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Integrated Healthcare Solutions

The business future ?

Ian Rhodes

PA Consulting Group

October 2009

© PA Knowledge Limited 2009. PPT presentation TOOLS V1-10.ppt

It is a good time to reflect on the future of healthcare…

Summary of President Obama’s speech to Congress on September 9th

Word cloud generated by www.wordle.net


Are we witnessing a revolution in healthcare? - DRIVERS

• There is much talk of the emerging healthcare environment:

– Driven by political will to improve quality and availability

– Driven by economic pressures on healthcare funding

– Pursued by increasing levels of patients education and expectation

– Enabled by new technologies supplying individual patient information

– Enabled by new, evolving commercial models

– Pursued by new entrants into the healthcare area

“In 100 years, people will look back at this period as the industrial revolution of health”

Prof Ed Byrne, Formerly Vice Provost (Health) UCL


Are we witnessing a revolution in healthcare? - BARRIERS

“In 100 years, people will look back at this period as the industrial revolution of health”

Prof Ed Byrne, Formerly Vice Provost (Health) UCL

• Our clients are coming to a consensus on many of these issues, but increasingly asking us when?

– When the economic and political hurdles are addressed:

• Regulations: clinical, data ownership & handling, who can talk to who, etc

• Payment systems

• Industry structure

• Not purely a technology, commercial or cost issue, and not predictable

© PA Knowledge Limited 2009. AFL-08-7958-D_A: The Future of Heathcare

Our industry is facing significant internal challenges

• Patent expirations exceeding new drug launches

– In 2011 drugs worth ~$18bn pa face patent expiration

• Dwindling development pipelines and fewer drugs reaching the market

– Reduced R&D productivity

– Increased cost of development

– Increasingly stringent regulatory hurdles

– Interventions are increasingly complex and risky

• Increasing reliance on reformulation & reformatting to sustain sales

Number of NME Approvals 1995-2009

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Source: Parexel Statistical Sourcebook 2008/9 FDA Website

© PA Knowledge Limited 2009. AFL-08-7958-D_A: The Future of Heathcare

Our industry is also facing significant external challenges

• Aging populations

• Rising prevalence of long term conditions

• New and emerging diseases

• Rising expectations

• More mobile populations

• The art of the possible raises the ethical questions of ‘can’ vs ‘should’

• The increasing role of Health Technology Assessment agencies (HTAs) and outcomes-based payment systems

• An increasing emphasis on wellness, prevention and primary care to save money

– This will require large scale human studies, and it isn’t clear who will lead this process

$356$1,100

$2,814

$4,789

$7,421

$0

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1970 1980 1990 2000 2010

US Healthcare expenditure

$/capita


The industry is becoming more complex as new therapies emerge, choices proliferate and costs of competing treatments diverge

• New therapies are emerging to satisfy increasing expectationsas the population ages and has better access to information, e.g.:

– Ageing (arthritis, cancer, dementia)

– Lifestyle (obesity, diabetes, respiratory, congestive heart failure)

– Lifestyle choices (cognition, cosmetic applications, sexual dysfunction, male pattern baldness)

• Emerging technologies enabling diagnosis and monitoring making it possible to bias reimbursement decisions

• Divergent cost choices - Over 15 disease modifying drugs available to treat Rheumatoid Arthritis (£25 to >£10,000 pa)

• The internet as a source of information giving patients easy access to good (and incorrect) information about disease and treatment options

Individual diagnosis and data analysis is helping select the optimum treatment from the plethora of options available and then monitor compliance


Harvard’s Clayton Christensen has demonstrated how new technologies drive centralisation and then decentralisation in a number of industries

• Historically, healthcare provision was disseminated

– The doctor came to the patient

• New technologies drive centralisation based on the ‘one-stop shop’, until technology becomes cheaper

– Centralisation leads to inefficiencies due to multiple clincial pathways

• Healthcare has yet to fully decentralise

– Technologies are here

– New business models are emerging

• Drive to keep patients at home, or treatment in local, specialist centres

– The doctor will ‘come’ to the patient

3. New Value Network

Distribution, suppliers

2. Business ModelInnovation

1. Simplifying Technology

Imaging

MRI, PET, CT

Surgical suites

Multi-channel

Clinical chemistry

ExistingInfrastructure

$8-9 overhead/$1 direct spend

Source: Clayton Christensen, Harvard University. The Innovator’s Prescription


The strategic use of information will underpin reforms that allow healthcare systems capable of delivering better care at reduced costs

.....by changing the relationship between five key components: Governance; Payer; Provider; Pharmaceuticals; Patients

• Low cost technology and the availability of information are enabling the collection of data to help improve disease diagnosis and treatment

• HTAs are looking at the cost effectiveness of treatments, and we are seeing the emergence of decentralised monitoring

• New business models and new payment systemsare creating openings in supply chains

• This represents a risk and also an opportunity for pharmaceutical companies to avoid becoming marginalised as “white powder” suppliers to new entrants


New technologies enable the collection of data to help improve disease management

• Data capture, transmission, analysis, & storage technologies arebecoming ubiquitous and cheap and allow new ways of monitoring disease and efficiency

– Improvements in care, productivity better targeting of therapies

– A huge increase in data generation, collections analysis and storage

• A move to payment for results / outcomes requires being able to monitor something - requiring data management

• New entrants are providing the tools that will be used to manage this data and pay for the information

– Where is the value………in the data?

