An ageing society that is fortunate to
benefit from an accelerating flow of innovative therapies must be prepared for
an ever-increasing nominal healthcare spending. But can healthcare continue to
take a larger share of the economy without starving other essential services
for a healthy quality of life? This is an especially sensitive question in the
‘New Normal’ average economic environment of low single digit percent growth
rate, when it is difficult to keep the healthcare cost growth rate at less than
twice that. With the US healthcare budget already accounting for a high-teens
percent of GDP, and most other developed nations at least in double digits, it
is no small matter.

The outlook is obvious. , the cost: benefit
justification will not be sustainable for long. Some biopharma managers are
taking the lead, promising to keep price increases of marketed drugs to around
the GDP growth rate. This is a good beginning, but increasingly it is the flow
of new drugs that is driving spending growth in the US. And the pace of
innovation is only accelerating.

Society’s mandate for its healthcare
system, and for the biopharma managers within it, is to deliver sustainable
value that enhances quality of life, not to force repeated compromises and
polarizing choices in allocating individual and collective resources.

Newcomers’ Advantages

Here, the entrenched systems and decision
processes and the resulting cost structures create a dilemma for the
established biopharma players, whose spending on the next generation of
rational drug discovery is not much lower than the previous two generations of
trial-and-error discovery. This is the opening for the non-industry R&D
entrants who do not have the legacy cost structures, nor the mindset to rationalize
pricing on inherently high legacy costs, nor the same regulatory burdens. We
have talked about these non-industry players’ gradual progress before, and are
sure to return to new developments on this front.

These efforts by the non-industry
entrants is just one facet of a multidimensional shift that is underway. A
broad range of new collaborative initiatives seems poised to disrupt the
industry structure even further. Consider these recent developments:

Newcomers’ Advantages

Here, the entrenched
systems and decision processes and the resulting cost structures create a
dilemma for the established biopharma players, whose spending on the next
generation of rational drug discovery is not much lower than the previous two
generations of trial-and-error discovery. This is the opening for the
non-industry R&D entrants who do not have the legacy cost structures, nor
the mindset to rationalize pricing on inherently high legacy costs, nor the
same regulatory burdens. We have talked about these non-industry players’
gradual progress before, and are sure to return to new developments on this
front.

These efforts by the
non-industry entrants is just one facet of a multidimensional shift that is
underway. A broad range of new collaborative initiatives seems poised to
disrupt the industry structure even further. Consider these recent
developments:

• KTH-Royal Institute of Technology in Sweden and three Swedish
  institutes analyzed the transcriptome of 17 major cancer types and identified
  32 potential targets that could be inhibited to slow or kill tumor growth.
  These organizations bring a majority of skills needed to advance these programs
  through the clinic.
• IBM
  Corp. (NYSE:IBM)
  and diabetes research charity JDRF (New York, N.Y.)
  partnered to identify risk factors for Type I diabetes in children by applying
  IBM’s machine learning algorithms to data from JDRF research programs. Both
  have many complementary relationships to take the resulting targets into
  advanced development.
• Patients For Affordable Drugs called on Novartis to set a
  “fair price” in advance of the US approval of its chimeric antigen
  receptor (CAR) T cell therapy to treat pediatric and young adult relapsed or
  refractory B cell ALL, noting that the US taxpayers “bore costs during the
  riskiest development phases” of CAR-T science, investing more than $200m
  “as far back as 1993 when there was no guarantee that the research would
  be successful.” But what if the future breakthroughs reach the patients
  with minimal biopharma engagement?
• Dentacoin, an Ethereum-based token for
  the dental industry, seeks to improve dental care by providing a transparent
  platform for dental care that empowers patients. An increasing number of
  clinicians in the not too distant future will respond just as today’s drivers
  from ride-hailing apps do by active online engagement and being first to tap
  and respond to a patient in search of healthcare.

Internet Of Value Will Force Radical Change

Internet of Value
(IoV), as the next frontier of blockchain is being coined, is poised to build
on the foundation that Internet of Things (IoT) has wrought, and promises to
further transform our lives. The central tenet of IoV is to take the power of
transparent information flow beyond secure transactions to find a superior
alternative to centralized authorities. Such concentration of power has been
essential for responsible functioning of democratic institutions, from banking
regulators to the FDA to doctors, and the healthcare industry players in
between. Imagine how the above four data points may converge: As with the four
Swedish research institutes and the JDRF-IBM collaborations, key resources of
biopharma innovation from target identification to clinical development are
evolving in settings beyond the biopharma monopoly—which are usually less
encumbered by pharma’s legacy decision making lethargy and cost structures. In
these circumstances, associations such as Patients For Affordable Drugs would
no longer need to plead with biopharma for fair pricing, as the interests of
the developers would be aligned with those of patients.

“Therapeutic
options are evolving rapidly and the biopharma industry seems to be short of
breath as companies struggle to catch up”

If such a disruptive
bypassing of entrenched interests seems far-fetched, just consider how many
industries have been displaced just within this decade, from retailing to
transportation. And then fast forward to the Dentacoin model to imagine the
regulatory shift ahead. before clinicians provide their services the same way
as the Uber and Lyft drivers do today.

The US is especially
ripe for this disruption, thanks to the way industry participants successfully
leverage market forces from behind their regulatory veil. Few such veils will
exist as the internet and blockchain level the playing fields, especially for
industries that depend on innovation. Deeper and integrated therapeutic options
are evolving rapidly, and the biopharma industry seems to be short of breath as
companies struggle to catch up. Novartis just announced the appointment of a
Chief Digital Officer who will report to the CEO. Most others have yet to
elevate this role to the same extent. Given the potential for rapid and radical
change across all aspects of healthcare, it is high time they did.This column originally
appeared on Scrip Biopharma Intelligence, September 8th, 2017