by Matthew Arnold, Principal Analyst
'Tis 'Tis that most festive time of year in digital publishing -- the season of listicles! To celebrate, I've been digging through the archives of our digital health news updates to figure out what to make of the year that was. Here's some key themes and takeaways that jumped out at me:
- AI mania! 2017 was the year that Artificial Intelligence (/machine learning/deep learning/neural networks, etc.) traveled from the dizzying heights of the buzz cycle’s peak to the troughs of the backlash phase (Ask Watson!). The buzz isn’t all froth -- Silicon Valley is betting that the shift to voice-driven, hands-free computing, coupled with AI-powered apps capable of nuanced contextualization and drawing on massive volumes of data, will be the next seismic shift after mobile. But the distance from today’s primitive smart speakers, voice assistants and chatbots to the truly intelligent and voice-responsive jetpacks we’ve been promised is vast, and as ever with technological leaps, our expectations are getting ahead of the exponential growth curve.
Case in point: Watson for Oncology, which went from It Tech to iffy after a breakup with MD Anderson Cancer Center and some bracing reporting took some air out of Big Blue’s tires. No one doubts that this is a miracle technology that will one day revolutionize the practice of medicine, but as Stat reported, Watson “isn’t living up to the lofty expectations IBM created for it.”
Bummer. But all the AI-for-health hype has got healthcare companies thinking about applications for these technologies, tinkering with offerings, lining up partnerships and sponsoring innovation challenges. Which is a good place to be at this stage of a technological revolution.
- Telehealth is on hold – but not for long: One of the big takeaways from CVS’ bid to buy Aetna was that healthcare companies are looking to telehealth and remote care to improve the customer experience and lower the costs of care. Barriers remain in the U.S., notably around state-level reimbursement legislation, but some health systems are trying to get ahead of the game on this front – most recently, Pittsburg’s UPMC, with its $2 billion plan to build 3 “digitally-based specialty hospitals” in partnership with Microsoft. The hospitals, for cancer, heart and transplant, and vision and rehabilitation, will have physical locations at existing UPMC sites but no additional beds. The shift from a consumer-driven, dial-a-random-doctor model of telehealth provision to one centered on value and the patient-provider relationship may be far from complete, but it’s underway – the U.S. Veterans Administration’s telehealth program reduced hospital admissions by 20%, and more than half of California-based Kaiser Permanente’s 110 million patient visits happened online or over the phone last year.
- The point of care is… here and there: Another implication of the rise of telehealth and CVS’ bid to make its retail pharmacy footprint the “front door” of American healthcare – in the future, the point of care will be harder to pin down, demanding that healthcare marketers be in many places at once – on small screens and large, at the doctor’s office, at the hospital, at the pharmacy and the urgent care center, etc. No wonder point of care marketing is red hot right now (no consolation for Outcome Health, which went into a Theranos-esque downward spiral when it emerged that the well-capitalized Chicago startup had been selling advertisers on inflated reach figures).
- DTC TV in the doghouse: If you’ve ever gone out for a glass of holiday cheer with the Manhattan Research team, you’ve probably heard us grousing into our mugs about pharma’s absurdly disproportionate skew toward TV – and its endemic shortchanging of digital – when it comes to consumer-directed promotional spending. This year saw some big pharmas question that misalignment, with Allergan chief Brent Saunders suggesting that the company would shift spend from TV to digital and Merck “significantly decreasing spend on TV.”
Meanwhile, women’s health brands have been shifting spend from TV to social amidst a “backlash against the traditional ads on TV,” and Gilead launched an unusual, almost entirely digital ad campaign centered on social media and dating sites. Consumer ad spend for prescription drugs rose 9% to $5.6 billion in 2016, per Nielsen data, led by Pfizer and BMS, which registered an Opdivo-driven 16% bump in DTC spend, but TV advertising’s share of U.S. ad spending across all industries is projected to fall below 30% by 2021, curbed by growing numbers of younger-skewing “cord-cutters” and “cord-nevers,” expected to comprise upwards of 50 million viewers this year.
