Business model innovation in life sciences

Beyond the pill business models that increase access, activation & adherence.


Business model innovation in life sciences

Up-start digital-first, customer-centric organizations have uprooted entire industries, and the life sciences industry is no exception. Business models based on blockbuster drugs, incremental innovation and physician preference are under pressure. Rising costs, outside digital-first startups/biotechs, and a slow response by incumbents all lead to a growing sense of urgency. 1

Leaders looking to drive innovation should take stock of their current business model and define how they will create, deliver and capture value in the future and ask themselves some simple questions that more often than not don’t have simple answers. 

Product-based organizations that control their entire value chain from R&D to distribution will have different opportunities to innovate than research-intensive organizations that focus on the early stages of the value chain and capture value through royalties. Both types of organizations are faced with increased competition from open business models that attack the cost side – rising development costs – by leveraging external R&D and the revenue side through licensing models. 2

In order to rethink an organization’s logic of creating, delivering and capturing value it’s crucial to first map out the status quo and look beyond once TA or industry to explore other ways of creating, delivering and capturing value.

Example: Understanding platform business models in digital health like Pager – a NYC based start-up connecting patients to HCPs – could inform how you aim to capture value from your solution. 

Pulling the right lever or focusing on the right problem to solve is crucial to ensure that you change your business model for the better. Understanding the current state across the patient funnel is usually a great place to start.

Awareness: Which patient/consumer segments are you targetting? What are the key challenges you’re trying to solve? What is your messaging and multi-channel strategy? 

Access: What type of partnerships can you set-up to increase access? Does the local payer system allow price differentiation? Have you considered outcome-based pricing models?

Adoption: How do you convince a patient/consumer to buy your product or service? What are the key behavioral drivers you are targeting? What is the customer acquisition cost and how does it factor into your business model?

Adherence: What is the current adherence rate? What are the key reasons/behavioral drivers that determine adherence? How could we increase adherence and health outcomes?

Data lakes with petabytes of patient data from clinical trials are a great starting point but moving from unstructured data to actionable insights is easier said than done. Defining a clear portfolio & pipeline strategy ranging from digital therapeutics to patient-centric services requires an organization-wide commitment and effort.

Understanding what potential business models leveraging data could look like and trying to kill them on paper instead of trying to build the solution first is a common-sense strategy that is unfortunately often overlooked.

Example: Glow launched with an interesting data-driven, B2C subscription business model geared towards pregnant women in 2013. They have since pivoted their offering and business model but it still gives us an interesting lens into opportunities and pitfalls.

A new business model can look great on paper but it will inevitably be based on a lot of assumptions: about patient and HCP behavior, about ability and willingness to pay, and about partnership expectations.

Traditional market research can help you answer some of these assumptions but it’s generally slow and expensive and it doesn’t allow for multiple iterations of your business model. Collect invaluable insights that will de-risk and speed-up your project by running multiple digital experiments specifically designed to test key assumptions of your product or service.

Example: Suppose you’re trying to increase awareness about Malaria with business travelers through a partnership with airlines and a joint multi-channel campaign. Assuming that the desired behavior for your target audience is that they get a subscription for anti-malarial drugs you could develop a campaign focused on increasing the perceived severity of Malaria or you could focus on a campaign that highlights the ease of access to anti-malarial drugs. Running Google ads or a Facebook campaign targeted to your customer segment using different variations of both approaches and comparing click-through rates could give you all the information you need.

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