After many small steps, is biopharma ready for one giant leap toward digital transformation?

My Take

After many small steps, is biopharma ready for one giant leap toward digital transformation?

By Greg Reh, vice chairman, US and Global Life Sciences leader, Deloitte LLP

Fifty years ago, Neil Armstrong descended the steps of his lunar lander and pressed the first footprints into the dusty surface of the moon. He declared the achievement "one small step for [a] man, one giant leap for mankind." Over the past few years, the biopharmaceutical industry has taken a number of small steps toward digitization. We have now reached a point where a growing number of company leaders are trying to decide how to take that giant leap toward digital transformation.

Last October, I wrote that many biopharmaceutical companies were experimenting with digital technologies—but I noted that few of them had made bold or consistent moves toward a digital transformation. My comments were in response to a survey that evaluated the digital maturity of biopharma companies. In the nine months since we published that report, I’ve seen meaningful changes to the digital landscape in this sector. In my conversations with biopharma executives, there is a clear acknowledgement that digital transformation is essential for the future. The challenge in the months and years ahead will be to maintain momentum so companies that are currently doing digital can transition into being digital.

Testing phase appears to be ending

Some of the digital experiments and pilots that biopharma companies launched during the past two or three years are maturing into sustainable programs. We are even beginning to see a few large-scale implementations. As my colleague Dave Rosner noted in his blog, a growing number of life sciences companies have brought on chief digital officers—often from outside industries—to lead their digital transformations. This is another signal that the industry has changed its thinking when it comes to digital.

Digital transformation is a foundational change that occurs when technologies are used to accelerate innovation, streamline processes, and eliminate barriers. This can help improve efficiencies, power new products or services, enable new business models, and even blur some of the boundaries between industries. Companies that lack a transformational vision could open the door to startups and new entrants that are looking to disrupt the industry from outside. Companies that choose not build or partner for digital capabilities are likely to be disrupted by those that do.

Can digital transformation help biopharma reach the stratosphere?

The Deloitte Center for Health Solutions led a four-day online crowdsourcing simulation with leaders from the biopharma sector to find out where they were in their digital journey. We found that biopharma companies are getting closer to incorporating digital technologies more broadly in everything from research and development (R&D), to supply chain, to patient engagement. Here’s an overview of what we learned:

• Research: Digital transformation has the potential to drastically improve productivity by applying artificial intelligence (AI) and computational biology to drug discovery and development and by making clinical trials much more efficient. More than 140 startups are developing AI-based drug-discovery tools.¹ In addition, nearly 300 novel cell and gene therapies are in development for a variety of diseases and conditions. Exscientia, a British biopharma company, is using its AI platform to automate the analysis of existing discovery data (including journals, patents, databases) to help identify novel compounds for synthesis. The platform pre-assesses each of the identified compounds for predicted potency, selectivity, absorption, distribution, metabolism, and excretion (ADME), and other key criteria. The platform could cut down the time needed to identify drug candidates to roughly one fourth of the time taken by traditional methods. While AI holds tremendous promise, it is worth noting that we are in the early stages of realizing its usefulness.
• Digital clinical trials: The pharmaceutical industry has been somewhat reluctant to move to digital clinical trials—particularly companies that lack the necessary systems and processes. Some companies have also assumed that regulators might not support the change. However, the US Food & Drug Administration (FDA) has acknowledged that data collected digitally can be analyzed more quickly, which can improve the safety profile of a new product.² In a recent blog post, my colleague Dawn Anderson explained that the transition to digital or virtual clinical trials could dramatically improve recruitment by breaking down some of the barriers that can keep patients from participating. The ability to target certain patient populations and enroll them in a trial more quickly can reduce the time it takes to bring a new product to market. The cost to bring a drug to market has skyrocketed over the past several years—from $1.1 billion in 2010 to more than $2.1 billion in 2018, according to Deloitte’s annual analysis on measuring the return of pharmaceutical innovation. Every day that a new drug isn’t on the market could translate to $1 million dollars or more in lost revenue.
• Supply chain: Manufacturing and shipping cell and gene therapies will likely require a different set of capabilities compared to the process used for traditional molecules. These capabilities should include advanced analytics and workflow automation to seamlessly coordinate patient cell collection, manufacturing capacities, cold chain logistics, and delivery of the viable product to the transfusion center.¹ Digital supply networks (DSNs) leverage a variety of technologies such as sensors, robotic process automation (RPA), blockchain, and advanced analytics to enable greater product visibility, traceability, and inventory control.
• Patient engagement: Digital technologies—combined with behavioral science principles—could help improve patient engagement. The crowd agreed that messages should be sent at the right time and include customized clinical information, education materials, and interventional and wellness recommendations. Moreover, direct-to-consumer interaction could require biopharma to behave more like today’s consumer brands—by analyzing and anticipating consumer needs to deliver personalized solutions. We are also seeing increased interest in the use of digital technologies to improve patient participation and sustained engagement in clinical trials.

