Blog

02/15/11

Innovation in Healthcare

The healthcare industry, along with the pharmaceutical industry, is undergoing a period of disruptive innovation. This disruption is occurring due to shifting paradigms in seven major areas: an increasing burden of chronic disease with an aging population; control of the practice of healthcare by policy-makers and payers; the focus of payers on pharmacoeconomic performance and outcomes; the blurring of boundaries between medical disciplines as new advances are made in personalized medicine; the significant growth in emerging economies; the increasing government interest in preventive medicine; and regulatory skepticism of innovation. Meanwhile, the global submission and approval rates for new drug candidates have fallen since 2005, while research and development expenditures have risen. Wall Street analysts predict the pharmaceutical giants will lose more than $140 billion in annual sales by 2016 as patents for major blockbuster drugs are scheduled to expire. The old business model paradigms require re-design in order for companies to survive.

In developed markets such as much of the pharmaceutical and healthcare industries, companies are discovering that to achieve future growth objectives they must look for adjacent growth strategies. Adjacency growth strategies are those that exist beyond a company's core business, but are supported by the company's core competencies and/or by synergies or efficiencies made possible by the core. Adjacent growth strategies is one of the most effective ways for companies to achieve new growth. While adjacent growth strategies provide opportunities, there are risks in moving beyond a company's core competencies. These risks increase the further one moves from core competencies. For pharmaceutical companies, adjacent growth strategies into healthcare ecosystems provide growth in areas that, while outside of the companies' core competencies, are within areas with which they are intimately familiar. Risk mitigation resulting in successful growth within adjacencies with lasting competitive advantage is dependent on understanding customer desires. The ability to obtain fast and accurate customer insight is critical to this understanding. Key healthcare ecosystems include Reimbursement, Regulatory, R&D, Marketing, Informatics, Technology Innovation (including Electronic Health, Mobile Health, Electronic Patient Monitoring, Collection of Health Data, Electronic Health Records, Telemedicine and PACS, Diagnostics and Devices), and Compliance.

We will address each of the emerging healthcare ecosystems in subsequent blog entries.