Rethinking the Role of Life Sciences Companies in the Healthcare Ecosystem

Guy Lefever, Michele Pesanello, Heather Fraser, Lee Taurman
iHealth Connections, 2011;1(2):103-7
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Abstract

The life sciences industry stands at a crossroads. Its business model is broken and the environment in which it operates is changing dramatically. So how should companies respond? They can carry on as normal, at the risk of fading into insignificance, or completely rethink how they engage with the other stakeholders in the healthcare ecosystem, i.e. all the entities—be they other life sciences companies, individuals, governments, healthcare providers or insurers—that help keep people healthy.
Disclosure The authors are employed by IBM Global Business Services, which develops fact-based strategic insights on critical public and private sector issues for senior executives via the IBM Institute for Business Value. This article is based on an in-depth study by the Institute’s research team.
Correspondence: hfraser@uk.ibm.com

The challenges the life sciences industry faces have been thoroughly documented. Its scientific productivity has declined. The blockbusters on which it has long relied for its prosperity are coming off patent (see Figure 1). The regulations governing drug development and manufacturing are becoming more onerous. And the promotional practices it engages in are attracting greater scrutiny, with a growing number of doctors in the mature economies refusing to take sales calls.1

As if this was not enough to contend with, social, economic, and technological forces are also reshaping the healthcare ecosystem in which the industry works. The global population is aging.2 The incidence of chronic disease is rising.3 Patients are becoming more demanding. Plus new technologies and treatments are driving already high healthcare costs even higher.

Many governments have responded by trying to curb the soaring healthcare bill while improving access to care. Countries with socialized systems are transferring a bigger share of the burden to individual citizens. For example, in 2010, Germany passed a law increasing premiums for the country’s 72 million people with state health insurance.4 Conversely, countries with market-based systems are digging into the public coffers. The US is one such instance; the Affordable Care Act 2010, which aims to help the poor and elderly, will cost an estimated US$938 billion.5

Meanwhile, the medical community is pioneering new modes of healthcare delivery based on the continuous management of disease rather than expensive episodic care. Healthcare providers everywhere are also investing in electronic medical record systems, which will enable them to study how genetic variations, differences in treatment, and the like, have a bearing on disease.6

In addition, new entities—many of them from industries that have not previously played a role in healthcare—are entering the arena. Some of these entities, such as 23andMe,7 are changing the way in which diseases are identified and treated. Others are creating value through new business models, one such example being Dossia, a consortium of US companies that uses its collective influence to give employees better access to health information.8

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