The three pillars of a digital strategy

Along the journey toward the future of health, I see digital transformation as a critical step for biopharma companies. Our recently published paper (based on the crowdsourcing) details the three categories of a digital strategy. As company leaders push their organizations forward, they should consider an enterprise-wide approach that utilizes this framework to categorize their digital transformation use cases:

1. Innovate new products and services: Catalyze the development of products, services, and new business models to drive value for customers using data and innovative platforms.
2. Engage effectively: Drive a new engagement model that creates and delivers targeted interactions that address patient, customer, and employee needs to foster loyal relationships.
3. Execute efficiently: Digitize and rationalize processes to drive efficiencies and cost savings and develop a digital culture that enables new ways of thinking and capabilities.

Our research and client experience suggest that digital transformation can be a complex and resource-intensive undertaking. Moreover, it promises to fundamentally change the way business is done. But I think the time has come for biopharma leaders to consider all of the steps they’ve taken toward digitization. Companies that are able to make the giant leap to digital transformation could rocket ahead of their competitors, as well as fend off companies from outside the industry that are trying to enter biopharma’s orbit.

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¹ BenchSci blog, 141 Startups Using Artificial Intelligence in Drug Discovery, July 3, 2019
² FDA, Breaking Down Barriers Between Clinical Trials and Clinical Care: Incorporating Real World Evidence into Regulatory Decision Making, January 28, 2018

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In the News

Senate releases, advances legislative package to lower drug prices

On July 23, Senate Finance Committee Chair Charles Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released a package of bipartisan proposals aimed at lowering drug spending in Medicare and Medicaid. According to the Congressional Budget Office (CBO), the package—the Prescription Drug Pricing Reduction Act (PDPRA)—is projected to save the government (and Medicare beneficiaries) more than $100 billion over 10 years. Medicare beneficiaries are expected to save $27 billion in out-of-pocket costs and $5 billion in premiums, and Medicaid could see $15 billion in savings.

Most of the projected savings would stem from a change to Medicare Part D, which caps drug makers’ list prices. Drug prices would be anchored to prices as of July 2019 and would not be allowed to increase more than inflation. Manufacturers that increase their drugs’ prices more than inflation would be required to repay the difference to the government through a rebate. The legislative package contains a similar cap on price increases for physician-administered drugs in Part B. These caps are expected to yield more than half of the package’s total projected savings over 10 years.

In addition to caps on drug prices, the proposal would change the Medicare Part D benefit to reduce beneficiaries’ exposure to out-of-pocket costs. It would eliminate the so-called donut hole and create an overall limit on out-of-pocket spending. The legislation also would seek to increase competition through biosimilars.

On July 25, the Senate Finance Committee voted 19-9 to advance the legislation for a full Senate vote. Although the package passed the committee with bipartisan support, several stakeholders, including the trade group Pharmaceutical Research and Manufacturers Association (PhRMA), expressed opposition to the caps, which it likened to price controls. The generic drug-lobby group Association for Accessible Medicines (AAM) expressed support for the bill, which exempts generic drugs from the Part D inflationary rate-requirements. Following its initial release, the White House praised the bill.

