Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a patient portal & relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.
It was only a matter of time before healthcare providers would start prescribing mHealth apps as soon as they proved to be as or more effective than prescription drugs. Happtique, a mobile health application store and app management solution startup will launch a trial of mRx. They claim this is the first program to enable doctors to prescribe mHealth apps to patients. mHealth pioneers are calling it an “app formulary” that complements (and competes) with a traditional drug formulary (i.e., the list of approved drugs a clinician can prescribe).
Pharma Execs Exhibiting Behavior Similar to Railroad and Newspaper Execs
What Pharma Can Learn From the Railroads and IBM outlined a grim future for pharma if they don’t take action. A program such as Happtique’s can be either a huge threat or a huge opportunity depending on what actions they take. I have had several meetings with leaders of pharma companies that are eerily reminiscent of meetings I had in the latter half of the 90’s with newspaper executives.
Pharma execs frequently share that when they gather as an industry, they all commiserate with their industry colleagues that their business is, in their words, “effed”. However, when they return to their office “innovation” is little more than small tweaks to existing business models. Like the newspaper execs I observed, the vast majority either seem to not fully believe the consensus about the future or they are simply incapable of marshaling the ability to drive change within their organizations. Whatever the case might be, they are lulled into complacency as they remain hugely profitable and face the reality of dealing with the short-term thinking of Wall Street. I predict most of them will have a final chapter of their career that reads the same as newspaper execs of that era. The chapter title will be “He/she ignored the handwriting on the wall.” I have yet to see a pharma CEO like John Paton who is one of the few newspaper CEOs to fully take advantage of the changed media landscape.
In fairness, John Paton took over a bankrupt newspaper chain so it’s relatively easier to make drastic change when an organization is that close to extinction. A cautionary tale for pharma is how IBM swung from their most profitable year to losing $16 billion in just three years. The lesson is that change lurks for awhile and then hits like a freight train. The question is whether pharma will have to wait until they near death or if they can make bold changes before they are in a death spiral like the newspaper or minicomputer/mainframe companies before them.
Smart Pharma Will Become Players, Not Just Spectators in Industry Disruption
It seems that a day doesn’t go by where I don’t hear about some pharma sponsored “app challenge.” While the challenges are a step in the right direction, they are doing the equivalent of providing polite applause from the stands and giving the gladiators (aka startups) some modest rewards for their efforts. “Here you go startup. Job well done. Take this $5,000 check and run along.” For something that could completely annihilate their industry, most app challenges aren’t rounding error in their marketing budgets. In other words, it’s wildly out of proportion to the threat/opportunity.
When I am asked for my advice by pharma execs regarding how to drive change and innovation, my primary piece of advice is to get out of the stands and onto the playing field. They should put more skin in the game (both money and people), however it need not be at the same scale as their venture arms. In fact, they could probably get involved with ten companies for the cost of one of their venture investments in biotech.
Imagine the learning they could get from the program Happtique is running. One of the benefits of participating in a program like this is pharma would get out of their industry bubble. For the program trial, Happtique is recruiting physician prescribers who treat heart disease, diabetes, and musculoskeletal conditions, as well as physical therapists and trainers to test the technology with health and fitness apps. After a training program, Happtique will track both prescribing processes and patient mRx™ downloads through early summer. “Mobile app prescribing will add an entirely new dimension to my ability to care for patients,” said Steven Magid, M.D. of New York-based Hospital for Special Surgery. “The use of Happtique’s mRx™ will ultimately improve patients’ health.”
Dr. David Shaywitz, comments in Pills Still Matter; So Does Biology — Managing Expectations About Digital Health about the combination of pills and apps likely being the most effective combination. I agree. Another sage industry commentator, John Moore of Chilmark Research, has interesting analysis in a piece mHealth: There When You Need It. He debunks the myth that lower income people won’t engage with mHealth apps, however two key attributes must be present. First, physicians’ reimbursement needs to be aligned with outcomes (and thus the transition from fee-for-service to fee-for-value that is underway). Second, patients consistently engage if there is someone they are interacting with via the tool such as a nurse.
Microsoft’s R&D Experience Instructive for Pharma
I’m not an expert in pharma by any means. However, I can see pattern recognition and have seen how one of the few organizations to spend as much on R&D as pharma (Microsoft) can be both a cautionary tale and a guiding light. Over the last 15 years, Microsoft has spent tens of billions on R&D. I would argue there are only two true stand-alone successes that have emerged out of that massive investment — Xbox and Expedia. What was the common thread between these two businesses? Microsoft physically and culturally separated them from the mothership. In Expedia’s case, it also made the most sense to separate them financially. It wasn’t that the Xbox and Expedia teams had people who were any smarter or harder-working than other Microsoft teams. However, the key difference was they were unshackled and unfettered.
Rather than having a mission of servicing a legacy business they operate as industry natives in their given sectors. This even included choosing to not use Microsoft’s crown jewel — Windows. Every so-called “innovation” I have heard about at pharma is in service of an existing business. For an industry that has made breathtaking bets on drug investment, pharma is remarkably timid when it comes to the changes coming in healthtech. Just as some of the R&D Microsoft spent was to support and grow existing businesses, pursuing some new tactics in service for the legacy business is a logical thing to do. However, if the objective is to be a market leader of an entirely new industry sector, that isn’t the path to success. The “right” path is to venture down some roads where the outcome isn’t clear and recognize there will be dead-ends. It’s really no different than clinical trials except the winners and losers can be determined much more rapidly.
What breakthrough innovation am I missing? I saw Sanofi is selling a glucose meter in Apple stores. That’s a step in the right direction. There must be more given the scale of the pharma industry. I look forward to hearing about them in the comments below.
Strategic Healthcare Investors’ Investment Thesis
What Pharma Can Learn From the Railroads and IBM
Healthcare Disruption: Pharma 3.0 Will Drive Shift from Life Science to HealthTech Investing (Part I of III)