medco innovation 2011.11
DESCRIPTION
I led a team, in my Management of Innovation & Technology class, to describe one of the more public innovations at Medco.TRANSCRIPT
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Innovation Capabilities Report
Adrian Carrión Gena Fazzari Chappella Mayweather
Personalized Medicine
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Today’s Agenda Ø What is Personalized Medicine?
Ø Who is Medco?
Ø Sources of Innovation
Ø Types of Innovation
Ø Patterns of Innovation
Ø Industry Standards
Ø SWOT/ Five Forces
Ø Medco’s Strategy
Ø Video on the Medco/Mayo Clinic Warfarin Study (Youtube)
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What is Personalized Medicine or Pharmacogenomics?
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www.medco.com
Ryan Phelan, CEO DNA Direct “Using genetic insights into treatment decisions, into early prevention, and into early diagnostics.”
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Who is Medco (MHS)
Pharmaceuticals
Retail-Rx
Mail-Order Rx
Rx INS
Health INS
Medco
Patient pays premiums
Patient pays Co-Pays
Patient pays premiums
Patient pays Co-Pays
Products & Services > Benefit design and management
> Pharmacy network management
> The Medco Pharmacy
> Specialty pharmacy solutions
> Diabetes management, home healthcare products and Medicare specialists
> Clinical management
> Precision Health SolutionsTM
– Genetic Testing
> Client services
> Retiree solutions
> RationalMed®
> Optimal Health®
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Sources of Innovation
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Firms
Universi+es
Gov’t Funded
Private Non-‐Profits
Individuals
n Sources of innovation emerge from a complex network of innovators (similar to the figure on the left) – And personalized medicine is no different
n Personalized medicine is a result of technology spillover in that, it is an off-shoot of pharmacogenomics
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Sources of Innovation Continued
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Research • Private firms – acquisi+on of DNA Direct to leverage R&D
• Applied research • Demand-‐pull approach
Linkages With Customers • Customers include both doctors and pa+ents
• Industry evolving toward customer-‐rela+onship management versus scale
Linkage With Non-‐Profit Organiza:ons • Hospitals and academic ins+tu+ons par+cipate in clinical trials
• Obtain regulatory approval from FDA
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Types of Innovation Product vs. Process
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• It is improving the efficiency and effec+veness • Pa+ents will no longer have to endure trial and error approaches to finding the best treatment
• Pharmaceu+cal firms can produce even beMer treatments – increasing the number of marketable compounds
• No longer “one-‐size-‐fits-‐all approach” – will be targeted with pre-‐selected focus groups versus large random samples
• More efficient approval process
Product vs. Process Innovation
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Types of Innovation Radical vs. Incremental
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• Personalized medicine encompasses both radical and incremental innova+on
• The product innova+on is incremental with poten+al for radical – compounds will be varia+ons of exis+ng compounds with infinite possibili+es
• The process innova+on is radical – large degree of “newness” and “differentness” – unlike prior experiences for most observers – how many people in the room have experienced personalized medicine?
Radical vs. Incremental Innova+on
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Types of Innovation Competence-Enhancing vs. Competence-Destroying
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• Building on exis+ng knowledge base • Pharmaceu+cal firms can produce beMer treatments – increasing the number of marketable compounds
• Compounds that do not sa+sfy a large popula+on will no longer have to be shelved – rather they can be matched to gene+cally compa+ble pa+ents
Competence-‐Enhancing vs. Competence Destroying Innova+on
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Types of Innovation Architectural vs. Component
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• Personalized medicine changes the overall design of how treatment is determined
• The impact is far-‐reaching – it will become more about customer-‐rela+onship management instead of scale – the days of dropping off samples to thousands of doctor’s offices are gone
• It is believed that the pharmaceu+cal industry will evolve into a niche market – a radical change from the
Architectural vs. Component Innova+on
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Patterns of Innovation Technology S-Curve
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Per
form
ance
Effort
Conventional Treatment
Limit of Technology
Personalized Medicine
• Conventional methods of treatment are reaching a plateau
• Personalized medicine is: § a discontinuous technology § in early stages of discovery § poised to transform healthcare industry within decades
U.S. Personalized Medicine Market is Roughly $232 billion!