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HHS, DoD will collaborate to develop new antibiotic

The US Department of Health and Human Services (HHS) will partner with the Department of Defense (DoD) and an East Coast pharmaceutical manufacturer to develop a new antibiotic to treat infections caused by gram-negative bacteria (a resistant form of bacteria), HHS’s Office of the Assistant Secretary for Preparedness and Response (ASPR) announced on July 22. According to the announcement, antibiotic-resistant bacteria is considered an urgent public health threat and an estimated 2 million people in the US become infected each year—which costs the health care system about $35 billion annually.

The collaboration is set to last for six years. Both DoD and HHS will provide funding to the pharmaceutical manufacturer to cover development and testing costs, including tests for the drug’s efficacy against potential bioterrorism threats.

(Source: ASPR, HHS, DoD, VenatoRx Pharmaceuticals to co-develop novel antibiotic to treat drug-resistant infections, July 22, 2019)

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Medicaid expansion is associated with reduction in mortality, study finds

Between 2015 and 2017, nearly 4,800 fewer deaths occurred (each year) in states that expanded Medicaid—compared to states that opted not to expand coverage—as called for by the Affordable Care Act (ACA)—according to a recent study published by the National Bureau of Economic Research.

The researchers compared mortality records of 3.7 million individuals (in states that expanded Medicaid and in states that did not). The individuals were between the ages of 55 and 64 and had incomes below 138 percent of the federal poverty level (FPL)—two risk factors for chronic-disease related mortality. According to the study, there was a .13 percentage-point decline in annual mortality associated with Medicaid expansion, and researchers say this effect grew over time.

The authors write that the decline in mortality is likely because people with Medicaid coverage utilize more of the program’s covered health services, such as preventive screening. People who have Medicaid coverage tend to access health services such as preventive screening, which the authors say likely contributed to the lower mortality rates. The report estimates that 15,600 additional deaths might have been averted if every state in the US had expanded Medicaid.

(Source: The National Bureau of Economic Research, Medicaid and Mortality: New Evidence from Linked Survey and Administrative Data, July 2019)

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Federal judge upholds short-term, limited duration health plan expansion

On July 19, a federal judge upheld the administration’s regulation to expand short-term, limited duration (STLD) health plans. In 2018, the length of time these plans could be used was expanded from three months to 12 months (see the August 7, 2018 Health Care Current). STLD plans were originally intended to provide individuals with an insurance option during gaps in coverage. However, proponents have said these plans are affordable alternatives to the more comprehensive qualified health plans (QHPs) defined by the ACA. STLDs typically offer fewer benefits than ACA-compliant QHPs.

Several health insurers have tried to block the expanded use of STLD plans. They have expressed concern that the lower-cost plans could attract younger, healthier individuals who might trade off coverage for lower premiums. This, they contend, could lead to a less healthy risk pool in QHPs. The court ruled that there was not enough evidence to validate such claims. This decision is expected to be appealed by the Association for Community Affiliated Plans (ACAP), which claims that the expansion of STLD plans violates the ACA.

CBO recently estimated that the federal government could save nearly $8.9 billion over 10 years by reversing the administration’s rules around STLD plans, and in late April, the House approved a bill to prevent the final rule from going into effect, but this has not been taken up in the Senate (see the May 7, 2019 Health Care Current). According to CBO, the savings would occur because qualified plans would raise their premiums and the government would have to raise its premium subsidies accordingly. Enacting the bill might keep nearly 1.5 million individuals from purchasing STLD plans each year, and while CBO estimates that 500,000 individuals would become uninsured because of the bill, another 500,000 would likely purchase individual coverage through an insurance exchange. CBO’s report predicts that premiums for coverage sold in the individual market would decrease by nearly 1 percent.

