Pharma perceives 'digital' as a disruptive technology, but to survive, it is in   the industry's best interest to get on with "the non-traditional entrants", such as the telecoms companies. Why   didn't it see this technology coming, and why the reluctance in embracing   digitality?

Many of the trends transforming the pharma landscape are ICT-related, but the   industry is urged to be less paternalistic in dealing with data-empowered   patients and “non-traditional entrants” from the device and ICT industries.

The Ernst & Young report, “Progressions: Pharma 3.0”, gave an insight   into pharma’s perception towards the digitally-led “disruptive technologies”,   and  also revealed the industry’s hesitance in taking the appropriate actions to   deal with the issues quickly.

New medical technologies spearheaded by the likes of GE Healthcare and   Philips were seen to be the most disruptive, closely followed by e-health or   m-health [mobile health] modes of labour driven by Google and Facebook.   Non-pharmacy retailers such as Wal-Mart, information technology provided by the   likes of Cisco,  consumer electronics such as Nintendo and telecommunications   also contribute to a significant amount of disruption.

                                

Speakers at the Economist Pharma Summit 2010. The main question asked at the event: how does pharma deal with 'disruptive technologies', such as the mobile phone?           Reportage: The Economist Pharma Summit 2010

The responses were pooled from 33 business development and innovation leaders   at 24 companies, including 11 of the top 15 Fortune 500 biotechnology and   pharmaceutical  companies

The report was launched at The Economist Pharmacy  Summit 2010 in   February in London,   UK.

The same sentiments were also articulated by the pharmacy community at the   summit. The choice of words made in speeches, and during coffee breaks, made it   clear that digital is a “disruptive technology”, with which any partnership   effort might be a “creative challenge” – but it is in industry’s best interest   to get on  with “the non-traditional entrants” to be effectively competing in   the future of the healthcare system.

The pressure is on pharmaceutical companies to get a sense of working at real   time as it is entering what Buck-Luce terms “Pharmacy  3.0”. “2.0 is about   products,” she explained. “3.0 is about patients”.

The rise of the well-informed ‘superconsumer’ means that the payer/patient   demands “outcomes”, not “products”. A payer-centric healthcare service means   that the client who wants to pay for services will demand more evidence of the   results.

                                

"2.0 is about products," Carolyn-Buck Lee of Ernst & Young tells Clinica. "3.0 is about patients".           Photo: Salina Christmas

A change in the mode of labour

The concern is not without foundation. Pre-industrialised social structures   in Europe were turned on their heads over two centuries ago not so much because   of capital ownership, but because of the change in the form of labour caused by    industrialisation.

At the summit, Carolyn Buck-Luce, Global Pharmaceutical Sector Leader, Ernst   & Young, explained to us the culture clash between pharmacy and digital.

“The R&D of a drug pipeline could be a 15-year cycle,” she said. “It   involves a series of processes, such as discovery, proof of concept, clinical   trials in different phases, and marketing in the last phase.”

The prototyping process, she noted, is faster, and is geared towards   a shorter product cycle.

                                

The telecommunication innovations are considered very 'disruptive' by over 30% of the pharma representtaives surveyed by Ernst & Young         Click here to see the bigger chart         Source: Ernst & Young Progressions survey 2009, p 17

 

A top-down perspective on technology

The report recommended pharmacy companies consider ‘inter-industry   collaborations’ with sectors such as ICT, biotech, device and telecommunications   – a suggestion mirrored in the talks given by medical device and   telecommunications representatives at the summit.

Despite industry’s awareness of ‘trust  issues’ between the pharmacy and the   non-traditional entrants, discussions at the summit and in the report were   slanted towards the adaptation of “technology-driven changes” rather than   trust-building.

                

The survey is insightful, but provides a 'top-down' perspective of on the disruptive technology affecting the pharma industry       Reportage: The Economist Pharma Summit 2010

At a talk on “Emerging Markets”, Robert Ward, Director, Global Forecasting,   Economist Intelligence Unit, emphasised that “technology continues to be the   driver of globalisation” and that trend is shifting towards   “hyper-globalisation”. It was a top-down perspective but not entirely    inaccurate. It was apt for a conference that addresses mainly those at the top   of the pharma food chain.

