RP

Research

Business
Model
Innovation:
Pharma 4.0
Opportunity From Disruption
Target the new value zone

Serving the new customer

Arrival of fourth industry revolution (see figure 1) characterized by interplay between
fields like nanotechnology, brain research, 3D printing, mobile networks, computing
and artificial intelligence, is transforming everyone - producer, consumer and the care
giver. For healthcare this IR 4.0 has started a revolution of patient individuality.
Physical access to healthcare from archaic mainframe systems is slowly moving to the
right place- the digital space.

What started as a preventive add-ons to your existing

smartphones to check, calibrate and manage the treatments
has picked up great pace. The field of patient centric
treatment is burgeoning with the portable, wearable,
interconnected-
to travel and have bio sensors
travel and point of care tests that do
experiences.
not require sophisticated infrastructures. The world of
healthcare today is undergoing pleasant creative
destructions. These creative restorative forces are shifting
the healthcare paradigm. One-on-one treatment shift - from
commoditized care to personalized treatments and from
physician governed treatment to patient assisted care is
creating an altogether new ecosystem. This Predictive
Care model is impacting all in the healthcare value chain.
For life sciences companies, this change opens up a new
value zone. One, which is chiefly information mediated and
is assisted by a closely held together ecosystem. Strategies
required to serve the new customer in this hungry for
McDonalds styled healthcare are different and should be
mastered by all Life Sciences companies. In this report we
outline major changes in the healthcare system and some of
the strategies life sciences companies could choose to
strengthen their business models and prepare for the future.

Ravi Vij
Research Director- Healthcare, Life Sciences
R&P Research
Industry Revolution 4.0
Change at an unimaginable speed, scale and force

Figure 1: Industry revolution 4.0

1786 1883 1968 2014 Future

Revolution 4.0
The interplay between
fi e l d s l i k e
Revolution 4.0 nanotechnology, brain
40% of businesses, research, 3D printing,
unfortunately, will not exist in mobile networks and
a meaningful way in 10 years computing will create
Cisco CEO- John Chambers realities that were
unthinkable yesterday.
Revolution 3.0
The third industry
revolution brought
mainframe computers,
personal computing
and the internet
Revolution 2.0
The second industry
revolution brought
mass production
through assembly lines
and electrification
Revolution 1.0
The first industrial
revolution brought
m e c h a n i c a l Revolution 4.0
innovations like the A fusion of technologies that
steam engines, cotton is blurring the lines between
spinning and railroads the physical, digital and
biological spheres.

Copyright 2016 R&P Research Pvt. Ltd. All rights reserved.

Healthcare 4.0
Patient powered care ecosystem

There is a great debate around how
Healthcare sector can benefit from the
fourth industry revolution?. We believe
that nanotechnology, 3D printing,
Internet of things, robotics, genetics and
artificial intelligence will transform our
current healthcare system - from a
closed system to an open system (see
figure 2).
This creative destruction offers unique
opportunity for traditional and disruptive
companies to build an outcome centric
care ecosystem that will live up to its
original motto - helping patients feel
better and live longer

3D Printing

Internet of
Artificial Things
Intelligente
Robotics
Genetics

Figure 2: Healthcare 4.0 Nanotechnology

Patients
Providers

Healthcare 4.0
Pharma Patients Payers
Will transform business
model of pharma
companies
Regulators
Copyright 2016 R&P Research Pvt. Ltd. All rights reserved.
 Healthcare Evolution
Care evolution and time for pharma to evolve its business model

Figure 3: Healthcare and Pharma Business Model Evolution Healthcare 4.0

Predictive Care
Healthcare 3.0
Data Analytics
Proactive Care
Healthcare 2.0
Remote Monitoring
Reactive Care Infrastructure

Healthcare 1.0 Patient

Pharma Payer
Paternalistic Care Treat Engage
Care Ecosystem
Patient
Provider
Bio Healthcare
Patient Services
Electronics
Govt. Provider
Parts Diagnose
Patient
Repairs Asset Optimization
Predictive Outcomes
Positive Outcomes

Rx Business Model Rx Business Model Rx Business Model Rx Business Model

Pharma 1.0 Licensing Business Licensing Business Licensing Business

Model Model Model

Pharma 2.0 Beyond Pill Business Beyond Pill Business

Model Model

Pharma 3.0 Pill as a Service

Business Model

Pharma 4.0

Copyright 2016 R&P Research Pvt. Ltd. All rights reserved.

