August 15, 2018

Digital Pharma - Defensive or Offensive Strategy

Martin Kelly

Digital health continues to attract significant new investment dollars and drive lots of M&A activity, however there is a lot of hype and confusion about how it will reshape healthcare delivery and impact the life-science industry.

A couple of weeks ago, one of our customers highlighted that although there are many interesting companies and solutions, there is lack of clarity on the strategic implications on how digital is impacting their (Pharma) industry.

For example, how is Pharma affected by the digital revolution? How will new entrants reshape the market? Is there a first move advantage? Is this a defensive or offensive strategy? Lots of questions – you get the idea and we thought it was about time we dug into this.

New kids on the block

Since Marc Andreessen announced in 2011 that ‘Software is eating the world’, there has been a frenzy of investment and deals focused on capturing the value generated by software and technology.Healthcare has, however, remained largely unchanged.Broad adoption of EHR records, new innovative solutions and rise in cheap computing power means the industry is poised for significant change – it just hasn’t happened yet.

Take Telemedicine / ‘Skype for Health’ as an example. Now, after years it is slowly moving from a niche offering to something that is being reimbursed by CMS but only in certain situations. In Healthcare it feels a bit like it’s 1995 again.

Compare this to other fast-paced and fast adopting industries and how new players like Amazon, Apple and Netflix are transforming how we shop and entertain ourselves.

These tech players have started to turn their attention to that 20% of GDP that Healthcare will soon account for. Business Insider reported this week that ‘health organizations are increasingly turning to tech companies to transform delivery of care and lower health expenditures’

Big Tech In Healthcare Comparison
Business Insider Intelligence

In addition to non traditional players, we are also seeing a new breed of healthtech entrepreneurs, new partnerships and a gradual shift of power from HCP to payer to patient. Below, we highlight some of these potentially disruptive forces.

Changing dynamics in healthcare
Disruptive forces in healthcare

For an industry that has been so profitable for so many years, it may be RIP Good Times.

Inflection point?

Hopefully you’ll agree that disruptive forces are at play and ask the question - how should a life-science company respond?Digital health isn’t new – it has been building for many years (see below) For companies like 23andMe, Proteus and WellDoc it has been a 12+ year journey. Health-systems and Pharma just weren’t ready when the first crop of these companies started hitting the market. Maybe this time we are at inflection point?

Key Moments in the Digital Health Timeline
Digital health moves past its inflection point

If there is indeed an inflection point, does it make sense to move early or wait, watch and learn before moving?

Our good friend Lisa Suennen recently covered this.

Lisa’s view is that there is a whole graveyard of companies who moved first and failed only for others to learn and capture the prize.

The risk, however, is that digital has a history of transforming other industries via winner-takes-all or winner-takes-most model.

If you wait too long, you might miss the boat.

Defensive vs. Offensive

Digital can of course drive change across the value chain impacting everything from research to development to commercialization. In each case, the dynamics are different.AI for drug discovery is very different to running siteless/ virtual trials or collecting RWE by means of sensors and patient-facing tech. In some cases it is about reducing cost, in others defending existing product lines. In terms of commercial opportunities - digital is largely supplementary (not a replacement), and in many cases, results in additional costs to protect existing revenues. Useful services may be discontinued when they don’t generate the expected ROI. That might be a tough message, however, it may be better to hold market share even if margins are being reduced.The key lies in linking digital opportunities to specific pain points and not getting too caught up in the hype cycle that applies to all tech innovations.

How digital health solutions can drive growth

Winner takes all

Does this winner take all model apply to life-sciences? Is there a risk of falling so far behind that it is not possible to catch-up down the road?

A recent McKinsey report highlights that 84 percent of global executives believe innovation is extremely important, yet only 6 percent are satisfied with their organization’s innovation performance

Innovation rarely comes from incumbents as innovation and collaboration are hard for large companies.

Even if you are not going to risk being an early mover – understanding how to adopt to this environment is important not only for growth but also for long term survival.

We believe that Pharmaceutical and Biotech companies are positioned to experiment with new business models and take a leading role in digital health networks and communities to learn and access cutting edge innovation.

There is an opportunity to get better at innovation and really understand the potential of digital health by collaborating in new ways.

We have started working on a short report to capture some of the key learnings. Some of the initial thoughts are outlined below.

If you are interested in contributing to our upcoming report on how digital is impacting the life sciences industry, please email me at