What is driving life sciences transformation?
Recently, I was asked to moderate an upcoming panel, “Transformation beyond U.S. Health Care Reform,” at the June 6 Financial Times (FT) U.S. Healthcare and Life Sciences Conference in New York City. I find the topic intriguing, in part, because it echoes my belief that U.S. health care reform is just one of several drivers of much-needed transformation in the life sciences industry.
Certainly, reform – which typically is linked to the American Reinvestment and Recovery Act (ARRA) and the Patient Protection and Affordable Care Act (ACA) – is mandating change across the entire health care value chain. However, other, non-legislative market forces – many of which predate ARRA and ACA – are serving as even more powerful drivers of change.
Life sciences companies and other industry stakeholders operate in a marketplace where the focus is shifting to information and value. They face a facts-based-messaging future where transparency, real-world evidence, great clinical outcomes, and a solid safety profile will likely be essential to attain product approval and adoption. In addition, companies will likely need to demonstrate that their products provide value across the ecosystem of consumers (patients), health plans, and providers. The catch is that each of these stakeholder groups defines “value” differently. While everyone has a shared goal of attaining improved outcomes for consumers, they may have different motivations and paths to get there.
In a value-based future, pure science alone may not ensure success. The post-reform market’s additional focus on economic value may require that life sciences companies establish a cost structure to deliver innovative science to the marketplace at a price that makes sense. What are considerations for companies looking to transform themselves to operate successfully in an information-intensive, outcomes-oriented marketplace?
Understand how the marketplace is changing and what capabilities may be needed at an individual and institutional level to engage stakeholders in a post-reform ecosystem. Such engagement will likely call for a new commercial model that expands a company’s network of stakeholders, focuses conversations on value, and moves from unit-based pricing to value-based contracting.
Recognize that industry transformation increases focus on stakeholder alignment across the entire health care value chain; however, this alignment may necessitate different behaviors and metrics within each stakeholder organization, as well as different skills to interact with the market.
Look for ways to enhance innovation and reduce costs in research and development (R&D). Essential to future competitiveness is a company’s ability to get products to market at a fraction of the cost and time that was required in the past. One way to accomplish this is to expand the company’s R&D borders beyond the U.S. and take advantage of manufacturing capabilities, clinical trial sites, and patient populations in other parts of the world.
Think about the company’s basis of competition and put in place a broad, real-world evidence program to help determine, in an intellectually honest way, the clinical and economic value of current products and those in the pipeline with a focus on increasing safety, efficacy, and effectiveness.
The benefits of life sciences transformation are both societal and economic. Reform itself is motivated by the idea that, as a population, we are trying to improve the access to, and the cost and quality of, health care for a larger and larger percentage of the population. Life sciences companies that transform their operations to help achieve this societal benefit will likely be better positioned for subsequent economic success.
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by Terry Hisey, Vice Chairman and U.S. Life Sciences leader
Terry Hisey is the vice chairman and U.S. Life Sciences leader for Deloitte LLP. Terry leads efforts for the Life Sciences sector in the fields of tax, audit, consulting and financial advisory services to assist clients in achieving sustainable competitive advantage through strategic change.