The birth of “Wellcare”: a long term digital strategy for Pharma and Insurance organizations
The digital revolution is evolving markets landscape, creating needs of services that go beyond brands, sectors and production practices. Markets will incrementally interconnect, generating new customer centric paradigms.
Pharma and Insurance are two sectors that can benefit the most from this digitization wave, but they need to rethink their vision around “patient’s view” and to refocus around wellcare, a more comprehensive concept than health, embracing missions that prevent episodes of care.
New tools, cheaper test costs (from blood tests to scans-apps), investment in educations and evidences of drugs effectiveness (on larger than ever samples) will facilitate the birth of a brand new ecosystem: the Wellcare.
Health Insurance and Pharma digital challenges
For decades, Insurance and Pharma organizations have structured their business model around being the “last resort” when something bad happens, keeping though a very limited exposure to their customer/patients.
While this has led to the creation of very powerful and large industries, lately they are loosing ground against new “high-tech” players that can easily break into their industries leveraging large availability of data, new AI algorithm to interconnect them, and last but not least lower entry costs to create “digital” ability to intercepting and preventing diseases.
With the spread of social media and “fake news”, this disconnect with their “final customers” has also started to challenge their brands: the first speculating on fake diseases , the second in timely collecting, but not paying when needed .
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When looking specifically at Healthcare, there are also global trends that financially impair their traditional business models. Strong R&D focus on early detection ( not prevention) of diseases and the aging of western population has generated an increase of healthcare costs ( in US 60% of the adult population has at least 1 chronic health condition). In addition, personalized medicine is strongly establishing itself as way forward to cure diseases, posing fundamental questions on the “pricing model”, and it will trigger an interesting confrontation between Pharma and Insurances: how much should cost one shot that treats a patient for a disease that otherwise would require lifetime drugs?
A closer look to Pharma Industry
Pharma R&D focus on treatments implies that progress in diagnosis has been mainly measured against anticipating discovery of diseases, giving the impression of targeting the increase of duration of the treatment more than extending life expectancy.
The concept of “treatment” has always driven the healthcare paradigm, routing research to create “potions” to recover with very limited attention on factors that could prevent diseases.
Genetics, diet, microbiome, immune balance, lifestyle (including financials stability) and emotional statuse s are now taking the stage, generating awareness in consumers before they become “patients” on how their lifestyle can help them living longer, healthier and wealthier lives.
Thinking about personalized medicine, who will master data will rule the game and the competition is going to go beyond the pharma lines: Amazon, Google, Facebook and other strong innovations players are going to enter the market as very strong competitors. In addition, high-tech start-ups will be able to compete with large Pharma Tycoons with consequences.
Pharma companies cannot really leverage their patient’s relationship to protect their market as their culture is not “patient-centric”. Until the contact will be limited within an episode of care, a patient will never be a customer in traditional sense as in a way “obliged” to consume these products and although seeking an outstanding “customer experience”, she will never wish to repeat it.
What strategies can be deployed?
Aware of the challenge, most of Pharma companies have already refocused in the last years on their core business, concentrating large shares of their research on chronic diseases, while shopping for promising high-tech startups: the sector reached in 2018 all-time record with 56 digital health mergers and acquisitions ). This specialization strategy can surely help on the short medium term to build higher barriers, but it could result quite ineffective on the long run against large players who can break in the pharma value-chain (ex. data collection, distribution, manufacturing)
A medium long strategy would be to establish a more conventional “customer relationship” by extending their services outside the episode of care. Wearable digital devices can offer a great opportunity to take care for patients affected by chronic diseases helping managing their medications or even their diets, this to improve their quality of life and their health. This is already happening and several apps have been lunched on the market to help around digestive diseases, anxiety disorders, diabetes and many more.
A long term strategy would be to dis-intermediate from their own products, and target prevention services in the core of their business. The role of drug informants will transition to process educators, using smart assistants and AI-enabled bots, personalizing the interaction to the current and future need of the client, for instance providing advice around around mindset, movement, nutrition, recovery.
A closer look to Insurance Industry
Insurance companies play mainly as “risks aggregators”, leveraging their dominant position by increasing yearly fees to keep a positive cash-flow and to secure margins.
Insurance traditional business model requires very low investments in research and very limited interaction with customers. This has created the impression of large “Post offices” keeping a positive cash flow by making lots of math around historically advantageous statistics, collecting money in right pocket and giving back from left one, only if they cannot avoid it.
