcomes data within emerging markets given the commitment many governments have made to universal healthcare coverage. They have committed to expand access but are faced with limited resources, so they need to see if the treatment proposed is cost-effective and if it produces real-world results that are beneficial to patients and health systems. Digital health can help through the more thorough and consistent collection of data, either directly from patients or via their providers.
Lastly, there is also the increased role of the private sector. As consumer expectations rise faster than governments can meet them, the private sector is stepping in. Of most significance to Pharma is that private health insurers are starting to take a considerable interest in healthcare, shifting their attention to medical management, rather than taking more passive approach of flat limits and increasing premiums. This is a double-edge sword for pharmaceutical companies as this also like entails the formation of drug formularies, which can potentially mean exclusions/tiers like in the U.S. or expanded access to those pharmaceutical companies that have a strong portfolio of drugs that can demonstrate value. The management of disparate healthcare resources requires a decentralized data-driven approach.
Implications for Pharmaceutical Companies in AsiaPharmaceutical companies are increasingly in need of partners who can allow them to reach the scale and efficiency needed in APAC regions to act on these above trends where they do not have as many resources as their North American or European headquarters. This is not surprising considering 80-90 percent of global pharmaceutical revenue originates from the U.S., EU5 and Japan. Moreover, this region tends to moves faster and multinationals will need to keep pace, unencumbered by long decision making and integration processes.
This is making pharmaceutical companies realize the necessity and importance of having these effective partnerships, many of which must be digital by nature as the resources do not exist to build the traditional ‘brick-and-mortar’ models. However, executing these partnerships in the context of existing systems and processes can be quite challenging, and this is one area where CIOs can make a critical difference in the success or failure of these initiatives.
Some of these challenges at the technology level are technical in nature with partnerships stalling due to interoperability, data exchange, ownership and governance issues. Others are more political in nature, with in-house teams asking why a partner is needed at all and insisting on “DIY” first, often forgetting key details about the end customer experience, ideal use cases and/or patient journey in the process (not to mention ensuring the spurned partner entertains working with the direct competition).
What It Means for Budding Pharma CIOs
A Pharma CIO seeking or tasked to facilitate the transformation of the core business should consider the following:
• Get involved from day one: Ensure you have a seat at the table of partnership initiatives at the inception stage—alongside the innovation, product, regulatory and market access teams to see how IT can play a role in ensuring a smooth cross-disciplinary collaboration across processes and systems.
• Focus on your core strengths: Do not hesitate to outsource when your team is stretched—most IT functions were designed to be internally facing and iterative in nature. For example, a Pharma IT function cannot hope to be best in class vs. Silicon Valley and Chinese technology companies in analytics, machine learning, etc. This does not mean the teams should not shadow their partners to upskill themselves and understand what ‘good’ looks like.
• Build the ecosystem, as one size does not fit all: Be open to accepting different solutions across geographies or disease areas as one vendor will likely not satisfy all the requirements or be present in all markets. Instead, emphasize standards, specifications, and interfaces to keep the same working language across multiple partners. Pharma has tremendous leverage given the difference in both size and resources—most partners would be ready to bend over backwards to be a long term partner.
Overall, it is an exciting time to be a pharmaceutical CIO, as your importance in improving the lives of your patients has never been greater, and the tools at your disposal to achieve this are formidable and improving by the minute.