- Silicon Valley wants in on healthcare: The launch of Apple’s Heart Study app, a massive real world data study testing whether Apple Watch sensors can reliably detect atrial fibrillation, represents an evolution in health tracker functionality. It also signals a radical departure in business strategy for Apple, whose genius has always been excellence in design and creating pricey luxury products pitched to gadget freaks and the aspirational consumer. In entering the medical side of healthcare – and cutting a deal with Aetna to make the watch available to the insurer’s 23 million members at a steep discount – Apple is moving beyond the consumer purchaser, signaling that it will look to sell its products as health (and possibly medical) devices to healthcare organizations (Fitbit, to be fair, has a head start in this game).
- Apple’s not the only tech giant that sees healthcare as the next frontier. Google is looking to hack the EHR with voice transcription, while Apple and Amazon are exploring healthcare data storage applications for their products (and Amazon is also partnering with EHR giant Cerner).
Meanwhile, Akili Labs is prepping to file with FDA for what would be the first prescription video game, for ADHD in kids, and Samsung is among those testing virtual reality for use in treating pain (other possible applications include PTSD and phobias).
All of this activity suggests that pharmas should be eyeing techs not just as potential partners but also potential competitors – which is probably why we’re seeing pharmas like GSK and Novartis poach top-level digital expertise from major online retailers.
- Christmas comes to Washington for pharmas: Going into 2017, pharma policy nerds expected the new regime in Washington to be generally favorable to their interests, but steeled themselves for the likelihood of having to dodge the occasional out-of-left-field Presidential Tweet blasting them for high prices. There hasn’t been too much of that, apart from Merck’s Ken Frasier getting into it with Trump over the President’s tolerance of white supremacists.
Instead, 2017 was pretty much a pharma lobbyist’s pipe dream, with veteran pharma investor and champion of digital medicine Scott Gottlieb being installed as FDA commissioner and longtime Lilly big Alex Azar taking the helm at Health and Human Services. Gottlieb came in promising to speed treatments to market, including generics and digital therapies. To that end, FDA convened a new digital health unit and established a program that lets pre-certified companies like Apple and J&J fast-track health apps through the approvals process – a kind of TSA Pre-Clearance for digital health -- and issued guidance spelling out the rules around digital decision support tools and other services. And the agency is on track to close out the year with the highest number of drug approvals and the lowest number of marketing enforcement letters against pharmas on record.
That plus massive corporate tax cuts and a U.S. repatriation holiday adds up to a lot of presents under pharma’s tree, and should help offset the cost of relocating all those E.U. lobbyists from London to Amsterdam, where the European Medicines Agency is setting up shop post-Brexit. Love him or hate him, pharma execs are likely to be hoisting a glass and saying “Proost, Mr. Trump!” when they pocket their bonuses next year.
- Prices were the dog that didn’t bark in 2017, but even as attention in the U.S. was focused on wrangling over Obamacare, big things were happening beneath the surface. After a year in which branded drug prices rose an average of nearly 13% in the U.S., Novartis debuted a half-million-dollar CAR-T treatment, while Pfizer took not one but two rounds of hefty price increases and Mylan sustained withering fire for raising prices on the EpiPen exponentially. It was against this backdrop that Anthem dumped Express Scripts, unleashing an avalanche of pent-up frustration with PBMs for failing to hold down drug prices. Express Scripts responded by partnering with several pharmas on a discount program, dubbed InsideRx, offering steep discounts to patients that cannot afford them.
These cost pressures will only intensify amid healthcare policy dysfunction, with millions of Americans expected to lose insurance as a result of changes to the Affordable Care Act. As a result, payers will be increasingly looking to value-based contracting to control costs – already, more than 1 in 4 health plans now have at least one outcomes-based contract with a pharma. In May alone, Merck and UnitedHealth announced a multiyear deal, and PBM Harvard Pilgrim and Astrazeneca inked a pair of deals – one focused on readmissions for patients on Brillinta and another looking at outcomes for adherent patients on Bydureon. And of course, Amazon is waiting in the wings with plans to… well, disrupt all that price pain somehow.
Beyond the U.S., the World Health Organization is working on a global fair pricing framework for prescription drugs. Sanofi pledged to peg US price increases to the medical inflation index, saying “complexity [in the pricing system] is undermining the reputation of an entire industry whose purpose is to make a positive change in patients’ lives.”
With an election year coming up in the U.S., E.U. markets still shaking off the doldrums of austerity and a rising middle class in a number of emerging markets, it’s a safe bet prices will be a major topic for pharma in 2018.