Specifically in the healthcare, in last years also the nature of the risk has changed as scan campaigns and early diseases detection are introducing in the actuarial models an increasing number of long-tail risks, producing pressure on premiums.
To make the situation more challenging, internet and social media have increased drastically the offer, impairing the traditional business model and facilitating the birth of new actors in each step of the value-chain: carriers, aggregators, insurtechs have gained large shares of the market, disermediating customers and generating impact on cash flows of incumbent insurance companies.
What strategies can be deployed?
A short term strategy could be using dominant positions for asking more strict regulation; increasing compliance could effectively put off market some of the new “internet” competitors, but this would not last long and would not prevent large high-tech organizations to get into. One other short term option could be to fix the “risk model” by using the large amount of data to only retain individuals with a remunerative risk profile. Also this is not sustainable on the long term as would dry out very stable revenue streams.
A medium term strategy could be in expanding over new markets: it has worked pretty well in Central-Est Europe in the last 20 years for the European Insurances, it could work in other countries ramping up on western social standards. But also this strategy will have to end unless will not be sustained by a more structural industrial design.
A long term strategy could be to reduce claims by using the new large availability of data to lower risk, preventing accidents and improving health and overall quality of life. This will move Insurance from product to service industry. This transformation will change how insurance work (processes), it will leverage and value traditional and new skill sets (traditional talents will bring knowledge, new talents will bring new ways of using it) mixed with a visionary ability to manage innovation. This strategy goes beyond health insurance and can be applied to all insurance sectors. Agents will transition to educators, front-ending customer relationship: they will be empowered by very comprehensive risk profiling AI tools and they will be able to customize polices by bundling together risk and coverage under the objective of leveraging “financial positions” to address current and future health needs and overall wealth objectives.
The birth of Wellcare ecosystem.
On the long term, Pharma and Insurance companies need to abandon their volume business model and start to work on new concepts, new devices, new way of ensuring better quality of life to customer before during and after they become patients. Their goals will intersect and by partnering they can achieve the creation of a brand new ecosystem in an effective and efficient way.
To evolve from the “ordinary” research “of a treatment”, large Pharma firms will not only need to shop for high-tech startups, but they will need new ways to extend their support services before and after the episode of care. Insurance will need to get closer to their customers, guiding them toward an healthier lifestyle which will results in lower claims.
“Zero failure” is the target for both insurance and pharma companies, but getting to that will not be an easy journey and will put in evidence all weakness of a slow moving sectors that has benefit for years of large subsidiary, strong governmental sponsorship and lose tights with patients-customers.
The new wellcare ecosystem will base its business model on prevention: the early diagnosis will not be used to sell more medicines, but to better understand how to remove the causes that are generating diseases. Insurance organizations will sponsor the approach as their objective is to have their customers healthy with reduced duration of episodes of care (less medical claims).
Pharma and Insurance will invest in new prevention analyzing habits and deducting behaviors that can induce to diseases. They will profit from a balanced life, a sort of wellness royalty model.
At the core of this transformation, the new born Wellcare ecosystem will need more, accurate data and an enormous ability to process them.
Three strong digital enablers will drive this disruptive transformation:
- Blockchain for medical management  will allow a safe sharing of data across the new ecosystem, respecting privacy and creating incentive mechanism for adoption of all actors of the new ecosystem, including patients.
- IoT sensors and apps will multiply exponentially offering a completely revolutionize diagnosis and diseases treatment. From ingestible sensorsto connected contact lensesIoT sensors, will give enormous insights and help patients to be in better control of their lives.
- Artificial intelligence will dramatically evolve signal management, allowing Insurance and Pharma to efficiently engage and effectively manage wellness of their customers/patients. One good example is the progress made in Mental Health care with artificial intelligence.
In the near future, we might experience a new Insurance-Pharma positive sum strategy that will target the creation of a truly patient-centric paradigm.
Insurance and Pharma organization will direct their research and innovation effort toward anticipating and inhibiting causes of diseases, developing a new relationships based on “preventive medicine”, providing services before, during and after the episode of care.
They will go beyond their industry silos and will jointly build a new Wellcare ecosystem, granting healthier, happier and longer lives to customer/patients.
Who will pioneer this new venture?
Disclaimer: Views or opinions represented in this article are personal and belong solely to the article writer and do not represent those of people, institutions or organizations that the writer may or may not be associated with in professional or personal capacity, unless explicitly stated.
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Originally published at https://www.linkedin.com.