Drugmakers are facing significant declines in their profits due the expiration of drug patents and cost-cutting by governments, among other pressures. Ernst & Young's report, Progressions: Building Pharma 3.0, says companies need to shift their focus from selling drugs to offering services that improve overall health outcomes through disease management, coordinated care, and an expansion across different stages of care -- or "Pharma 3.0."
That transformation is under way, albeit at an early stage of experimentation, the report notes. In the last year alone, pharmas initiated 97 projects -- a 78% increase over 2009. Driving those initiatives was mobile health technology. In particular, smartphone apps -- many specific to Apple's (AAPL) iPhone -- represented 41% of all initiatives.
Some apps are aimed at physicians. For example, Pfizer (PFE) is working with the Epocrates drug-reference app, which now includes a "Contact Pfizer" feature that allows physicians to contact the company to ask scientific questions or report adverse events. And Japan's Astellas has released a smartphone app that helps physicians assess the need for cardiac imaging.
Other apps empower patients. For example, Pfizer's collaboration with Keas brings a holistic approach to developing online personalized care plans, from weight loss programs to reminders to take pills. Roche is working with InterComponentWare to develop a web-based solution for diabetes management, while Merck (MRK) has the iPhone app Vree, and Sanofi-Aventis (SNY) produces blood-glucose monitoring devices -- developed with AgaMatrix -- that can connect to the iPhone.
Beyond diabetes, companies launched apps to aid with care in at least 14 disease categories in the past year alone. For example, Novartis' (NVS) VaxTrak helps patients keep track of vaccination schedules, Bayer's Factor Track helps hemophilia patients manage infusions, and GlaxoSmithKline's (GSK) Cancer Trials helps locate clinical trials. The largest fraction of these initiatives -- 15% -- are oncology-related.
Helping Old Drugs Work Better
For pharma companies, some of the biggest benefits will likely stem from improving patients' compliance in following treatment regimens. Novartis, for instance, is working with Proteus Biomedical's technology to develop microchip-embedded "smart pills" that can wirelessly transmit data to a patch and from there to a smartphone or a doctor's computer. PharmaTrust and Vitality also offer technologies to help remind patients to take their medications, as well as to notify caregivers.
"As payers [insurers, governments] become increasingly focused on health outcomes, Pharma 3.0 solutions ... will allow pharma companies to better leverage what they produce and what they know for improved health outcomes" he said. "Over time, these initiatives can generate new revenue sources as they are scaled up and applied widely."
That may be true, but for now pharmaceutical execs are still largely focused on drug innovation. Pharmas have invested only a small amount in such projects compared to the estimated $20 billion publicly committed by non-pharmaceuticals that are getting into that aspect of the health care business. And non-pharmas are going beyond apps into the realm of previously science fictional technologies.
Qualcomm (QCOM), for one, is leveraging its expertise in wireless connectivity. It is partnering with Hughes Telematics to develop bracelets, watches and pendants that can alert caregivers when an elderly patient has fallen down. The next generation of this tech will be "smart Band-Aids" -- peel-and-stick disposable biosensors that track heart rate, ECG or other common vital signs.
Meanwhile, a number of companies, including Cisco (CSCO), Medtronic (MDT) and Philips (PHG), are experimenting with "hospitals of the future" where patients' vital signs would be wirelessly transmitted from ambulances to the hospital, and where "smart beds" will communicate real-time patient data to the hospital's EMR system and alert caregivers immediately about adverse events.