Healthcare Evolution
Shift from reactive to proactive to predictive care

From a simple philanthropic system of

home remedies and itinerant doctors with
little training that provided paternalistic Changing Healthcare
care, our healthcare system has evolved
into a complex, commercial, System
technological, and bureaucratic system
often called the "medical industrial
complex.

Our current health system, designed in 1

the post-World War 2 era is reactive in
nature, focused on responding to an
individuals needs once a symptom,
event or illness has occurred.
Proactive care stratifies at-risk
individuals based on known algorithms
and ensures that preventive actions are
taken to intervene well before the onset
of symptoms, let alone illness. This
approach has long been recognized as
vital to maintaining population health
and protecting healthcare (or sick care)
system resources so they are available
only for the most acute needs.
Paternalistic care
Medical care in which health care
professionals exercise unilateral authority
over patients
Reactive Care
2 Focused on responding to an individuals
needs once a symptom, event or illness has
occurred
Proactive Care
3 Risk stratification based on known
algorithms to initiate preventive actions well
before the onset of symptoms

The emergence of cutting-edge 4

Predictive Care
technologies and sophisticated machine- Stratify and predict risks and provide
learning data algorithms is taking this upstream care based on new age
shift to the next level, paving a way to technologies
not only stratify risk, but also to predict
risk and intervene further upstream. This
is called predictive care.
Pharma Business Model Evolution
Evolving to keep pace with changing times
Traditionally pharma companies
designed their business models around
providers. Rx and licensing business
models are centered around providers:
influence the providers to get
prescriptions for researched or acquired
products.
This race to build the next block buster
drug resulted into sixty companies
becoming top ten pharma companies in
last two decades (see figure 4). Our
analysis also confirms that M&A have
historically helped big pharma
companies grow more than the growth of
the global pharma market. We believe
that M&A would continue to fuel the
pharma growth in the short term.
With the advent of the Internet,
wearables, wellness apps and other
technologies, patients are becoming
more empowered and informed about
their own health and this is resulting in a
movement toward patient-centred
healthcare. Beyond pill business models
are an attempt to offer patient centered
services by pharma companies
Future of healthcare is in predictive care
and pill as a service business model
offers a great opportunity for pharma
companies to transform themselves from
a product centric business to a digital
healthcare services business.
Changing Pharma
Business Models
Rx Business Model: Direct and
1 indirect channels to influence the providers
to
Prescribe new medicines to existing
and new patients
Get new patients for existing drugs
by making patients aware about their
diseases
Promote new indications for existing
drugs to providers
Licensing Business Model:
2 Business development to augment
research and commercialisation in targeted
therapy areas
Beyond Pills Business Model:
3 Services and solution to improve patient
engagement, health analytical and clinical
services
Pill as a Service Business
4
Model: Become predictive care partners
by offering digital products and services
(medical-industrial internet, cloud based
software platform, Intelligent health
assistants) using bioelectronics &
personalized medicines.
 Building segmental capabilities
Mergers and acquisition have fuelled the growth historically
Figure 4: Pharma industry M&A analysis 1995-2015

Copyright 2016 R&P Research Pvt. Ltd. All rights reserved.

Pharma Business Model 3.0
Bundling services to become customer relevant

Pharma companies are getting ready to

adapt to the new realities of healthcare, How Merck Is
in which all the healthcare stakeholders
including pharmaceutical companies
would be reimbursed differently- on the
Building Beyond The
patient outcomes achieved in real world
healthcare setting. Pharma companies are
Pill Services?
capitalising on the synergy between
health technology and patient data to
Capturing the patient voice
build beyond the pill services to improve
patient outcomes. Many companies have to better define populations
established healthcare services segment and outcomes. Merck is working
that provide beyond the pill services and with social media data to better define
solution to improve patient engagement, the diseases & symptoms and build
health analytical and clinical services. optimal patient engagement and care
solutions.
There are few emerging companies that
are now entering the realm of proactive
care. These technology companies offers Innovative uses of data to
their healthcare platforms, disease data find new opportunities for
and softwares to build proactive care treating disease. Merck is
interventions. building partnership with healthcare
Institutes in using clinical data to
Verily healthcare (see figure 5) is
identify new and better ways to care
building this proactive healthcare system
for patients in targeted therapy areas
by establishing the disease baseline to
stratify the risks. Verily has also built the
proactive healthcare platform that utilises Technologies to help
nano particle diagnostics and wearable clinicians improve care
detectors to identify the state of disease
using big data analytics models. Many
quality: Merck is building
pharma companies are working with technology solutions to help doctors
Verily to build Smart devices & track, remind and engage the patients
personalised medicines that will offer in clinical care.
proactive care before it becomes an
illness.
 Proactive Healthcare Management
How verily is reinventing healthcare

