Disruptive innovations and unsustainable costs propel life sciences companies into the behavioral change business
Shanghai, 13 September 2012 – With chronic diseases now accounting for three quarters of all health care spending in developed countries, life sciences companies will face increasing pressure to demonstrate that they are helping patients adopt healthier behaviors and manage their diseases more effectively. Yet to thrive in this environment, companies will be required to fundamentally reinvent their business models to make them more patient-centric and better able to drive behavioral changes in consumers, a path that few companies to date have been able to take. These and other findings were released today in Progressions, The third place: health care everywhere, EY’s annual report on the global life sciences industry.
This new imperative for life sciences companies to better understand patient behavior and influence positive changes is being accelerated by two key trends. First, changing incentives are shifting more financial risk to providers — who will need to change patient behaviors to manage this risk. Second, patient-empowering technologies such as smartphone apps, social media, sensors and monitors are giving individuals more direct control over their data and their health. This change is also leading to the emergence of what the report describes as the “third place” in health care. By shifting the epicenter of the health care system from the hospital and doctor’s office to wherever the patient happens to be, this third place, “health care everywhere” revolution has the potential to bring greater sustainability to health care, but will also cause great disruption to companies not able to adapt their business models accordingly.
Glen Giovannetti, Global Life Sciences Leader for EY, said: “Almost every life sciences company, regardless of their product or offering, will soon be expected to help change behaviors and deliver better health outcomes. Achieving creative disruption to one’s own business model requires bold leadership on the part of companies, but for those willing to invest in understanding what truly motivates patient behavior and applying it to the creation of patient-centric business models, the opportunities and rewards in the health care system of the future will be profound.”
Technology and the “third place” in health care
The Progressions report lists several technological trends that are driving the shift to a “health care everywhere”, including:
- Next-generation social media – Building on the emergence of health-specific social media sites that allow patients, physicians and others to discuss their conditions, side effects and relevant treatment options, new sites such as Treato by First Life Research are going even further by using natural language processing and artificial intelligence to indentify patterns and trends among discussion threads across multiple sites. Still others are empowering patients with information on cost and quality — making the economics of health care increasingly transparent.
- Gamification – Electronic and online games, long viewed as deterrents to healthy behavior, are increasingly being used to promote healthier behaviors such as better diet and weight control and medication adherence. Innovative start ups such as Keas and HealthPrize have developed programs combining the use of games, social media and technology to serve the growing ranks of employers seeking to motivate their workers to adopt healthier behaviors. In another approach to health gamification, Kaiser Permanente’s Garfield Health Care Innovation Center is researching games to help doctors and other medical personnel improve their skills and reduce errors.
- Medicalization of consumer devices – and consumerization of medical devices – The line between everyday objects and medical devices is rapidly blurring. Smartphones and other objects are becoming sensor-embedded and wirelessly connected — creating increasingly empowered patients who are able to generate and monitor their own medical data and interact with health care professionals without having to visit a doctor’s office. Meanwhile, medical devices are becoming smarter, more connected and increasingly under the direct control of patients.
Entering the behavioral change business
To understand and influence patient behavior and successfully extend their business models in new directions, companies will need to leverage insights from the field of behavioral economics, which has made tremendous strides in the past decade at understanding the inherent decision-making biases that often prevent patients from achieving healthy changes.
Guiding principles for translating these insights into action highlighted by EY include:
- Disrupt the business you’re in – Life sciences companies need to find more patient-centric ways of creating, delivering and capturing value. This includes producing products/services with the features that most matter to patients, developing life-long relationships with patients, focusing on the customer experience and earning revenues from multiple sources (e.g., creating data insights rather than just selling drugs or devices).
- Learn from behavioral economics – Successful companies will boost adherence, enable prevention and build brand loyalty by using behavioral economics to understand what truly motivates patients. For example, a recent pilot study by university researchers at University of Pennsylvania and Carnegie Mellon University used lottery-based incentives and other behavioral economics levers to decrease non-adherence among warfarin patients from 36% to just 3-4%. Understanding patient preferences will allow companies to “mass customize” their products and create more personalized offerings. But accounting for individual preferences will also require communicating information in more clear and neutral ways. (e.g. in direct-to-consumer advertising).
Stanley Chang, EY Greater China Life Science Leader, said: “With the digitalization of medical information and the popularity of smartphone/tablet PC, our day-to-day health decisions and behaviors are more closely connected with people, products and service providers together than ever before. For those businesses who are able to analyze the business opportunities and offer value-added services will be the biggest winners in the upcoming years.”
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About EY’s Global Life Sciences Center
EY’s Global Life Sciences Center brings together a worldwide team of professionals to help life sciences companies address their challenges at every stage of development. From the emerging biotech or medtech firm to the well-established, global pharmaceutical company, our industry teams bring deep experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify implications and develop points of view on relevant industry issues. Whether it’s forming innovative alliances, improving operations, new regulations or exploring new markets, we can give you a clear perspective on how to drive value in an increasingly complex, competitive and risk-driven environment. It’s how EY makes a difference.
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