PharmaNewsNo. 18 – Autumn 2015

Patient Services

Turning science into value

Digital Finance

Shattering the boundaries of HR

Interview: The future of Digital Medicine

Digitization in Life Sciences

Accenture Life Sciences

Rethink Reshape Restructure …

for better patient outcomes

For distribution in Austria, Germany and Switzerland only

Editorial

Dear readers,I am delighted to share with you another edition of PharmaNews, the Accenture Newsletter for the pharmaceutical industry.

Rapid change in the biopharmaceutical industry is here to stay, even as it returns to growth. As in many other industries, digital is continuously disrupting how Pharma Companies operate now and in the future. In this edition, we take you on an exploration of how digital is changing the Pharma Industry and the implications for Pharma Companies.

Our first article explores Pharma Companies’ interest in patient services and its implications for their transformation into patient-centric health providers. Next, we summarize the findings of this year’s High Performance Biopharma Study, which underlines the importance of thinking beyond traditional business to build a strong, science-based position in the market.

Turning from strategy to operations, we next explain the implications that digital has for corporate functions. Specifically, we first highlight the CFO’s role in creating agile operations by breaking down functional silos. Then, we discuss the shattering of HR’s traditional boundaries to accommodate the demands of the new era.

In our executive interview, we spoke with Dr. Friedrich von Bohlen und Halbach, co-founder and member of the executive board of dievini Hopp BioTech, a venture capital firm investing in life and health science companies. Dr. von Bohlen und Halbach shares his view on how the digitization of medicine is going to change healthcare, and the impact on industry, payers, providers and regulators. Finally, we present our recent study results quantifying the opportunit-ies offered by digitization in the pharmaceutical industry, the disruptive business estimated at US$100 billion that will be a major growth driver until 2020.

I wish you a pleasant read.

Yours faithfully,

Andrea BrücknerManaging Director

What’s driving this transition is, among other factors, a changing regulatory landscape focusing on outcomes, rapid digitization of healthcare and the growing needs of patients for information and services.

Changing regulatory landscape focusing on patient outcomesDrug approval and pricing and reimbursement negotiations are becoming more data-driven, with the final decision dependent on a proven added benefit for the product seeking reimbursement.

Pharmaceutical firms thus face an additional burden of proving the added value of their particular products while remaining competitive and innovative. With clinical trials becoming not always sufficient to satisfy regulatory bodies, access to and use of real-world patient data is becoming ever more important.

Digitization of healthcareThe global trend toward digitization is also having a very profound impact on the Life Sciences industry. Pharmaceutical firms, in an attempt to reduce costs and keep up with digital trends, are using more information and communication technologies in their daily business. The Internet, smartphones and wearables have created a new Digital Health Market, as well as a new reality.

Patients now have easy access to information about diseases, existing and emerging therapies, products and side effects, even if that information is not always qualified. They are able to monitor and measure their health conditions themselves. At the same time, the healthcare solutions landscape is undergoing rapid change, with new players joining the game almost on a daily basis. With a record-breaking US$390 billion worth of M&A transactions being registered in 2014, and a similar trend being witnessed in 2015, the rate of digitization looks set to continue on its very strong upward trajectory.

Growing needs of patients for information and servicesPatients have a clear need for added support and information on their condition and

risk profile. This observation was recently confirmed by a study conducted by Accenture of 10,000 patients across five countries (Brazil, France, Germany, UK, US) and seven therapeutic areas. One of the key findings was that fewer than one out of five patients are aware of the services available to them. In contrast, nearly eight out of 10 of the patients who use services rate them as “extremely” or “very” valuable.

Patients show frustration across the whole patient journey, especially in the pre-diagnosis phase. With 60 percent of patients ready to disclose their data if they feel their needs will be met more comprehensively (see PharmaNews 17), there is clear opportunity for Pharma Companies and other healthcare providers to work with patients and their data to achieve better patient and health system outcomes along the patient journey.

