The health care space is undergoing a major transformation, driven in part by Big Tech entering the space. The past year has seen Amazon buy online pharmacy PillPack (sending shares in rival health care firms tumbling as a result), Alphabet’s Verily Life Sciences potentially make a move into insurance, and Facebook speak to biopharma companies about using its adverts for clinical trial recruitment.
This rapidly changing ecosystem has forced traditional pharmaceutical companies to consider how they can best compete with and leverage relationships with technology companies. As former Teva CEO Yitzhak Peterburg commented, ‘Part of our competitors are not only the Novartis of the world and the other pharmas, but really the Amazons and Googles.’
Of course, these are not the first technology companies to enter into the health care space. IBM Watson, Microsoft and others already have well-known suites of software solutions applicable to clinical trials. However, with headlines of household tech names moving into health care becoming more familiar, should traditional pharmaceutical companies be worried?
The Tech Threat
Agile, innovative, consumer-focused; these are words that are more often associated with Big Tech than Big Pharma. However, all three concepts are central to the drug development process. Biopharmaceutical companies working in challenging disease areas need to employ creative problem-solving abilities to deal with the unpredictable nature of clinical trials, with the aim to get life-saving therapeutics to market as soon as possible. And it goes without saying that Big Pharma’s reputation with the public has been damaged in recent years due to pricing scandals.
On the other hand, the Big Five Tech companies churn out solutions at a rapid pace that fit seamlessly into the lives of their customers. With this in mind, they are well-placed to disrupt the clinical trial space. And based on industry developments over the past year, we can see there are at least three areas that traditional pharmaceutical companies will need to change their processes to successfully compete with these new players.
Most of the top five tech companies are based in the Bay Area and, in recent years, we have seen some big names from the clinical trials community being courted over to Silicon Valley. For instance, Art Levinson who was former Genentech CEO, was named the CEO of Google’s Calico (a company focused on R&D in aging) back in 2013. More recently, Taha Kass-Hout who was the FDA’s first Chief Health Informatics Officer was hired by Amazon.
And increasingly, we are seeing middle-managers and directors from traditional pharmaceuticals take roles at these new tech-backed life sciences companies. The attraction of the new health care initiatives is easy to see; they operate as start-ups but also have a huge amount of resources at their disposal and enable clinical professionals to break free from the traditional, outdated processes that are often the scourge of working in a large pharma company.
But when competition for pharmaceutical talent in the Bay Area (and other biotech hubs across the globe) is already fierce, this is no small problem for big pharma; a ‘brain drain’ like this could leave them uncompetitive and reliant on external partners.
Indeed, many large pharmaceutical companies are now looking for innovation outside of their own walls—and with good reason. IDEA Pharma, a leading consultancy in the industry, recently examined 30 biopharmaceutical companies and concluded that overall they got just 11 percent of their 2017 revenue from drugs developed within the past five years. The problem in innovation for traditional pharma companies stems from drug discovery to clinical trials. In the clinical phase, there is a wealth of new technology available aimed at improving the efficiency of trials and expediting successful drug development. However, the legacy systems of big pharma makes new technology integration a huge challenge and there seems to be little appetite for the level of change management required.
Instead, century-old companies like Johnson & Johnson have set up their own incubators aimed at finding and nurturing start-ups to deliver promising health care solutions. The tech giants have also been making their own moves in this area; in the first few days of 2018, Google invested millions into several start-up health IT companies.
The third area where big tech stands to undercut the pharma giants is in terms of being consumer-centric. Patient-centricity has been a buzzword in the pharmaceutical industry for several years now. Through the work of patient advocacy groups and the need to increase retention and recruitment rates, patient needs have become more of a consideration within trial design. However, it is a concept that has not come naturally to pharma.
Conversely, the Googles and Amazons of the world have whole departments dedicated to user experience and customer-focused design. How much of a leap is it for them to apply this mentality to health care solutions and even clinical trial design? Smartphone penetration in the U.S. has reached 77 percent and nearly 90 percent of the population uses the internet regularly, according to a Deloitte study. This places tech companies in the perfect position to connect with potential patients through these channels, engage them throughout trials and collect health care data which can be used to find solutions to common, widespread diseases.
The Opportunity for Pharma
Despite there being grounds for fierce competition between pharma and tech, there are also opportunities for the two to pool their resources together to find solutions to some of the most pressing health care issues of today. After all, big pharma are the drug development experts and the tech giants may find it difficult to go it alone in such a highly-regulated and complex industry. There have already been several high profile partnerships in recent years, such as Calico Life Sciences partnership with AbbVie to look for new treatments to age-related diseases. So far this partnership alone has resulted in more than two dozen programs exploring aging and disease.
And the opportunities extend beyond R&D partnerships; for instance, Uber and Lyft have recently launched patient transportation services, Apple iPhones are being used in Bring-Your-Own-Device trials and social media/search engines are increasingly being leveraged by pharma to help patients find clinical trials.
Moreover, companies such as Apple and Google are working on solutions that could have industry-wide benefits such as standardizing electronic health records and collecting and organizing huge amounts of health care data to prevent and predict health outcomes.
To conclude, there is no doubt that the direct entry of Amazon, Google and other tech giants into pharmaceuticals will transform the traditional landscape in drug discovery, clinical trials and beyond. For big pharma, the choice is between competing or collaborating with these new players. Some have already formed partnerships with positive results. But the question remains, will some pharma companies choose to compete by radically transforming their business model to encourage internal innovation?