McKinsey PMP Digital Pharma in a digital world...Jan 27, 2016 · McKinsey & Company 4 Thought leaders in digital health agree that the fundamental ecosystem of healthcare is changing

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McKinsey PMP Digital

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Pharma in a digital world

New York Pharma Forum

January 27, 2016

McKinsey & Company

Contents

McKinsey & Company 2

Why does digital matter?

What are the opportunities?

How to capture the value

McKinsey & CompanyMcKinsey & Company 3

5 technology-related trends will lead to major disruptions to the pharma industry by 2025

Competitors and non-traditional entrants

seize control points

Patient engagement capabilities are

core to Commercial model

Expected 2025 disruption

Payors and

providers intervene

beyond the pill and

between HCP visits,

leverage technology

to drive on outcomes

and value

Patients

increasingly using

digital channels to

engage in their

health, savvier about

products as well

as services

New players will act

as intermediaries,

aggregating data and

building platforms

essential to a

pharmaco’s business

Data on product

performance

increasingly

generated outside

pharmaco, often

owned by consumers

Non-traditional

players move into

healthcare tech

Patients are more

engaged in their

health

New tech makes

outcomes-based

care easier

New generation of

tech-enablement

for core biz

processes

More transparency

into product

performance

1 2 3 4 5

Dramatically higher

expectations on

efficiency

and agility

Advanced analytics,

sensors and

automation of

complex decisions

allow step change in

efficiency, speed,

quality and

responsiveness

SOURCE: McKinsey PMP Digital Hub research


Thought leaders in digital health agree that the fundamental ecosystem of healthcare is changing

SOURCE: McKinsey interviews with leaders in digital health across pharma, data analytics, startups, venture, academics, and medical futurists

Physicians“Wearable devices that today are still in the more recreational-grade state are changing incredibly rapidly into research-grade

and, ultimately, clinical-grade tools. Physicians need a package of solutions to navigate this environment”

Data“Payers will become increasingly like providers in

offering interventions and home care, and increasingly

like pharma in analyzing data and pressure-testing

value”

“Healthcare will be driven much more by consumers than

physicians, with patients increasingly coming to their

doctors with more information, parameters they

measured at home, and an informed opinion about

how they should be treated”Patients

“How doctors spend their time will change dramatically.

They will shift to spending a smaller proportion of it ordering

diagnostics and interpreting results, and much more on the

social elements of healthcare”


Pharma/healthcare is behind other industries on digital

Source: Expert interviews, McKinsey analysis

Time

Industry revenues rapidly compressing and shifting away from IncumbentsIndustry revenues rapidly compressing and shifting away from incumbents

Margin compression

New trends

emerge

Innovative start-

ups create disruptive

business models

Early adopters start

embracing the new

models

Advanced

incumbents start

adapting to the

new model

Mainstream

customers

adopt

Laggard in-

cumbents die

Advanced in-

cumbents and

established

“startups”

constitute the

new normal

Tipping

point

Traditional

Media

Consumer

Digital Media

Healthcare

Retail banking

McKinsey & Company

Contents






IoT platform

Big data

Business processes

Sensors and digital services for

tailored care 24/7

Omni-channel conversations across

HCP and patient decision journeys

Advanced analytics to gain real-world

insights and demonstrate value

Automate processes to improve cost,

responsiveness, and agility

Build digital services, apps and

platforms delivering beyond-the-

pill care as part of a suite of

therapy area solutions

Foster the dialogue between

to patients, HCPs, caregivers,

and KOLs to develop

relationships, provide support

and generate insight

Build analytics and data

access capabilities to drive

distinctive insight on unmet

needs, safety & efficacy,

personalized therapy

Bring safe drugs to

market faster, with

improved agility

and efficiency

Opportunities for pharmacos to drive value from digital can be seen across four dimensions Details follow

Digital is

transforming

patient care and

existing business

models



Personalized: integration of products and services: 2025 vision

Medications include embedded

sensors for tracking and

diagnostics

Adherence is monitored by such

“smart pills” which helps to

determine specialty drug

reimbursement

Therapeutics include real-time

services and support integrated

with social networks

AI-based treatment planning

achieves balanced treatment goals

and outcomes

Wireless body area networks and

sensors become ubiquitous

Data are combined with “exhaust”

from other products (e.g. smart

refrigerator) to achieve more

precise readout



Data-driven advanced analytics used across the business: 2025 vision

Pharma utilize multiple streams

of data, including claims, clinical

data, and patient-reported

measures for real world insights

Contracting based on granular

risk-based pricing (e.g. using

adherence and cure rates) to

determine payments

Sales reps are targeting using

advanced analytics to identify

highest likelihood of lift in

prescriptions and dedicated to that

Physiological simulation and 3D

tissue modeling models toxicity

in-silico, for speed development

Clinical trials and development

use data from multiple

wearables to track physiological

measures, adherence



Apple and other non-traditional big data players are gaining traction in healthcare

