From ‘doing digital’ to ‘becoming digital’: Biopharma companies can consider a North Star approach to digital transformation Bookmark has been added
From ‘doing digital’ to ‘becoming digital’: Biopharma companies can consider a North Star approach to digital transformation
Health Care Current | October 16, 2018
This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies, and provides updates and insights on policy, regulatory, and legislative changes.
From ‘doing digital’ to ‘becoming digital’: Biopharma companies can consider a North Star approach to digital transformation
By Greg Reh, vice chairman, US and Global Life Sciences leader, Deloitte LLP
Digital transformation might be the buzzword du jour, but for life sciences companies it can be a critical imperative to succeed in a changing business environment. It’s one of the key themes at tomorrow’s Financial Times Digital Health Summit in New York, and it’s something we’re frequently talking about with our life science clients. (If you happen to be attending tomorrow’s event, my colleague Chris Zant will be leading a panel discussion on how digital technology can help pharmaceutical companies improve how they engage with patients).
While many biopharma companies are experimenting with digital, most have yet to make consistent, sustained, and bold moves to take advantage of the new capabilities. We recently assessed the digital maturity of biopharma companies based on a survey conducted with the MIT Sloan Management Review. We found that about 25 percent of biopharma executives are in the early stages of their digital journey and 55 percent are developing their digital capabilities. Only 20 percent of respondents say their companies are digitally mature. This indicates that the industry has a long way to go from simply doing digital to being digital.
Bringing digital talent from the outside in
Nearly 80 percent of biopharma executives from global organizations say new types of leaders are required to succeed in the digital age. Moreover, just 20 percent of these executives thought their companies were doing a good job of developing leaders who possess the skills needed to lead their organization into the digital age.
It’s no surprise then that some digitally maturing biopharma companies are looking outside of their industry—often to the retail and even fashion industries—for consumer-focused digital expertise. This strategy could bring some fresh perspective to an industry that tends to be conservative and risk-averse. Here are some recent examples:
- GlaxoSmithKline created its chief digital and technology officer position about a year ago and tapped the chief information officer from a national retailer to fill that new role.1 She is focusing on disruption and creating value through digitizing pharma end to end.
- Novartis’ first chief digital officer (CDO) was previously the CDO at one of the United Kingdom’s largest online retailers, and also held senior positions at Amazon.com. He now reports to Novartis’ CEO and is overseeing the biopharma manufacturer’s company-wide digital strategy. 2
- The CDO from another biopharma firm is leveraging his experience in the fashion industry to help redirect his company’s approach to patient engagement. He structured his team to mirror a magazine outlet, hiring editors, librarians, and copywriters to run a digital campaign.
What else are digitally mature companies doing differently?
Finding the right CDO to lead a digital transformation is important, but leadership alone likely won’t be enough to drive meaningful change. Change should be driven at all levels of the company. While 77 percent of executives from digitally maturing biopharma companies say leadership is driving change within the organization, nearly all of them (92 percent) said managers are also responsible for driving change. And nearly half of these executives said the employees are also facilitating change. Among companies in the early stages of a digital transformation, just 13 percent of executives said employees were involved in facilitating change.
Other lessons we’ve learned from digitally mature companies include the need to take a measured approach to digital and to foster collaboration. Digitally mature companies are likely to encourage feedback and share results from failed experiments in ways that facilitate learning across the organization. They are also increasing and encouraging collaboration internally and across functions, as well as collaborating externally with business partners and customers.
A framework to define your digital North Star
The North Star Metric is a term coined in the Silicon Valley that typically refers to the strategic direction of a company. A digital North Star could help guide biopharmaceutical companies to become more digitally focused. Digital transformation can help companies gain business advantages by applying innovation, design, process, and digital technology to existing and new business models. Based on our research and experiences, we have identified three categories that can help guide this digital transformation:
- Execute efficiently: Biopharma companies should consider how digital could help streamline and/or automate predictable processes and approaches. Digital technology could help streamline marketing approaches or simplify the processes involved in recruiting and training new employees. For example, one global biopharma company is experimenting with virtual reality in its manufacturing operations. By creating virtual training programs that mimic aseptic production environments, managers can cut training time in half and speed up the path to proficiency. Another biopharma company determined that up to 60 percent of its localized asset-creation activities were duplicative. Establishing a digital global marketing system helped that company reduce its marketing base costs by 20 percent.
- Engage effectively: Digital platforms can make it easier for biopharma companies to connect with patients, physicians, employees, and other stakeholders. Such strategies can create and deliver targeted interactions that address stakeholder needs, foster relationships, and improve engagement. For example, ConvergeHealth, by Deloitte’s Connected Patient Ecosystem, helps biopharma companies build partnerships with advocacy groups and providers to enhance the experience of patients who have complex, chronic, and terminal diseases.