The challenge will be to bundle the services in such a way that they constitute an integrated, connected and end-to-end health platform that spans the entire treatment spectrum. It should provide services before diagnoses are made and enable patients to continue managing their condition and lifestyle even after formal treatment is finished.

What does this mean for Pharma Companies? How can companies optimize their patient services strategy to achieve their patient-centric vision, while maintaining their competitive advantage in a tumultuous industry?

1. By offering pre-treatment services, pharmaceutical companies can become the “go-to” resource at the start of the patient journey.

2. The best way to make patients aware of services is through their healthcare professionals, making use of key digital information channels.

3. Pharmaceutical companies need to invest as much in the communication and coordination of services as they do in building them.

For further information, please contact Eva Wiedenhöft, eva.wiedenhoeft@accenture.com

Patient Services

Bringing fundamental change to the pharmaceutical operating modelIn the last few years, Pharma Companies have moved from being traditional providers of medical products to become patient-centric healthcare providers capable of providing services beyond just a pill.

In Accenture’s “Biopharmaceutical High Performance Business Study,” we track the long-term performance development of 16 of the largest pure-play biopharma companies. The 10th study, which was released in May, shows improvement, with 2016 expected to mark a return to considerable revenue gains – e.g. 3.2 percent in the group studied. Revenues come in no small part from development pipelines bearing fruit: New Molecular Entities (NMEs) are expected to contribute sales growth in developed markets of US$90 billion through 2019.

Nonetheless, growth will be distributed unevenly. A gap is expected through 2019 of US$65 billion between the revenues the industry anticipates from NMEs and the projected healthcare spend growth in the developed world. As a result, we expect intensified competition and drug shakeouts, as governments and payers seek further cost savings with generics and reimbursement shifts to new products that differentiate clearly on patient health and economic outcomes.

In the midst of this intense competition, six High Performers stand out in the crowd. They are expected to grow at a rate outpacing that of the trailing peer group by a factor of four (4.7 percent vs. 1.1 percent CAGR), with a high proportion from recent and upcoming releases. At the same time, the leaders are seen keeping operating margins at significantly higher levels (33.1 percent vs. 27.7 percent) than their peers, despite being strained by innovation.

What are the High Performers doing differently from their peers? They actively accommodate for the changing pharmaceutical environment. High Performers pursue partnerships, strategic alliances and M&A, tap into external capabilities to complement their own, and drive developments in all areas, ranging from R&D to commercialization.

We have summarized four distinctive capabilities that set them apart from the rest of the industry.

Collaborating to get the best science and breakthrough speed to approval and launchBristol-Myers Squibb (BMS) is cooperating with, among others, Novartis to better leverage their capabilities in immuno-oncology, seeking to expand labels and/or improve efficacy. Roche is partnering with 23andMe to access anonymized Parkinson’s disease patient records. It is doing the same with Foundation Medicine for genetic-screening technology, to enhance the specificity of its early-stage research.

Transforming their organizations by leveraging partnerships, acquisitions, divestitures and asset swapsNovartis’ three-way asset-swapping deal with Eli Lilly and GlaxoSmithKline allowed it to refocus on three core growth segments. Likewise, BMS divested its diabetes business, specializing instead in the cancer immunotherapy field with capabilities acquired in its acquisition of Medarex in 2009.

Developing new business models in response to the consumerization of healthRoche cooperates with Qualcomm, a wireless investor, to delve into remote patient monitoring and chronic-care management. Likewise, Novartis engaged the same company to explore “beyond the pill” technologies.

Mastering flexible pricing and market access, while demonstrating superior outcomes Novo Nordisk is building a better understanding of diabetes and obesity prevention with its “Cities Changing Diabetes” program, a partnership with Houston, Mexico City and Copenhagen. Astellas and BMS used flexible pricing for certain patient groups to secure reimbursement recommendations in the UK.