– But it isn’t clear where the data will be held or exploited

– New sorts of data are being collected and integrated, e.g.: compliance

Proteus ingestible event markers

MedApps D-PAL


HTA’s are focussing on cost-effectiveness but at what level?

• This is contoversial because it assesses whether the drug will work at the population level rather than whether it will work at the individual level

• "The vast majority of drugs - more than 90 per cent - only work in 30 or 50 per cent of the people”. "I wouldn't say that most drugs don't work. I would say that most drugs work in 30 to 50 per cent of people. Drugs out there on the market work, but they don't work in everybody.“Allen Roses, worldwide vice-president of genetics at GlaxoSmithKline

• Increasingly expect the HTAs to push payment for results to the individual patient level, eg:

– Velcade in the UK

– Risperdal Consta in France

– Actonel trial in Illinois and Iowa


New payment systems are creating openings for new business models

• As cost effectiveness assessments move to the individual level……….it is likely to be highly specific to geography, due to differences in epidemiology, aetiology, treatment options and payment systems

• Similar arguments for other types of healthcare

– Long-life hip implants

US$ Thousands

Redrawn from Davis et al

Nature Reviews Drug Discovery 8, 279-286 (April 2009)


The integration of technology could drive revenues away from traditional suppliers (1)

Example: Potential scenarios for asthma treatment (ongoing client discussions)

• Current asthma treatments are prescribed according to initial diagnosis

– Potential for overdosing (↑ $)

– Poor compliance (↓ disease management)

• Possible near future scenario:

– Regular diagnostic (CO/NO IR spectroscopy) to identify level of underlying inflammation and to determine need for steroid.

– Increases value of diagnostic, reduces use of branded products

• Possible longer term scenario:

– Dose is titrated against marker on a dose-by-dose basis, following adaptive study

– With increased compliance, option for generic and diagnostic to outperform branded product

– Further increases value of diagnostic

– Significant opportunity for generics company to share cost benefit with payer


The integration of technology could drive revenues away from traditional suppliers (2)

• Of significant interst to generics suppliers in emerging markets

• Technology to do this already exists, but

– The reimbursement mechanism not clear?

– Regulatory/clinical hurdles?

Diseasediagnosis

Treatmentdecisions

Sporadicmonitoring $

Dx

$

Rx Gx

Gx

Rx

Diseasediagnosis

Daily/Weeklymonitoring

Reactivetreatmentdecisions[+/- steroid]

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Rx captures most value

Gx + Dx > Rx, if issue iscompliance

ComplianceMonitoring


New value networks are emerging

• There are new companies offering savings to payers, e.g.:…….telecare, telemedicine, telehealth

• We are witnessing significant growth in the number of new entrants seeking to enter the healthcare sector from a variety of other disciplines (IT, imaging, defence, motor sport…)

• Focus on data collection, remote processing, analysis and mining, and viewing incumbents as partners as part of a broader value proposition – patient centric product service offerings

ConnectivityLocal data Interface Platform Assistance

Devices Infrastructure Service

Delivery

Figurative only. Many participants active in multiple sectors


The new entrants are generally big existing players in other sectors


The value of information about the patient; the disease state; the efficacy of therapies could squeeze profitability of traditional incumbents

• The future profitability of companies operating in the healthcare sector will be contingent upon capturing and using the data intelligently to avoid commoditisation

• Healthcare supply chains will change as payers seek to reduce costs and new entrants seek to capture value


The future’s bright the future’s ………

It is not clear which companies will win and how the industry will look in 20 years time

……But it is clear that a company simply selling chemicals, which “might” make you better, will be unlikely to dominate healthcare in the future.


Closing Thoughts: A Revolution in Healthcare?

• Based on requests from clients, we are seeing the beginning of a revolution based on

– Low cost technology, diving new treatment options

– The emergence of new data, payment systems and business models

– New value networks and starting to decentralise healthcare

• These will continue to develop, with an accelerating influx of new technology from other sectors

• The real revolution is around how do we pay for this?

– Private vs Public

– Inputs vs Outcomes

– Centralised vs Decentralised

– Treatment vs Wellness

– Regulation vs Reform


Evolution is slow, revolution is fast ! !

20 years ago this month: The Berlin Wall

9th of November, 198930th October, 1989

• These are political not financial decisions

• A week is a long time in politics

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