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High-performing ACOs support physicians, engage with patients, according to OIG report

On July 24, the HHS Office of the Inspector General (OIG) released a report identifying the characteristics of successful accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP). According to OIG’s report, common strategies among the top 20 high-performing ACOs were:

• Working with physicians to help them understand the cost of services. Nearly all of the high-performing ACOs provided their physicians with information about their practices and referrals. Some ACOs cited in the report also shared unusual spending or utilization trends with physicians.
• Encouraging patients with chronic health conditions to take a greater role in their care (see the July 2, 2019 My Take). One ACO asked patients with certain illnesses to check in with a care coordinator each day. According to the report, this strategy led to 43 percent fewer emergency-room visits and 47 percent fewer hospital readmissions in the second year of the program.
• Helping patients avoid unnecessary hospital visits by coordinating transitions to other facilities. Additionally, some ACOs brought hospitals into their organizations and attempted to set weekend hours and allow same-day appointments.
• Sharing data among providers to better address patients’ unmet behavioral needs and social determinants of health (SDoH). Several ACOs worked with non-medical staff, such as social workers, to connect patients to community services. A recent Deloitte paper discussed how health plans, physicians, and government agencies have been increasingly focused on addressing SDoH, and some of these initiatives are associated with improved patient health outcomes and lower health care use (see the July 2, 2019 Health Care Current).
• Encouraging physicians to build relationships with their patients during wellness visits. One ACO in the report identified Medicare beneficiaries who did not receive wellness visits and helped them set appointments.

OIG’s report notes that the high-performing ACOs vary by size and location, but all have shown that working with physicians is critical to the organization’s success.

(Source: OIG, ACOs’ Strategies for Transitioning to Value-Based Care: Lessons From the Medicare Shared Savings Program, July 2019)

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Breaking Boundaries

Can AI help to improve the patient experience?

Many health care organizations are working to improve patient experiences. Early efforts have centered on strengthening patient-physician interactions and improving facilities, but some organizations are going beyond those early strategies and are using data analytics and artificial intelligence (AI) to improve the information available to care teams, which could drive better treatment decisions.

Some health systems are using AI to enhance patient navigator services for cancer patients. Some patients see multiple providers who don’t always communicate effectively with patients or with each other. Primary care clinicians might be able to detect cancer with a screening but patients are often left to figure out which specialists to go to and how to prioritize services and procedures. Patient navigators typically work with patients after the initial screening to explain further tests and direct them to resources. AI can help these navigators sift through pathology data to identify patients who need intervention. This could continue to evolve and lead to more targeted patient care pathways.

Some dental practices are using AI to improve patient experience. AI can lead to faster X-ray analysis, and machine learning can be used to access dental images for areas of concern. AI can also be used to offer a virtual second opinion. Smart glasses worn by the dentist could allow them to see bone and dental-root structures during routine visits. In the future, patients might expect customized dental care based on genetics.

Forward is a startup that wants to use technology to improve the typical primary care visit. The venture-backed company offers a concierge medical service that leverages technology such as AI to improve annual exams. Patients, or members, pay a flat fee every month. Physicians use a digital assistant that can take notes as they speak to patients. Patients have access to their vitals and lab results via an app on their phones. They can schedule appointments and ask follow-up questions using the app. Patients can also share data from their wearables with the care team.

RELATED: Doug Beaudoin, vice chairman and US Life Sciences & Health Care Leader, Deloitte LLP, wrote in a recent My Take that we are in the early stages of a health care system transformation marked in part by consumer demand for greater transparency, accessibility, and personalization. Consumers will want automated, actionable health insights that come from smart AI applied to interoperable data that is seamless and integrated across all platforms and applications. He noted that a wide range of companies—from inside and outside of the health care sector—are making strategic investments that could be the foundation for a future of health that is defined by radically interoperable data, open and secure platforms, and consumer-driven care. These organizations illustrate early innovations that can help personalize health care, enable consumers to make more informed decisions about their health, and leverage AI and other emerging technologies to harness and share data.

(Source: Sara Heath, How artificial intelligence helps CIOs drive patient experiences, Patient Engagement HIT, April 8, 2019)

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