Transforming Life Sciences To Reduce Costs, Increase Value, And Improve Outcomes

Joseph Miles

Recently, a business trip through Asia took me through Japan, Hong Kong, and Western China. The timing was perfect as spring had arrived in all the cities I visited, and I enjoyed reconnecting with co-workers and customers while meeting numerous new people.

I always enjoy my trips to Asia, but this one seemed different. The life sciences industry continues to go through a period of tremendous volatility, and this trip would highlight the current reimbursement challenges across the globe. It started as I was departing the U.S., where the current administration had been talking about “astronomical drug prices” and how to reduce the level of reimbursements across the healthcare market. As a percentage of gross domestic product (GDP), the U.S. has the highest-priced healthcare in the world, but it is rated in the middle of the pack of mature markets on health metrics, and can no longer continue to spend at its current rate.

Arriving in Tokyo, I was greeted with the recent news of an approximate 50% reduction in the price of Bristol-Myers Squibb’s and Japan’s Ono Pharmaceutical’s cancer drug Opdivo while Gilead’s Hepatitis C cure Solvaldi had its price cut by 32%. Further, the drug pricing review board in Japan was transitioning to review all new therapies on a quarterly basis, and of all existing therapies on an annual basis to reduce spending across the world’s third-largest pharmaceutical market.

As I headed to China, the news was more positive as the pharmaceutical market is expanding, with approval by the Chinese government, to increase the number of drugs covered by the state-run medical insurance plans. The second-largest drug market in the world announced it would expand the number of products covered to include 2,535 western and traditional medicines, an increase of over 15%, even as the margins for those products would be reduced due to account for the increased volume.

Unfortunately, what’s happening in Asia is not an isolated incident. Governments across the globe are no longer able to pay for healthcare at current levels. Markets are reducing reimbursement levels significantly, requiring life sciences companies to reimagine their business models, processes, and work in ways that create incremental value for patients, physicians, payers, and providers while simultaneously reducing the cost of therapies, drugs, and devices.

Although this transformation is just beginning for many countries and companies, it’s exciting to see some of the ways organizations are transforming their current processes to improve the value of the products and therapies for patients across the globe:

  • Outcome-based reimbursement: Payers require greater certainty that their capital is having it intended impact rather than simply paying to have a patient consume a drug or product. Further, as patients become more accountable for their own health, they are increasingly more active in the evaluation and analysis of the therapies and treatments available. Today’s technology now provides the opportunity to create outcome-based reimbursements across many new drugs and products. For example, many of the new biological drugs provide tremendous innovations, but they also are very targeted to patients who have a specific biomarker. Oncology products like Merck’s Keytruda require a genomic test for a patient’s L-PD1 level as a prerequisite for taking the drug. Patients with higher levels of the L-PD1 protein are much more likely to have a positive outcome to the test.
  • Leveraging machine learning: Rapidly evolving technologies are providing the ability to leverage machines across a wide array of process areas. Machines can track a patient’s health metric from a wristband, wirelessly notify a diabetic patient of their glucose levels, or follow voice commands in a manufacturing clean room to read back standard operating procedures during a manufacturing process. Machine learning, along with adoption of connected patients and devices, is increasing at a remarkable rate and we will continue to see rapid growth in this area.
  • Enable operational excellence: Global regulatory agencies have established operational standards for the manufacture of drugs and devices, but many organizations have been reluctant to automate good manufacturing practices (GMP) for fear of non-compliance. That approach is no longer acceptable as organizations must look to improve their quality processes in ways that also reduce the cost of compliance. Electronic batch or history records, documents that capture every aspect of the manufacturing process, are still aspirational, but leading companies recognize the importance of transparency and auditability across the operational landscape and strive to improve in this area.   
  • Leverage an outsourced operational model: Reimbursement reductions have negatively impacted margins, so organizations have increased the use of third-party/contract organizations to reduce the cost of operations. This is a logical response to the margin erosion, but outsourcing in a highly regulated industry like life sciences is never simple. The life sciences manufacturer that owns a particular drug or device patent can outsource the process, but not the regulatory accountability for that process. For example, many life sciences companies manage their source to pay processes. This allows them to source and buy raw materials and manage the manufacturing of direct materials by third parties to incorporate work instructions, including serialized information to meet global pharmaceutical regulations, and most recently, monitor quality processes in real time in the cloud.

It is truly a remarkable time in life sciences, and I am excited about the innovations that are happening across the industry. Let me know your thoughts and some of the innovations you are seeing—I would love to hear about more exciting use cases.

For more on how technology is transforming the life sciences industry, see Business Process Digitization In Life Sciences.


Joseph Miles

About Joseph Miles

Joseph Miles is Global Vice President pf Life Sciences at SAP. He is passionate about helping organizations improve outcomes for their patients and enable innovation across the health sciences value chain.