2015 PartnershipsApple Watch

Healthkit /

ReseachKit

Source: Press

“We believe Apple’s HealthKit will revolutionize how the health industry interact with people”

- CEO Mayo clinic

Ochsner utilizes Apple’s Healthkit and Watch to

track data for patients with heart conditions

(44% drop in readmissions)

John’s Hopkins built an Apple Watch app,

EpiWatch, based on ResearchKit data that helps

diagnose epilepsy

Introduction of IBM Watson Care Manager, a

tool which integrates HealthKit / ResearchKit

with IBM’s patient engagement tools from Phytel

Quintiles improved open source code for

ResearchKit and will use the software to develop

applications in neurodegenerative diseases


Startups and other non traditional entrants are developing solutions to diagnose and treat patients digitally

Insomnia

Schizophrenia Cardio

Cancer“We hope today is a turning point in

the war on cancer…by enabling the

early detection of cancer in

asymptomatic individuals through a

simple blood screen, we aim to

massively decrease cancer mortality

by detecting the disease at a curable

stage”

- Jeff Flatley

CEO, Illumina

ADHD /

Neuro

▪ App to measure Lead 1 ECG in real

time through the company’s

automated algorithm

▪ Attachable to any smartphone

▪ Received FDA approval for Afib

diagnosis in 2014

▪ Cognitive training for schizophrenia

and related disorders

▪ Underwrote largest clinical trial

assessing the efficacy of

computerized cognitive training (487

participants)

▪ Recruiting for study assessing CT

for mild traumatic brain injury

▪ “Prescription-strength” video game to

improve working memory and

attention of users

▪ Initial findings in late 2015 show

positive impact on attention

▪ Received $10M in funding from Shire

and PureTech and used in a Pfizer

Alzheimer’s trial

▪ Gene sequencing firm Illumnia

announced the launch of a new startup

company, Grail, in early 2016 to develop

a simple blood test for cancer diagnosis

▪ Received $100M in funding from Jeff

Bezos and Bill Gates

▪ Developed platform for CBT, initial

implementation in insomnia

▪ Targeting direct to consumer payment

▪ Conducting 2+ clinical trials testing

efficacy of internet intervention vs.

electronic control module



Pharmaceutical companies are also partnering with startup health tech companies

SOURCE: Press searches, company websites, literature search

Collaboration to develop

“smart” version of GSK’s

Ellipta inhaler

Propeller’s proprietary

sensor used on inhalers to

track usage directly onto

mobile app for improved

disease management

Propeller’s sensor has

been used over 35

commercial programs in

the US and demonstrated

over 70% reduction in

rescue inhaler use

Development of a pill-plus

form of Otsuka’s Abilify for

mental illness, a disease

category with pronounced

compliance issues

Proteus ingestible sensor

measures medication-

taking patterns and

physiologic response

FDA has agreed to review

the product as the first

digital drug filing

Formation of a joint

venture called Bayer

LifeScience Center with

CRISPR Therapeutics, a

genome editing startup

Partnership seeks to take

a data driven approach to

drug development in

hemophilia, heart disease

in infants and macular

degeneration

Bayer will invest $300M

over next 5 years in

CRISPR

Dec 2015 Sep 2015 Dec 2015


Teva and IBM are partnering to drive innovation through the Watson Health Cloud

SOURCE: Teva website, Fiercebiotech, Press, September 2015

▪ IBM’s Watson Health Cloud

developed to house

anonymized personal health

information that can be shared

and combined with clinical,

research and social health data

▪ Teva selected to become the

first global pharmaceutical

company to partner with the

Watson Health Cloud

▪ Initial goal is to use Watson to

create disease models for

therapeutic advances

▪ Broader motivations include the

analysis of real-world data to

identify drug misuse and

development of advanced

analytical solutions to improve

adherence

By building on the

Watson Health Cloud, we

believe Teva will be in a

unique position to put the

best information and

insights in the hands of

physicians, care teams

and patients, to empower

treatment optimization”

