The accelerating move toward value-based care is resulting in new health care delivery structures, changing payment models, and new roles for everyone from physicians and care providers to payers, employers, and consumers themselves. At the national and local levels, there is debate on “who should be at the table” to drive this progress. Where do life sciences companies fit in? Do they have a seat at the value-based care table?
The short answer? Yes.
The move from volume-based care delivery to an ecosystem that values better health outcomes and effective cost-containment is usually discussed from a provider or plan perspective. Less attention has been paid to the role life sciences organizations are and should be playing in the evolving health care ecosystem.
In a recent meeting with biopharma and medtech clients, our conversation turned to the dramatic acceleration of value-based care. Until quite recently, many executives in the provider sector have been skeptical about the move to value, or have taken at best a “toe in the water” approach. Not surprisingly, many life sciences executives have followed suit. Many of us remember the undelivered promises of managed care from the 1980s and 1990s, and of course, all health care players still have much to earn through the existing fee-for-service model.
But now, government and commercial health plans have set clear timelines for incorporating value-based care incentives into the majority of their payments.
In local markets, providers and plans have been coming to the table to create new partnerships and alliances and to invest in capabilities to effectively manage care as well as financial risk. Over the past year in particular, we have seen a growing set of health care players strengthen their core capabilities to rethink and integrate clinical workflows across organizations and sites of care, collect and analyze data for specific patient populations, and pilot new payment models. At the same time, new entities are emerging with a singular focus on improving transparency for cost and quality to further drive progress through better health care decision- making.
While change has already begun, providers and health plans still have a long way to go to achieve the goals of the Triple Aim and to deliver more value in a way that ensures their own business models are sustainable. The care continuum – physician practices, hospitals, post-acute skilled nursing facilities, home health providers, and so on – looks different by locality, as do patient characteristics. Although the market is experimenting with strategies to share risk through new payment models, some of which have shown early results, it is unclear if these will be scalable across diverse delivery systems and patient populations. As a result, there is no consensus on how best to design a system or a simple pathway to deliver lower costs and improved quality.
Despite the lack of consensus on how to make value-based care work, life sciences companies are already being impacted by this volume-to-value shift. In our meeting, the pharma and medtech executives were swapping stories on a range of topics regarding value-based care. They focused on the increasingly high hurdles to demonstrate value, a pharmacy benefit manager’s plans to set pricing for cancer drugs based on efficacy in different tumor types, and the intensifying public debate over affordability of even the most clinically impressive medicines.
One executive was calling out the growing trend for hospitals to significantly restrict the numbers of device suppliers with which they contract. Two things struck him about this trend. First, was the fact that even academic medical centers, which have historically welcomed a diversity of choices given their research and teaching missions, are starting to discuss and explore this streamlining. Second, he noted that this is not simply a continuation of previous cost-focused supply chain initiatives to improve purchasing power and inventory management, but rather intended to drive better outcomes by eliminating unnecessary variability in standards of care.
The headlines tell stories of biopharma and medtech companies redesigning their customer teams to better align with consolidating provider organizations and adopting new contracting models (e.g., pay-for-performance) for drugs and implantable devices. However, the strategic implications of a shift to value for biopharma and medtech companies go far beyond these moves. Succeeding in a value-based world means a new value proposition for life sciences companies. They will no longer be able to compete by focusing on clinical innovation alone, but will need to deliver innovation, through their portfolios of products and services, that drives economic value in addition to improved clinical outcomes.
Some leaders are already rethinking their portfolio of offerings to create new standalone services, while others are making more modest investments in wrap-around solutions such as patient-oriented apps to support treatment compliance and provide coaching for behavioral change. New strategic collaborations are beginning to form between life sciences companies, providers, plans, and entrants such as technology players to identify, deliver, and drive value across the health care system.
In addition, companies will need to build new capabilities to deliver on the value of their portfolios. These new capabilities span the entire life sciences enterprise from R&D to commercial operations and throughout the supply chain. Some examples include rapid incorporation of real-world evidence into decision-making, faster investment cycles to drive new product development on this new view of unmet needs, robust actuarial capabilities to enable pricing models commensurate with reductions in total health care costs for specific patient populations, and segmented commercial models to engage with new decision makers.
And finally, as life sciences companies consider their strategies, they will need to make choices on how to build advantage through scale and/or therapeutic focus. These choices are already playing out in the market and continue to fuel M&A activity and asset swaps.
At my client meeting we discussed what these changes mean for life sciences leaders who need to operate in this heterogeneous and fast-changing set of local markets while still managing the scale of a national and global business. However, I believe this also creates an opportunity for life sciences companies who understand the emerging archetypes within the market and can engage their customers in assessing where both clinical and economic value is leaking from the system and how to address it – making them highly valuable innovation partners “at the table” with providers and health plans. This vantage point, combined with impressive resources – scientific expertise, deep knowledge of disease management and treatments, and analytic capabilities that extend beyond data integration to drive true insight – will set the life sciences leaders apart.
These leading companies will do more than just have a seat at the table. They will set the pace for value transformation and differentiate themselves from competitors by becoming indispensable partners to fuel the next-generation of innovation as the health care ecosystem continues to evolve.