In conclusion, confidence in the industry is back and expectations are high. Growth is predicted, but polarized between High Performers and the rest. The spend gap places a tangible limit on revenues and there will be new launch winners and losers in increasingly crowded and price-competitive therapeutic areas. Biopharma pure-plays will need to find ways to differentiate themselves not only with superior science, but also with new business models and flexible pricing and market access. Achieving superior patient health and economic outcomes will be the deciding factors in turning science into value.

For further information, please refer to the Accenture Study “Turning Science into Value: Biopharmaceutical High Performance Business Study 2015,” or contact Philip Frey, p.frey@accenture.com

Turning science into value

Delivering on the commercial promise of new science through outcome-driven operating modelsPerformance among top biopharma companies is improving but increasingly polarized. The stock market is showing confidence in the industry again, evident in the valuation of expected future revenues (so-called future value). This indicator is positive for the first time in seven years. Still, these strong prospects hide radical differences between the High Performers, who actively accommodate for the changing realities of the pharmaceutical industry, and their followers. Companies have strong expectations for sales even though developed economies are only slowly recovering – expected sales growth outstrips spend constraints. This, too, will have a profound impact on the divide between leaders and followers.

Shattering the boundaries of HR

HR is more relevant than ever to overall business success – however, in a different way than before.The traditional understanding of HR as “talent administrator” is over. An on-demand talent-to-task matching, regardless of whether these talents are inside or outside the organization, and a broad enablement of people management skills in all parts of the organization represent the new focus. This requires HR to break out of its traditional boundaries and increase its integration across the organization, closely collaborating with functions such as Finance, Marketing, IT, Sales and Corporate Strategy to drive innovation across the business.

HR is more and more seen as a distinctive capability embedded throughout the

organization rather than only as a business function. HR capabilities need to be embedded across the organization. HR executive’s primary job will be to own and manage that broader capability including its digital enablers, requiring in some instances a broad upskilling of today’s HR professionals. To support this “de-centralization” of HR, HR and talent analytics solutions and new HR governance and operating models need to be established.

In order to attract and retain top talent more effectively, HR must increasingly develop a “customer-centric” view and service orientation: adopting customer service mindsets and approaches for the delivery of employee services. This can be accomplished with integrated shared services across functions, where cross-functional capabilities offer integrated, seamless experiences

organized around expectations and needs of employees.

Another significant shift we foresee is that the traditional boundaries separating a company from external people and other organizations will come down. In the future, competitive success will depend on the ability to not just utilize but also actively manage an extended workforce. New, technology-based talent exchanges allow for an on-demand utilization of temporary workers with a wide variety of highly developed skill-sets, thereby enabling the matching of the right talent to the task on a micro-level.

These developments can already be spotted in pioneering industries, such as the high-tech and software industries, and also in R&D departments across various industries. They have already changed or are about to change and see the wide-ranging positive effects on the business: employee engagement and loyalty become stronger, resource forecasting and planning is improved, cycle times are being reduced, and value is driven to the bottom line of the organization.

For further information, please contact Rouven Fuchs, rouven.fuchs@accenture.com

Digital Finance

The CFO as architect of business value Digitization is disrupting the traditional way companies are doing business, managing their value chain and running their operations. The question is whether incumbents are driving the change or if they are outperformed by rivals that are more digitally advanced. What sounds like a threat is rather an opportunity to transform from a pure “pill producer” to a digitally enabled healthcare solution provider, benefiting from new revenue streams and cost optimization.

The digital revolution has enabled the emergence of new business models. For instance, Philips and salesforce.com partnered to create a cloud-based health platform that connects Magnetic Resonance Imaging (MRI) scanners and heart monitors with the patient’s computer in order to facilitate the collaboration between doctors and patients at home. Digitization also changes companies’ value chain. Scientific collaboration platforms and crowdsourcing boost innovations in the R&D department, while analytics-driven supply chains help to lower costs.

But how does the digital revolution impact Finance? Digital technologies enable finance organizations to do things that they never could before. End-to-end multi-dimensional data access is enabling visibility into enterprise and customer data. The finance organization evolves from an expense-control, spreadsheet-driven reporting center into a predictive analytics powerhouse that creates valuable insights for the whole value chain. As a result of this, the CFO becomes more influential within the business. He will be the CEO’s co-pilot in defining and implementing innovative, forward-looking strategies.