Figure 5: How Verily is reinventing healthcare

Current Reactive Healthcare Management

Patient diagnosed Treatment for the Disease Patient

with a disease diagnosed disease management engagement

Reactive Healthcare Infrastructure

Hospitalized care Rehabilitation Wellness wearables
Provider diagnostics
Home care Medication management Incentivization
Self diagnosis
Patient self care Diet management Gamification

TO
Proactive Healthcare Management

Onboarding on Proactive care Patient management

Disease baseline
proactive healthcare management ecosystem
platform

Proactive Healthcare Infrastructure

Application software
Biomarkers Nano-diagnostics Remote monitoring
Development tools
Risk stratification Wearable detectors Smart devices
Devices and accessories
Proactive healthcare standards Big data analytics Personalised medicines
Patient management services
Copyright 2016 R&P Research Pvt. Ltd. All rights reserved.
Pharma Business Model 4.0
Pill as a service model

In recent years, healthcare businesses

have witnessed a new threat from
disruptive data and analytical companies.
These new age companies are playing on
Signs Of Disruption In
their understanding of Internet of Things.
The Internet of Things refers to the Pharma Model
networking of industrial products
through the use of embedded sensors,
that can collect or transmit information
about the products. The data gathered Atomwise uses supercomputers that root out
from these connected devices can then be 1 therapies from a database of molecular
analyzed to optimize healthcare structures
products, services, and operations. To
overcome the threat of becoming a Google, launched its Google Deepmind
commodity business, pharma companies 2 Health project, which is used to mine the
will partner, buy or build capabilities to data of medical records in order to provide
become a digital healthcare business. better and faster health services
These new age capabilities would
include building- medical-industrial IBM Watson launched its special program
internet, cloud based software platform, 3 for oncologists for selecting appropriate
Intelligent health assistants and shift treatment pathway
towards bioelectronics & personalized
products. U.K.-based startup Babylon will launch an
4 app later this year that will listen to your
In Pharma 4.0- pill as a service model symptoms and provide medical advice
(see figure 6), companies will offer their
digital product and services through a
GlaxoSmithKline is experimenting with
new business model to ensures long term
high margin business. In this model,
5 grain-size implants called bioelectronics
that treat disease
pharma companies will offers their
costliest product (medicines) free to their
customers and charges payers for the
healthcare outcome services at a
premium.
Pharma Business Model 4.0
Pill as a service business model

Figure 6: Future pharma business model

The future of pharma Core Capabilities Emerging Capabilities

in healthcare 4.0 R&D Regulatory Manufacturing S&M Digital Services

WHATS COMING NEXT?

The pharma landscape is changing fast. There is
increased pressure to innovate and create business Payers Pharma Provider Patient
models that might work in the healthcare 4.0 .
Here, we outline what the future might hold. Current Pharma Business Model
Changing Pharma Business: Four Possibilities

By 2030 over 80% of all doctor visits will

1 have been replaced by automated exams.

Software Platform
By 2030 traditional pharmaceuticals will be
2 replaced by hyper-individualized medicines
A.I. Health Medical-Industrial
that are manufactured at the time they are Assistants Internet
ordered
Personalized Healthcare
Medicines Core Capabilities Operations
By 2030 it will be common to use next
3 generation search engines to search the Bioelectronics
physical world

Patient
By 2030 Most people will have stopped
4 taking pills in favour of a new device that
causes the body to manufacture its own Digital products and
healthcare services
cures
Pharma Payers
Outcome contract
revenue

Future Pharma Business Model

Healthcare 4.0
Are you ready to transform your business model?

Four Key Questions for

? Pharma Companies
Are we open to new business models? Do we have a
1 partnership strategy in place?

Have we chalked out a plan to build or buy new

2
competencies? Do we know who are the disruptors?

Do we want to be a disruptor or are comfortable

3
being a fast follower, how do we map competitors?

How do we ensure common understanding of our

4 strategy?
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About R&P Research

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