- Guy Hadari

SVP/CIO, Teva

McKinsey & Company

Contents






Incumbents can do it

MyJohnDeere.com

A tractor


It is not easy though

Data

Poor quality, heterogeneous,

sparse data

“Walled gardens” hinder data

fluidity

Fragmented talent

& resources

Internal talent scarce; weak

position in external “talent war”

Funding scattered across 100’s of

initiatives

Unaligned incentives

Inflexible legacy IT

Focus on ERP, supply chain

Long application dev’t cycles

Fragmented IT architectures

Little senior support & focus to

scale promising initiatives

No central oversight on portfolio of

partnerships; hard to extract value

Legal, regulatory, policies

Data privacy, cyber security issues

Intellectual ownership and liability

issues

Mindsets

Risk averseness

Strong incumbent mindset

Trust across partners in ecosystem


Lack of top-down

governance


It starts with being aspirational

SOURCE: www.space.com

“We choose to go to the

Moon in this decade and do

the other things, not because

they are easy, but because

they are hard; because that

goal will serve to organize

and measure the best of our

energies and skills

– John F. Kenney

September 1962

Text


Here’s what external thought leaders are saying to pharma

Strategic Shifts What thought leaders are saying

“Users of pharmaco products are comparing them with those of the best

consumer electronic brands”

“Pharmacos are now competing with nimble, small to midsize rivals that have

nothing to lose”

Go beyond the

pack mentality

and embrace

experimentation

and risk

1

Embrace a

collaborative

culture and

challenge barriers

to sharing

“Pharma companies may think they need to keep their data secure but not being

transparent about clinical trials will put them at a perilous disadvantage in

front of patient groups and regulators”

“Pharmacos need to build trust-based personal relationships with consumers”

2

Reinvent

companies by

building

nontraditional

capabilities and

embedding them

in new operating

models

3 “There’s a broader conversation to have with pharma about moving from a

products and pills company to a solutions company”

“The harder question is what are the fundamental organizational changes that

will need to occur? … Technology change is the easy part”

“Pharmacos need to double down on talent that truly understands science and

health data: clinical informaticists who can manipulate EHR data, or data

scientists who aren’t just the IT guys in the basement but are business partners”

SOURCE: Interviews with external thought leaders across VC, startup, analytics frims, pharmacos

McKinsey & CompanyMcKinsey & Company 19SOURCE: McKinsey Digital Taskforce

Change management & digital leadership

How

Digital capabilities

What

Digital transformation driven by the CEO

New

frontiersCore

Foun-

dationsMission

Ground

controlBooster

Scaling the relevant assets into the digital worldProduct portfolio and product development team, existing customer relationships,

global supply chain, company assets, business building approaches

To drive a successful digital transformation, you need to define the "what" and "how"


Mission

9 steps to take on the "how"

Ground

control

Link budget to realization of intermediary targets (e.g. from

idea to concept to prototype to go-live)5 Budget like a start-up

Install a blended digital challenger board with digital natives

as well as those who know the core business6 Be critical

4 Define rough quantitative targets for each team/initiativeNo measurable targets –no learnings and success

Give cross-functional teams authority to lead the "classical"

teams/ functions7 Allow for dictatorship

and a "license to kill"

Start from the customer and prioritize key customer journeys

in order to digitize touchpoints journey-by-journey 2 Customer first!

Rank all relevant digital initiatives / assets by impact and

feasibility along foundations, core and new frontiers1 Digitize end-to-end

For each prioritized initiative / asset, build a cross-functional

team with clear mandate and digital talent3 Break your functional silos or

they break your digital future

Split up IT: Protect legacy IT which hosts sensitive data and

establish agile capabilities for fast moving B2C systems –

initiate rapid test and learn cycles

8 2-speed IT or you are too slow

Drive implementation to scale along a digital roadmap:

Journey-by-journey, touchpoint-by-touchpointScale it!9

Booster

SOURCE: McKinsey Digital Taskforce

Approach


Takeaways from today

There is a lot of opportunity and

players are already carving out space

Digital is changing the

pharma/healthcare landscape as we

speak

Be bold – it's a transformation not a

number of initiatives

Talent and mindset shift is key

Implementation success requires being

clear on "what" and "how" (and

courage)


To discuss more, you can email me at

[email protected]

Documents

McKinsey PMP Digital Pharma in a digital world...Jan 27, 2016 · McKinsey & Company 4 Thought leaders in digital health agree that the fundamental ecosystem of healthcare is changing