- Innovate new products and services: Biopharma companies should determine if there are digital therapies, or digital-support systems, that can make a patient’s life easier, make a drug more tolerable or effective, or improve outcomes. There could be opportunities to improve the return on research-and-development costs by shortening drug discovery or otherwise lowering research costs.3 Using NORA, Science 37, a clinical research company, recruited patients for a rare-disease, phase-3 trial at its meta-site approximately 20–30 times faster than is possible through traditional recruitment methods. The team gathered medical records and screened patients from seven states in the country and covered a more diverse study population (30–40 percent were from minority groups, compared with the typical 2–10 percent).3
When it comes to digital transformation, many biopharmaceutical manufacturers seem to be a few steps behind entertainment, retail, telecommunications, and other consumer-centric industries. But pressure is building for them to become more customer-focused and digitally savvy, and if companies don’t act now, they may be left behind.
1 GlaxoSmithKline press release, July 25, 2017 (https://www.gsk.com/en-gb/media/press-releases/karenann-terrell-appointed-chief-digital-technology-officer-gsk/)
2 Novartis press release, August 24, 2017 (https://www.novartis.com/news/media-releases/novartis-appoints-bertrand-bodson-chief-digital-officer)
In the News
CMS announces participants in new value-based bundled payment model
On October 9, the US Centers for Medicare and Medicaid Services (CMS) announced that 1,299 hospitals and physician-group practices had agreed to participate in the administration’s Bundled Payments for Care Improvement (BPCI) Advanced Model. The BPCI Advanced Model builds on the earlier BPCI initiative, which ended September 30 (see the January 31, 2017 Health Care Current).
Under BPCI Advanced, participants agree to take financial risk for the costs of care for certain episodes of care—they can earn a bonus if Medicare spending for a patient’s episode of care is lower than a spending target and the provider meets expectations for quality. If spending exceeds the target price, the participating entity must repay money to Medicare.
Participants in BPCI Advanced include 832 acute-care hospitals and 715 physician group practices—totaling 1,547 Medicare providers and suppliers. The model will initially include 32 bundled clinical episodes—29 inpatient and three outpatient. The top three clinical episodes selected by participants are (1) major joint replacements to the lower extremity, (2) congestive heart failure, and (3) sepsis.
Some key differences between the previous initiative and the BPCI Advanced Model include:
- BPCI Advanced offers bundled payments for more clinical episodes of care, including outpatient episodes.
- The model gives participants preliminary target prices, which reflect the amount CMS will pay for episodes of care before the start of each year. This addresses a concern voiced by participants in the earlier program.
- BPCI Advanced counts as an Advanced APM under the Quality Payment Program (QPP), and participants can be exempt from MIPS reporting requirements.
The BPCI Advanced Model was announced in January 2018 and runs from October 1, 2018 through December 31, 2023. The Deloitte Center for Health Solutions published a report on navigating bundled payments that describes the early evaluation findings for BPCI and some of hospitals’ lessons learned from the program.
(Source: CMS, CMS Announces Participants in New Value-Based Bundled Payment Model, October 9, 2018)
Almost half of young adults do not have a primary care doctor
About 45 percent of patients between the ages of 18 and 29 do not have a primary care doctor, a recent Kaiser Family Foundation (KFF) poll of 1,200 adults found. Older adults are more likely to have a primary care doctor, according to the report. For example, just 12 percent of adults age 65 or older said they do not have primary care doctors.
According to Kaiser Health News, millennials (the 83 million Americans born between 1981 and 1996) are shifting away from traditional doctor visits toward alternatives such as retail clinics, free-standing urgent-care centers with extended hours, and online telemedicine options. Deloitte’s 2018 consumer survey on virtual care is consistent with Kaiser’s in that we found younger patients are more willing to embrace health care technology, such as online virtual visits, instead of in-person trips to the doctor.
(Source: KHN, Spurred By Convenience, Millennials Often Spurn The ‘Family Doctor’ Model, October 9, 2018)
Related: New research from a public policy organization found that the patients who participated in its focus groups support improving electronic health record (EHR) interoperability. Today’s technology identifies patients based on demographic data (e.g., name and date of birth), which risks duplicating or mismatching patients. Future technology would use unique patient identifiers, which could improve patient data-matching across multiple doctors’ offices or health systems. Better matches could reduce medical mistakes, provide doctors with clearer pictures of patient health, and strengthen data security.
Improvements to EHR functionality, security, and methods for data-sharing are common topics of discussion among stakeholders throughout the health care system. According to Deloitte’s 2018 physician survey, 60 percent of doctors agreed that EHR systems should be interoperable (see the October 9, 2018 My Take).
Building on the Blueprint: President signs two pharmacist ‘gag clause’ bills
On October 10, the president signed two bills aimed at promoting drug-pricing transparency. These are the first such bills to become law following the administration’s May release of its blueprint, American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (see the June 19, 2018 Health Care Current).
The two bills, the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act, prohibit "gag clauses,” which prevent pharmacists from telling customers about opportunities to save money by paying for prescription drugs out of pocket, rather than using their health insurance. The Patient Right to Know Drug Prices Act addresses private health insurance plans, including those sold through public insurance exchanges, while the Know the Lowest Price Act targets Medicare Part D and Medicare Advantage (MA) plans.