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Patterns of Innovation
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Physicians
• Limited knowledge of technology
• Compensated for
procedures NOT treatment process
• Typically slow to
support new methods of care
Slow Technology Diffusion of Personalized Medicine
Pharmaceutical Companies
• Priority is to market a
drug to as broad a population as possible
• Personalized medicine undermines business strategy
FDA/Government
• Publicly supports technology
• Slow to modify polices to encourage use of technology
Key Stakeholders in Healthcare Industry are Unfamiliar with Technology
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Industry Standards
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Technology Cycle
Era of Ferment
“Dominant Design” Emerges
Technological Discontinuity
Incremental Innovation
• Personalized medicine in Era of Ferment
• Companies still experimenting with technology
• Learning curve still significant
• Dominant Design has not been identified
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“…this is when the value of a good to a user increases with the number of other users of the
same or similar good.”
Industry Standards
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Network Externalities
Personalized Medicine
Lab/Genetic Testing
“Complementary Goods”
• Positive consumption externalities will materialize once technology reaches a critical mass
• Emergence of Dominant Design will increase installed-base
“Additional goods or services that enable or enhance the value of
another good.”
Complementary Goods
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Industry Standards
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Government Regulation
“To improve access to and appropriate utilization of valid, reliable and accurate molecular genetic tests by all populations thus helping to secure the promise of personalized medicine for all Americans.”
Bill calls for:
• Genomics and Personalized Medicine Interagency Working Group
• Expansion and Acceleration of Genetic and Genomics Research
• Genetics Workforce and Training
Genomics and Personalized Medicine Act of 2006
Bill proposed to Congress; however, is not yet a law.
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Industry Standards
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Expected Dimensions of Value
Improvement of Drug Discovery & Approval
Decrease in Overall Healthcare Cost
More Powerful, Safer Drugs & Vaccines
VALU
E
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• Intense compe++on could put market posi+on under duress
• Changes in government regula+ons could lead to a decrease in the demand for services
• Changes in industry pricing benchmark could impact the financial performance
• Reliance on low-‐profit clients could affect company’s profitability
• Leading market posi+on boos+ng brand image and bargaining power
• Strong growth in revenue and profits building investor confidence
• Mail service contract increasing the customer base
• Acquisi+on of DNA Direct and online OTC and healthcare products sites to augment customer base
• Collabora+ve agreements would provide revenue growth opportuni+es
• Posi+ve outlook for the U.S. Generics market
• Aging U.S. popula+on would lead to an increased demand for health care services
SWOT Analysis
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Data Monitor
Strengths Weaknesses
Threats Opportuni+es
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Porter’s Five Forces Model
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Pharmacogenomics
Threat of New Entrants
Supplier Power
Buyer Power
Threat of Substitutes
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Strategy
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It’s leveraging the power of advanced pharmacy to redefine the standards of clinical excellence as we drive down overall healthcare costs
n Growth Strategies - Acquisitions > Horizontal Integration
– Accredo’s Specialty Pharmacy – BioSources’ Medical Equipment Testing
> Vertical Integration – DNA Directs’ Genomic Test Analyses
n Information Technology Management Strategies > Agile Infrastructure (modular) & Patent applications
n Collaboration Strategies > Outsourcing
– Contract Manufacturing (IT) > Equity Joint Venture
– Mayo Clinic and Medco Research Institute
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Warfarin (anticoagulant drug) Study Conducted by The Mayo Clinic & The Medco Research Institute
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What competitors are saying about Personalized Medicine...
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Medco’s First Mover-Early Entrant Strategy Decision Support Tools
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Precision Health Solutions: ‘The Trusted Advisor’
http://www.aishealth.com/Bnow/hbd060710.html
n Coverage management to help them determine reimbursement policies and appropriate coverage criteria, while ensuring that the tests are properly used.
n Policy and benefit consultation to advise plans on how to best structure their genetic test benefit and help plans choose available tests, including lab work.
n Web-based genetic testing related information and education modules for patients and providers.
n web-based tools that will connect patients and physicians to live counselors who can provide “reliable information around these kinds of tests by walking them through indications of a test and helping them to understand the results
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Recommendations
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n Take advantage of the opportunities as an early mover
n Be prepared to respond to changes in legislation
n Strike up more joint ventures or strategic alliances with lab infrastructure (Qwest Diagnostics, LabCorp, etc)
n Look into other vertical/horizontal integration opportunities involved with genetic testing
n Protect innovation through patents
n Get the word out about Medco’s role in positively affecting drug therapy directly to the consumer
n Conduct more studies through the Medco Research Institute (Warfarin)
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Questions?
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http://www.aishealth.com/Bnow/hbd060710.html