The bottom-up perspective would reveal, however, that digital technology,   like any technology, is a sociotechnical system. It operates hand in hand with   the way  we work, socially. The social cohesion that is built around this   technology is the platform that props up an economy. It isn’t just technology   that drives hyper-globalisation; it’s societal needs as well.

The summit, however, also gave room to a discussion on hyper-localisation and   how the digital practices help pharma to engage at a community level, as   opposed to  state or enterprise level. This was touched upon by Ranjit Shahani,   Country  President, Novartis India in “Emerging Markets” and to a large extent,   by Jon Achenbaum, Senior Vice  President of Bayer Healthcare Diabetes Care in a   session entitled “Patients  driving healthcare innovations”, which centers on   Bayer’s Nintendo-inspired  device for “kids”.

                    

John Achenbaum  of Bayer Healthcare is one of the 'non-traditional entrants' that makes an appearance at the Economist Pharma Summit. This Didget blood monitoring device, which comes with a dongle-based connectivity for mobile data transfer, is co-designed by Bayer and Nintendo for children     Reportage: The Economist Pharma Summit 2010

‘We  didn’t see this coming’’

As  reflected in the talks and also in the Ernst & Young survey, the   attitude  of pharma towards the rise of digitality and the superconsumer it   enables is  one of surprise – surprise by the  sudden speed of which   digital technology transforms the pharma business  practices.

Why  didn’t they see it coming? The sociotechnical system, rooted in a unique   type  of group cohesion that “is neither economic nor political”, remains hidden   from  those who try to analyse the phenomenon using the conventional economic   and  political perspectives.

The  ‘misdiagnosis’ is common and is only realised when the disruptive   technologies render  the mainstream technologies obsolete. Disruptive   technologies, and the social  behaviour which revolved around the applications,   are not monetised and are  therefore of no interest to the top-down market   researchers, who are supposed  to spot the trends. But they are easily   identified.

                

The mobile phone, a 'disruptive technology' at work at the Economist conference. Big pharma companies, too busy to concentrate on their product research, don't pay attention to the 'inferior' alternatives until it's too late         Reportage: The Economist Pharma Summit 2010

A  disruptive technology is inferior to the mainstream alternative and is   adopted  by a segment of consumers that don’t make big bucks out of it. (2) In   his book,  “The Innovator's Dilemma: When  New Technologies Cause Great Firms to   Fail”, economist Clayton M Christensen provided a  set of examples which should   help us understand the mainstream / disruptive binary:  ‘hospitals’ versus   ‘outpatient clinic’; ‘open  surgery’ versus ‘endoscopy’; ‘desktop PCs’ versus   ‘Sony Playstation’; ‘wireline  telephone’ versus ‘mobile telephony’.

The  problem is, says Christensen, big companies who listen very well to   their  customers don’t pay attention to these ‘inferior’ alternatives – because   that’s  not what their customers want. When the fickle customers suddenly decide   that  this is what they want – probably due to a credit crunch – the big   companies  find themselves not being able to offer these alternatives. They   can’t keep up.

“Different  industry, different values”

The challenge is not only rooted in ‘work  culture’ and the ‘modelling’ that   follows. There’s valuation to consider, too, which  poses a problem to business   alliances.

A  pharma product is valued on its formulations – ‘hardware’ would be the   digital equivalent of this concept. The processes behind the creation of the    formulations are protected by patent, among other intellectual property   strategies. A mobile phone might be easy to value, but how does one deal with a   software  application?

                

The Roche Diagnostics Accu-Chek Mobile blood monitoring device. The hardware is very much defined by the software. The 'materiality' of the software is something that pharma has to consider in assigning 'value' to digitality       Watch the video     Photo: Salina Christmas

“When we talk to companies in the [IT] space, there’s no manufacturing line   to see,” says Beverly Jordan, Vice President, Special Projects and Business   Development, AstraZeneca, in the report. “Their ‘manufacturers’ are programmers   and  developers. How can we truly understand what’s there at the company? How do   we assess what their assets are and how much they are worth?”

