The CX Files—Life Sciences: Digital Health and Value-based Care
As the industry shifts toward value-based care, the role of outcomes research is now critical to whether a new generation of digital health therapies will commercially succeed or fail.
I’ve been working in life sciences for much of my consulting career, including significant stints with pharmaceutical and biotech firms. Despite being highly regulated, it’s a fascinating industry in the midst of a once-in-a-generation seismic shift. Everywhere you look, stakeholders are searching for ways to manage ballooning costs through a shift to value-based care, tamp down consumer frustration with an antiquated experience, and add patient centricity to a sclerotic “system” of bewildering complexity.
COVID-19 and the rise of digital health
In light of rapid enhancements to consumer electronic devices and the proliferation of smartphones, the concept of ‘digital health’ has long been intriguing. Equipped with powerful cameras, a multitude of sensors, fast processing power and access to the internet, smartphone solutions are currently being developed to diagnose many disease states, including skin cancer, HIV, malaria, and more.
Pre-COVID-19, there was a lot of talk about digital health in the industry, though, admittedly, few pharmaceutical companies had achieved significant successes in the space. The global pandemic has greatly accelerated innovation, however. Digital solutions that diagnose, manage, and monitor patients remotely are beginning to play an important role in healthcare delivery load balancing, medicine adherence, and the continuous push toward value-based outcomes. In fact, the pandemic has accelerated digital health’s adoption with such speed it’s difficult to see the industry turning back.
Recent momentum aside, digital health is still at an early stage of maturity across the pharmaceutical industry. One major reason is the long timeline required to develop and commercialize digital therapeutics. I worked on my first digital health project in 2013—a technology which was to be combined with an existing therapy. At this time, the solution had already been in development for several years, and it was ultimately approved by the FDA and launched four years later, in 2017.
While five-plus years doesn’t sound unreasonable when compared against drug patent lifespan of 20 years, in actuality this timeframe is halved to about 10 years by the time a drug is usually cleared by the FDA and brought to market. Using the example above as a baseline, if a digital health therapeutic takes at least five years to develop and commercialize, this leaves only a handful of years, at most, for a pharmaceutical company to reap any financial benefits.
Another digital health product I worked on with a large biotech firm took close to six years to develop and launch. As opposed to building it themselves, the organization ended up acquiring an existing technology—speeding things up considerably — but the solution still took many years to refine and commercialize. Ironically, the product launched this year — just in time for the therapy’s loss of exclusivity (LoE) date to arrive.
APMs and the industry shift to value-based care
Another big issue in digital health is reimbursement. Like it or not, many payers simply do not want to reimburse for digital therapeutics unless they are proven to result in value-based outcomes; in other words, lower costs, proven longitudinally. Proving value-based outcomes requires complex studies, which take time to execute, and a tight partnership with providers (and maybe payers) to understand both costs and outcomes. No mean feat.
Looking inside pharma, the shift to value-based care means drug prices and reimbursement will be increasingly tied to patient outcomes through the introduction of APMs, or alternate payment models. APMs attempt to bend the cost curve for all healthcare, including prescription drugs. In a value-based healthcare system, payers will increasingly tie formulary decisions and reimbursements to outcomes.
Based on what I’m seeing, all of these parties—payers, providers, and pharma—are not overly enthusiastic about the prospect of supporting the studies needed to prove value-based outcomes. Some payers and providers actually view them suspiciously as nothing more than a means for Big Pharma to extend LoE dates or find additional items for reimbursement. One CMO of a medical products company I’ve done work with claimed he approached half a dozen major health systems to collaborate on value-based studies. Every single one turned him down, citing resource constraints and lack of buy-in.
While they may be loath to admit it, some pharma marketers have also approached the shift to value-based care with trepidation. On the surface, value-based care aims to provide transparency into adherence and help both patients and healthcare professionals (HCPs) better manage care for a lower overall cost. It’s hard to argue against these lofty goals. That said, if a pharma brand manager is measured and incentivized based on the number of scripts written by HCPs, many brands thus have a disincentive to push a technology that ultimately seeks to drive down healthcare costs and, with it, potentially lower the amount of total prescriptions.
Citing a well-known example from the industry, a pioneering firm that created a novel smart pill technology, Proteus, recently filed for bankruptcy and was acquired by the Japanese pharmaceutical company Otsuka. Once heralded as the future of the industry, Proteus came crashing to Earth when it failed to secure its latest round of funding. Though the technology worked as advertised, there was apparently no viable commercial path for this approach. “Proteus’ Abilify MyCite was an add-on to Abilify, a drug that already worked, so the company faced a steeper climb,” explained Vasudev Bailey, a partner at ARTIS Ventures.
Further, the average monthly cost for generic Abilify—a central nervous system (CNS) drug used to treat several indications including schizophrenia and bipolar—ranges from $500 to $800 per month. The product Proteus developed with Otsuka, Abilify MyCite, costs approximately $1,600, reports Fierce Healthcare. Adding to the mix, Abilify’s final patents expire on December 12 of this year. Without value-based studies, doubling the price of an existing therapy set to go off patent was a hard pill to swallow — pun intended — for most payers.
So what’s next?
Already, manufacturers are being forced to provide longitudinal outcomes research and failure to do so is impacting sales. Anecdotally, several years ago one of my biotech clients saw up to 80% of claims for a cardiopulmonary therapy get rejected at the pharmacy level due to a step therapy edit necessitating a generic alternative. Why was this step edit in place? Because the organization rushed the therapy to market sans outcomes research.
Whether brand managers like it or not, the shift to value-based care and APMs is here to stay. In other words drugs will increasingly be evaluated according to safety, efficacy, and outcomes. Outcomes research thus becomes paramount in both payer relations and pharma’s ability to successfully commercialize new drugs and treatments, especially digital health therapies.
With the rapid pace of change in marketing technology and ever-shifting consumer expectations, it can be hard to keep up with the latest trends. The CX Files was created to report out what the leader of Slalom’s Global Experience Team, Rio Longacre, is seeing from the field.
Rio Longacre is an executive with two decades of leadership and experience in the digital space across strategy consulting, technology services, data, and media planning. He’s a frequent thought leader and subject matter expert in customer experience management, digital business transformation and marketing/advertising technology. Reach him at riol@slalom.com.
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