For years, the pharmaceutical industry has been urging companies to go “beyond the pill” — that is, to develop and deploy supplementary services and solutions to diversify income streams. The logic is straightforward: a corporation with expertise in selling pharmaceutical items should be able to successfully and profitably market additional healthcare services to its significant clients (health plans, delivery systems, and governments).
The motivation to develop beyond the pill usually stems from one or both of the following realizations: 1) medications alone are frequently insufficient for patients to obtain optimal clinical results, and 2) when pharmaceutical pipelines dry up, beyond-the-pill enterprises can be attractive new income streams.
Many initiatives to go beyond the pill, on the other hand, have sputtered or perished. During my years as a pharmaceutical business executive and senior management counselor, I’ve noticed that these projects frequently fail due to one of three issues:
Leadership. Many pharmaceutical firms make the error of promoting great sales executives to the helm of their beyond-the-pill businesses. Regardless of their abilities, these individuals frequently lack expertise in creating non-pharmaceutical service enterprises. Additionally, pharma firms periodically buy new services and solutions and attempt to integrate them. These integrated organizations are commonly run by pharma executives who lack a thorough understanding of the acquired companies and their markets.
Regulatory framework. Existing customer ties with big payers, health systems, and physician organizations are seen as a benefit in developing new beyond-the-pill enterprises. While these connections can help open doors, anti-kickback laws compel pharmaceutical businesses to disclose and charge back the fair market value of any additional services or solutions provided to purchasers of their goods. This is a necessity that entrepreneurs outside of the pharmaceutical business do not have to deal with. Many big pharma clients (payers, for example) also market healthcare services and solutions. As a result, pharmaceutical businesses may fight for interaction with their most essential clients.
Capital is available. Money to start and expand diverse new firms is rare, especially in publicly listed organizations with shareholder duties. When allocating capital, boards, CEOs, and executive committees are more likely to support and develop a molecule that could generate a billion-dollar annual annuity or boost sales of an existing molecule than to enter an unfamiliar business with lower margins and less clear long-term business prospects. As a result, beyond-the-pill efforts sometimes get off to a good start with substantial seed funding, only to fall behind in later rounds of capital allocation when new scientific research with larger potential returns needs to be supported.
Pharmaceutical firms may help beyond-the-pill projects take off by acknowledging the long history of failed starts and taking proactive steps to avoid making the same mistakes. Here’s how to do it:
Recruit people from outside the business. The expertise and skill necessary to develop and sell services and solutions differ from that required to market pharmaceuticals. As a result, pharma businesses should carefully explore attracting new talent from outside the sector when selecting CEOs for new ventures. When Sanofi launched its new chief patient officer job to develop solutions that matter most to patients, it hired Anne Beal, a physician. She has been heavily involved in attempts to change American health care.
Make strategic alliances. Companies should avoid developing their solutions or purchasing other businesses wherever possible. Instead, they should collaborate with other companies, as Novartis did recently when it formed a $100 million investment fund with Qualcomm. Partner firms can give an outside view on the solutions environment and skills that pharma companies might struggle to develop on their own.
Revise the rules. Anti-kickback laws arose from a time when financial incentives were offered to doctors and hospital systems in return for prescriptions. These policies require some reconsideration and new industry direction, given the rise of digital health technologies and the health care sector’s focus on value. Pharma firms should proactively engage with the Office of the Inspector General, the Food and Drug Administration, and the Centers for Medicare and Medicaid Services in the United States to seek a new regulatory framework.
Different solutions should be avoided, and any additional services or solutions should complement rather than compete with the primary pharmaceutical business for finance or managerial attention. Rather than attempting to develop beyond-the-pill solutions that are unrelated to their core pharmaceutical products, companies should work to improve the efficacy of their existing medicines by providing tightly linked complementary services, answers, and tools that encourage patients to be more involved in their care and assist them in sticking to their prescribed therapies.
Clinical studies that are integrated. Pharma firms should think about incorporating beyond-the-pill solutions into clinical trials so that they may market services and pharmaceuticals as a bundle. Biogen Idec’s recent research on the use of Fitbit devices to monitor multiple sclerosis treatment and progression was a forerunner to these clinical studies. Companies may distinguish their offers and create additional income by combining medications with wrap-around solutions in a clinical trial context, especially in chronic disease categories where patient participation is key to better outcomes. As a result, medicines might be released with a label that contains an “around the pill” solution, such as a wearable or other tracking device.
Companies that research and market new medications will continue to be needed worldwide. These same organizations must not lose sight of this fact and hire the necessary leadership to leverage around-the-clock services, solutions, and technologies to improve their core goods’ clinical efficacy and commercial success.