Remixing the classic five

Over the past 100 years or so, the health care industry has evolved through regulation, culture, technology, and happenstance. It can be broken into five silos that we have dubbed the classic five: health plans, health care providers, pharmaceutical companies, medical technology manufacturers, and government/regulators. Twenty years from now, we expect the value in the health sector will likely be measured by the health and well-being of people, rather than being defined by these five silos. While the classic five—and the health industry overall—will likely look much different in 2040, existing stakeholders could continue to thrive. Here’s how we expect each member of the classic five could be affected:

• Biopharmaceutical companies: We appear to be in the middle of an innovation cycle in life sciences, and many of our biopharma clients are investing heavily in digital transformation, artificial intelligence (AI), and other technologies. Precision medicine, curative therapies, and gene editing have become increasingly common. We are also starting to see several biopharma companies move toward virtual clinical trials, which allow patients to participate in a trial from their home or at a more convenient location. Over the next 20 years, we expect that overall health spending will shift from later-stage treatment to earlier-stage intervention and, eventually, to prevention and wellness. As this change happens, biopharma companies could see a fairly dramatic decrease in the volume of units sold as some consumers turn to non-pharmaceutical treatments or catch illness in the earliest stages. However, per-unit costs could increase as therapies (including digital therapies) become more personalized and effective.
• Medtech companies: Medical device manufacturers—such as those that develop artificial joints and other implantable devices—could become key enablers of connected care by developing better diagnostic devices. For example, to position themselves for the future, a company that manufacturers artificial joints might invest in diagnostic sensors that can detect the early stages of joint degeneration. Rather than using this information to develop a better artificial joint for a damaged ankle, for example, what if a medtech company developed a sensor-equipped sock that detects the early stages of joint degeneration. That might help patients avoid joint replacement in the first place. Imagine the billions or even trillions of data points that medtech companies could have at their disposal by incorporating such sensors into their devices. We believe medtech companies are positioned to take a leading role in the future of health.
• Health care providers: While the provider-patient relationship is important today, we expect future care decisions will likely be based more on convenience than on relationships. Consumers will likely care more about their relationship with their health than with their doctor. Consumer-centric virtual care will likely meet consumers where they are. Twenty years from now, people are still going to get sick, but we expect they will have access to sophisticated diagnostic tools and assessment capabilities that help to keep them out of the doctor’s office. Using highly trained medical professionals to diagnose and treat low-acuity, highly algorithmic care is wasteful. Instead, imagine using a smartphone or other device to capture the data sufficient to confirm a diagnosis and algorithmically provide access to a treatment or solution that is delivered to the patient’s doorstep. For routine diagnostics, we can imagine a world where people don’t need to interact with a care provider for certain ailments. We can also imagine a world in which connecting with a provider, maybe virtually in another part of the world who has access to the patient’s complete medical history. This model might be much more appealing to consumers than scheduling (and traveling to) in-person office visits to address relatively simple health issues.
• Health plans: In any industry, insurance exists to protect against mass uncertainty. In health care, we expect that, at some point, data generated by wearable or implantable sensors, along with always-on sensors in our clothes or in our homes will reduce a good deal of uncertainty related to our health. In response, health plans might base their premiums on injuries and other unpredictable care and increase their focus on keeping people healthy. Insurance will likely still be needed to finance highly complex and high-cost interventions. However, the ability to identify disease earlier and to intervene non-invasively, with greater precision, and often at a lower cost could mean health coverage is no longer the main financing vehicle for health plans. We are already seeing health plans take a more active role improving the social determinants of health that can negatively impact the health of their members.
• Government: Health has traditionally been a closely regulated market. As the health industry evolves, regulators will likely continue to build guardrails that help ensure safety while encouraging innovation. It seems some of them are already broadening their view of what is possible and allowable. Case in point: Early this year, the US Centers for Medicare and Medicaid Services (CMS) proposed nationwide Medicare coverage for Chimeric Antigen Receptor (CAR) T-cell therapy if accompanied by evidence-development. Data from registries and studies can help CMS identify the patients who benefit the most from CAR T-cell therapies, which can assist with future coverage determinations. We also think regulators are willing to work collaboratively with new entrants that are consumer-centric and technology focused. Regulators might give new entrants more freedom to experiment.

What will today’s decisions look like in 20 years?

In a 1994 promotional video, Tower Records founder Russ Solomon acknowledged that emerging technology would someday allow people to “beam” music into their homes.³ But he predicted this change would occur in the far-off future. “As far as your CD collection—and our CD inventory, for that matter—it’s going to be around for a long, long time, believe me,” he asserted. Tower declared bankruptcy 12 years later—after taking on significant debt to expand globally. If the company had a more accurate vision of the future, it might not have focused on its brick-and-mortar footprint.

How should health stakeholders prepare for a future that is 20 years away?

• Should hospital and health system leaders, for example, seek funding for a new 2,000 bed facility, or should they invest more in remote care and tele-health technology?
• Should health plans continue to emphasize the strength of their provider networks, or should they develop new coverage models designed around the health and wellness of their members?
• Should the biopharma industry continue to develop products aimed at the mass-population, or is the future of health moving to highly personalized therapies?
• Should medtech companies continue to improve existing devices, or should they incorporate sensors into their devices so that they can collect data about the root causes of health issues?

In 2040, what will health stakeholders think when they look back on the decisions that were made in 2019? We can’t say for sure, but we are certain that the future of health will be here sooner than you think.

PS—for more on the impact of the future of health on the “classic five,” check out our on-demand webcast here.

<sup>Endnotes
1. Can record shops avoid extinction?, BBC News, April 15, 2011 (https://www.bbc.com/news/entertainment-arts-13067160); Best Buy closing 50-60 Sam Goody retail stores in malls, Louisville Business First, September 6, 2002
2. Visualizing 40 Years of Music Industry Sales, Visual Capitalist, October 6, 2018 (https://www.visualcapitalist.com/music-industry-sales/)
3. Russ Solomon, Tower Records founder who created a mecca for music lovers, dies at 92, Washington Post, March 5, 2018; The Life and Death of Tower Records, Revisited, North Bay Public Media, October 20, 2015.</sup>

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