Again, it’s impossible to put on the usual economist goggle to see what   digitality is  about. The value of ICT lies in knowledge and creativity.   Digitality is an  economy geared towards knowledge (k-economy), not just   production (p-economy). Copyright is the most popular form of legal protection   employed, but open  source – often created on the back of crowd-sourcing – is   also a form of protection for these ‘creative’ workers. An economy is made on   the back of open source – ask Microsoft how XML and Arduino help its proprietary   projects.

Despite this awareness, the Ernst & Young report indicated that pharma is   hesitant in taking the necessary actions beyond the predictable legal and   financial measures.

                                

Challenges of creative partnering           Click here to see the bigger chart           Source: Ernst & Young Progressions survey 2009, p 52

Close to 80% of the respondents acknowledge that the biggest challenge in   creative partnering with non-traditional entrants lies in corporate strategy,   valuation and modelling, and due diligence (see table above). This is understandable   given that the pharma corporate practices are slanted towards risk protection   (an example:  patent). Digital entrepreneurship, however, is slanted towards   risk-taking.

Talent  is a prerequisite in preparing for the k-economy and the uncertainty   the new  labour process brings, but the report indicates that the preparedness   for  ‘talent’ and labour-related issues such as ‘operations’, change management’   and  also ‘data security and privacy’ is low.

                                

Preparedness for creative partnering challenges           Click here to see the bigger chart           Source: Ernst & Young Progressions survey 2009, p 53

Talent  is certainly not identified as a key function essential for CEOs in deal-making, according to the survey.

Trust: It can be a science

So what does it take to prepare for the  inevitable?

Janice Haigh, Senior Director, Pricing and Market Access, Astellas Pharma   Europe, said at the summit that pharma has to get over its paternalistic   attitude. The data-empowered consumers can engage   at  expert-to-expert level and are more demanding of results.

                

Janice Haigh (pictured, right) says pharma has to get over its paternalistic   attitude         Reportage: The Economist Pharma Summit 2010

However, pharma’s paternalism and aversion towards risks are not without   basis – drug trials are not like software trials. Get the formulation wrong and   it can cost lives.

Concerns regarding privacy and data protection by the clinicians are also   valid, although  much has been said about the benefits of trading off privacy   over convenience – as discussed at last year’s Informa Mobile Healthcare IT   Summit 2009 and as illustrated by  Pfizer’s   successful rollout of its eCard scheme in Russia, the Phillipines,  Malaysia and   Indonesia. To date, there are 2.2 million patients in the system,  which is to   be expanded to Mexico, Brazil and Venezuela.

“I think pharma will lose out to digital,” a delegate  from a European   pharmaceutical  company told us during coffee break. “The business mentality   revolves around the ‘hardware’, the drugs, not human communications. Digital   businesses put the  human interaction before its hardware and software. Digital   would win.”

Pharma  can’t rely on that tradition of “selling the science”, the report   suggests,  because it’s no longer enough. Is this true? Does pharma have to   ‘lose out’ at  all?

                

Bayer's Didget is one of the examples of the medical device technology that is steadily crossing over to pharma, and is taking over the industry with its combination of ICT and engineering capabilities. A delegate tells Clinica that "pharma will lose out" to the digital camp.         Reportage: The Economist Pharma Summit 2010

“Other  members of the health ecosystem sometimes view pharma companies as   the enemy,” says  Paul Stoffels, Company Group Chairman, Johnson & Johnson,   in the report.To  create innovative breakthroughs, he says, “we need to foster   trust between  pharma and the academic and scientific communities”.

Why not use the digital technology as a method of establishing trust among   the traditional  and non-traditional entrants? For digital businesses, this can   be an access  point to consider when entering the ecosystem.

In fact, this is what the digital camp is good at. They build technologies on   the concepts of crowdsourcing, interaction and knowledge-sharing. An automated    supply chain management system is, after all, a method of ensuring that the    contract can be fulfilled between the supplier of goods, and the receiver of    goods. The hardware and software applications running on this platform, and the    connectivity methods linking them, are there to make it possible for ‘trust’ to    be audited.

The digital industry, having learnt its painful lessons from technological    determinism and obsolescence, have managed to turn this system of belief into a    science.