When the human body is the biggest data platform, who will capture value?

We are entering a Fourth Industrial Revolution where rapid technological advances have made it possible to generate and disseminate data at unprecedented rates. As new technologies empower individuals to see and share their health data, they are demanding greater say over their lifelong health journey, as well as new health products and services.

Sensing an opportunity, digital health and technology entrants are moving to meet consumers’ demands. The explosion of narrow, disease-specific point solutions are slowly being aggregated into integrated systems that create engaging, high-touch offerings. In this rapidly converging world, life sciences companies must consider how they will adapt their current business models to create future value.

Creating future value

Innovation will continue to be a central component of how life sciences companies create future value. But increasingly these innovations will be valued based on their ability to satisfy the demands of life sciences companies’ diverse customers – payers, care providers, policy makers and consumers.

To do so, companies will need to frame innovation in terms of health outcomes, affordability and personalization. This broader definition of innovation means products are no longer the central driver of value. Instead, innovation will be powered by an increasingly diverse stream of data that resides outside the confines of the traditional health ecosystem and the electronic medical record.

Creating agile and data-centric platforms

To be successful in this new environment, life sciences companies need new ways to safely and quickly tap into different data sources to combine and connect them to their deep scientific and clinical data. Platforms, interfaces that promote the exchange of information between new and existing stakeholders, are one way to do this.

In health, platform capabilities are emerging at two different levels. In immediate proximity to consumers, companies developing different applications, products or tools will join forces to create platforms of care that address specific health needs. Above these individual platforms of care, global technology, artificial intelligence and data analytics companies will combine skills to become supra-platform aggregators, helping to scale insights gained at the platform of care level across multiple therapeutic areas.

Embracing the health technology opportunity

Although life sciences companies currently house only a small amount of data tied to health outcomes, the data they do hold are incredibly rich. If life sciences companies combined these clinical data with environmental, behavioral and financial insights, they could position themselves as one of the primary owners of the outcomes data that drives future value, strengthening their position as key health technology providers in a wider ecosystem.

Digital health start-ups and technology incumbents are using their engineering and data expertise to create new products and services that satisfy the demands of consumers, physicians and payers. An EY analysis of the US health patents filed by major technology players shows the investment technology giants are making in health care.

Life sciences companies have responded to this potential disruption with their own exploratory programs, using AI and other digital tools to improve or optimize clinical trial recruitment, drug discovery and interactions with payers and physicians.

These efforts are important. An analysis by EY shows that even major clinical breakthroughs face the prospect of diminishing returns as cost-conscious payers require proof of real-world value. As life sciences companies expand their digital efforts, however, the investments are too often made in isolation of each other. As a result, companies are at risk of underinvesting in the technologies that will transform their business models and generate significant future top-line returns.

Robust platforms of care won’t become a reality unless life sciences companies also partner with payers, providers and consumers to create a shared vision of future value that is linked to health outcomes.

As care platforms become a more important part of capturing future value, life sciences companies can deepen existing relationships using data. They can help stakeholders achieve value-based care goals that include increasing the quality of care delivery, lowering the total cost of care and most importantly, improving overall long-term health outcomes.

Future models

Platforms can help accelerate alternative payment models that share risk more broadly with payers, physicians and consumers. Life sciences companies should be aware of three different models of growing importance:

Subscription-based: Subscription models allow consumers to pay for higher-touch care in increments, making the service more affordable. For physicians, subscription models allow them to spend more time with individuals with more complicated medical needs. Life sciences companies, meanwhile, have new opportunities to develop services that improve medication adherence or make lasting behavioral changes.

Population-based: Population-based models pay a physician or group of physicians a set amount for each enrolled individual assigned to them during a defined period. The idea is to create incentives that standardize treatment protocols in order to provide the most cost-effective care to the greatest number of people. Most biopharma or medtech products are not included in population-based payment models due to the complexities associated with defining which products and services should be included, but examples in diabetes and end-stage renal disease merit watching.

Pay-as-you-live: A recent trend in the insurance market is the rise of “pay-as-you-live” (PAYL) models that reward customers for adopting healthy behaviors. In exchange for providing data to the insurer via wearables or mobile phones, consumers are encouraged with lower premiums and personalized solutions to make long-term changes that reduce the risk of chronic illness. While most current PAYL models are linked to wellness, they could be adapted to the treatment of diseases and involve not just insurers, but life sciences companies as well.

Across all industries, convergence has accelerated the turn-over rate for companies earning a Fortune 500 listing. Based on EY forecasts, between 47% and 81% of the companies on the Fortune 500 could be new by 2023. The implications for the 18 life sciences companies listed on the Fortune 500 are significant: only four might still be there by 2023.

Although many life sciences leaders question the return on investment associated with platforms, these interfaces are a way to seize disruption in a transformative age. Because of their scientific and clinical knowledge, life sciences companies can play a leading role in shaping platforms of care into robust, evidence-driven interfaces that exponentially improve health outcomes.

Creating value in the convergent age

As companies respond to evolving customer demands, their share of total market value will shift in ways that depend on their chosen business models: Breakthrough innovator, Disease manager, Efficient producer, Lifestyle manager. To be successful, companies must differentially invest in capabilities and intellectual property that align to their business models. Should companies decide to shift business models, they must also understand the investment in time, money and talent required.

Future-proofing the business

Convergence will create new business models, and new opportunities for life sciences companies to capture value. Indeed, the four traditional models may shift, meld or completely disappear as a result of rising customer expectations and technological changes. In the future, life sciences companies will be better able to use data to understand the shifting market landscape and predict how changing customer needs directly affect the future value they can create.

Life sciences companies have a limited window of opportunity to embrace and participate in the development of platforms of care. In doing so, companies not only gain direct access to customers, but build trust by working alongside payers and physicians to improve the health care experience, and solidify their place as trusted contributors to the overall health ecosystem.