Additionally, the Patient Right to Know Drug Prices Act requires companies that produce biosimilar and brand-name biologics to submit patent-settlement agreements to the Federal Trade Commission (FTC) and US Department of Justice (DOJ) to improve market competition.
Related: A group of lawmakers, patients’ rights activists, and trade associations are calling for the federal government to reclaim patents and license them to other companies by exercising existing authority in the patent law. Under the Bayh-Doyle Act of 1980, the government can rescind and redistribute a drug’s patent to other manufacturers, who can develop their own versions of the drug. These “march-in rights” can only be applied if government funding was used to help create the drug, and only in specific circumstances, such as public health crises. The second is called Section 1498, due to its location in the US Code. Section 1498 was used to negotiate reductions in drug prices during the 1960s and 1970s.
(Source: KHN, In The Battle To Control Drug Costs, Old Patent Laws Get New Life, October 5, 2018)
Iowa Farm Bureau Health Plan to screen applicants for preexisting conditions
People who enroll in individual health coverage through the Iowa Farm Bureau Health Plan will be screened for preexisting conditions, according to an October 3 announcement. Policies for the 2019 plan year will go on sale November 1 and are expected to be less expensive than individual health plans sold through HealthCare.gov.
Iowa is allowing the sale of the policies under a recently enacted state law that declared policies sold via the Farm Bureau are “underwritten health benefit plans” and therefore not required to comply with the Affordable Care Act (ACA).
Applicants will go through a “pre-enrollment checklist,” which will screen for preexisting conditions and treatments that enrollees received over the past five years. Applicants must agree to disclose medical records and medication use. According to the Farm Bureau, applicants could be denied coverage—or required to pay higher premiums—depending on health status.
The plans are for Iowa residents who neither have employer-sponsored coverage nor qualify for federal subsidies through HealthCare.gov. Farmers and non-farmers can apply for coverage upon joining the organization. Benefits for the coverage will be comparable to ACA-compliant plans, according to the Farm Bureau. Maternity services, mental health care, prescription drugs, and addiction treatment will be covered under the plans.
Premiums for exchange benchmark plans to grow just 1.5 percent
Premiums for benchmark health plans sold through HealthCare.gov will increase by an average of 1.5 percent for the 2019 plan year, although this varies by state. This is the first time the overall average rate has declined since the federal exchange launched in 2014, according to an October 11 statement from CMS.
Federal premium subsides are tied to the second-lowest-cost silver-tier plan sold through the exchanges. Of the 39 states that sell coverage through the federal exchange, 16 will see lower premiums, two will not change, and most of the others will have single-digit increases. Premiums for health coverage sold in Tennessee will decrease by an average of 26.2 percent, while average rates in North Dakota will grow by more than 20 percent. Between 2017 and 2018, premiums for benchmark plans increased by an average of 37 percent, according to CMS. The agency’s analysis is based on health plan data as of September 28.
(Source: CMS, Premiums on the Federally Facilitated Exchanges Drop in 2019, October 11, 2018)
A peek inside the White House’s tech startup
The United States Digital Service (USDS) is a group of 150-200 private-sector staffers who serve in the White House for 18 months to four years while trying to solve some of the federal government’s biggest technology challenges. They refer to their group as the White House startup.
The program started in 2014, when the White House recruited a technology team from the private sector to help solve some of the challenges resulting from the launch of HealthCare.gov. Since then, the USDS team has worked on technology transformation for Vets.gov, the Internal Revenue Service (IRS), and many others. Early this year, USDS rolled out Blue Button 2.0, an application program interface designed to make Medicare claims interoperable. The team is also helping to roll out of the Precision Medicine Initiative, and is partnering with various federal agencies to build volunteer research platforms and the supporting technology.
The USDS’s mission has four core components:
- Transforming critical services by managing technology projects that rely on a user-centered design framework to prioritize user needs and to modernize software development practices.
- Rethinking how the government buys digital services by modernizing procurement processes for the digital era.
- Expanding the use of common platforms, services, and tools by partnering with agencies to identify and implement shared tools and services to address common technical issues and usability challenges across the government.
- Bringing top technical talent into public service by recruiting top technologists for term-limited tours of duty with the federal government.
Recently, CMS asked the team to move Medicare data into the cloud. The dollar value of the claims it processes is equivalent to about four percent of the US gross domestic product (GDP). To accomplish this, the team will need to run eight million lines of Common Business-Oriented Language (COBOL)—a high-level programming language for business applications.
Medicare now pays claims through four separate systems, and USDS will start with the oldest one and slowly move data into the cloud. USDS is beginning this process with a small, low-risk piece of code that would not cause the system to grind to a halt if disrupted during testing and development. After establishing a proof of concept, the team aims to move faster and provide CMS with tools and processes to continually move data.
In addition to writing code and solving the latest technology problem, the USDS wants to introduce and foster interest in public service from top talent who might naturally gravitate to Silicon Valley.