The Glimpse into the Commercial Crystal Ball: A new business model for life sciences

Decision-making in healthcare across Europe and North America has changed dramatically since the financial crisis in 2008. We look at how these changes have impacted the historical commercial model in life sciences and what the future might hold for doing business with healthcare.

Increasing government debt, an ageing population with growing healthcare needs, larger healthcare datasets with better analytical capabilities and sluggish economic growth have forced the policymakers, buyers and providers of healthcare to rethink how to maintain a sustainable model of healthcare – now and for future generations.

This evolution has led to change in the procurement model of healthcare – from clinical decision-making to a more complex, multi-stakeholder buying and adoption model - a system that aims to ensure consumers and tax payers money is spent as effectively and efficiently as possible.

So what does this dramatic philosophical and practical change in healthcare decision-making mean for the future of doing business in healthcare? Is the current commercial model of the pharmaceutical, biotech and medical devices industry still appropriate or will the industry need to rediscover how it defines, engages and sells to their customers?

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An Evolving Business Model

Historical Commercial Model

For many years, life sciences firms have operated in a unique commercial model that focused heavily on engaging clinicians to influence the adoption of new medicines.

Clinicians had broad freedom to choose what they thought was the most appropriate treatment option, based on their expertise and experience with little pressure or curtailment in decision-making.

Insurers and reimbursement authorities (healthcare buyers) largely relied on technical economic and clinical reviews to aid their procurement decisions. Price and budgetary concerns did not feature as a primary decision driver, due to loose government funding and relatively muted cost growth.

Patients, as the consumers, commonly followed the direction and prescription of the doctor without much questioning or challenge. The physician was responsible for assessing and evaluating the outcomes of the patients in their care.

The commercial focus was rightly placed on the individual prescribing clinician – the decision point that impacted commercial profitability for life sciences firms rested in their hands.

Future Commercial Model

The environment is now evolving.

Clinicians now are increasingly under direct or indirect pressure to act and prescribe treatments according to algorithms, pathways or guidelines. Large healthcare datasets are used to develop treatment and prescribing algorithms that, according to statistical analysis and predictive analytics, represent the best possible outcome for the money. In many cases, the role of clinicians is evolving from “decision-making” to “implementation of decisions already made”.

Insurers and health authorities are increasingly in the driving seat – using clinical experts, healthcare data, economics and technology to define an ever-growing, complex network of algorithms that are expected to produce the best outcome per dollar, euro or pound sterling spent. Buyers are also developing their negotiation capability and thus have an greater impact the profitability of their suppliers – they are controlling both pricing AND volume of the usage of a product.

Patients not only have access to more information– they also contribute more data back into the system than ever before. The data resulting from their treatment pathways and associated outcomes are becoming an increasingly important component to healthcare buyers and therefore to the commercial model for suppliers.

This is not only a shift in how healthcare stakeholders procure products and services. It is also a significant change in who the commercially relevant decision-makers are.

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So what does this mean for life sciences firms?

This data-driven, economic shift in decision-making can have quite profound implications for the commercial strategies, tools, capabilities, roles and structures of life sciences firms in the future.

Some of the main implications we anticipate for life sciences firms in the future may include:

• The definition of “customer” or “account” will shift from individual prescribing physicians to the buyers of healthcare. Firms will have fewer but significantly larger customers

• The commercial focus will move from driving adoption and uptake with prescribers to negotiating and partnering with the buyers of healthcare

• Relationships between life sciences firms and healthcare buyers will change dramatically from adversarial competitiveness to partnership-based collaboration

• The definitions and responsibilities of commercial functions, such as marketing, market access, health economics and real world evidence, will change significantly. The dawn of new buyer-oriented marketing strategies and strategic account management capabilities will become core to building collaborative relationships with healthcare buyers. Organisations will realign their structures, roles and capabilities to deliver on these commercial needs

• Medical teams and customer-facing medical science liaisons will have a critical role as the technical liaisons in helping physicians and other providers adopt new technologies and pathways through change management programmes, designed and executed in partnership with healthcare buyers

• Patient-centric initiatives will become focused on developing and implementing health outcomes assessment tools together with healthcare buyers

The potential implications of this shifting commercial model extend well beyond these aspects. Given the variation of healthcare system structures, disease areas, unmet needs, procurement models and geopolitical environments, this evolution of course may not present itself in exactly this form everywhere. None the less, the evolution to data-driven, economics-based decision-making is a macro-environmental trend that will manifest itself in some way in developed healthcare systems in the years to come.

The question then remains: does the life sciences industry need to fundamentally change as well? What do you think the future look like?