Tomorrow’s Digital Finance organization shifts traditional accounting and data processing activities to cross-functional integrated business-services models that use robotic process automation. Analytics competency

centers provide real-time management reports via self-service tools, enabling finance professionals to analyze immediately the financial impact and risks of operational events. Instead of reporting past data, finance focuses on predicting future economic and market data.

But digital transformation is hard work because it involves aligning the organization, people, processes and technologies behind it. This is a costly and time-consuming journey which needs a CFO as value architect.

For further information, please refer to the Accenture studies “High Performance Finance: The CFO as an architect of business value” and “Finance 2020: Death by digital,” or contact Christian Campagna, christian.campagna@accenture.com

Dr. Friedrich von Bohlen und Halbach is a co-founder and managing director of dievini Hopp BioTech holding, a venture capital firm investing in companies in the life and health sciences industry.

How is the digitization of medicine going to change the healthcare and specifically the Pharma Industry? Two technologies are bringing profound changes to medicine: molecular-level patient data and digitization of medicine.Understanding the genome and other “-omes” transforms medicine from an observation-based, statistical field, to truly evidence-based, individual “Precision Medicine.” We are about to understand the dynamic pattern of “variants,” how they define and drive a disease. This will give us precise targets for treatment. It is similar to how GPS is replacing maps. With this, the role of digital becomes evident. “Omes” can only be read, stored, integrated and understood with structured databases and powerful algorithms that can cope with the differing natures of clinical, biologic and pharmacologic information.

Digital also leads to democratization of medicine. There is no reason why, in the future, smartphones couldn’t track a person’s health, clinical, treatment and lifestyle information. Independent of EMR (Electronic Medical Record) systems, patients will have their own medical data on their smartphones to help doctors learn quickly about the patient’s medical history. Patients will become owners of their own data – just as they should be. This will change everything.

How will drug discovery and development in particular be affected?Drug discovery and development will shift from “one disease – one drug” to “individual molecular patterns – individual drug combinations”: Drugs will be developed towards a molecular constellation, allowing better stratification of study patients and smaller studies with much higher success rates in shorter time frames.

This is likely to lead to higher response rates – but in much smaller patient cohorts. What will this mean for future prices, healthcare spending and drug affordability?Smaller and shorter studies with higher success rates lead to longer patent protection, significantly reducing drug prices. On the other hand, analytics-based molecular diagnostics

will lead to a much greater use of combination drugs, thereby increasing treatment costs. The strongest impact on the system, however, will come from significantly improved overall survival expectancies: the cost per treatment cycle will be lower than today, but there will be many more treatment cycles over a lifetime. This is not so much a challenge for the pharmaceutical industry as it is for healthcare systems and society.

Recent technology developments will increas-ingly enable Precision Medicine with the aim to find the best treatment for each patient. What challenges do you associate with this development? I see three main challenges:First: Quality assurance of the data, including training and education of all players in the system.Any analysis of data is only as good as the input it is based on. Analytics used for Precision Medicine, as in all other systems, may be subject to human error. It is indeed the single largest risk factor. Sequencers read DNA – but that DNA needs to be from the right cell(s) and/or tissue(s). That’s why the molecular-based workflows must be subjected to quality guidelines at every step. This will, in my view, be pathologists’ key role: They must become “quality guardians.” Similarly, it will be critical that users, pathologists and doctors who are involved in this process receive ample training, support and education.

Second: Future roles and readiness of regulators and payers.With molecular profiling come individual and dynamic combination therapies. Regulators will have to find ways to approve these therapies even when their uniqueness means

there are too few patients for studies to be conclusive with classical statistical approaches. Approval of the underlying process will become more important than that of the combination itself. Today, this would be considered “off-label use,” which payers will need to accept for reimbursement. This also leads to novel ways to look at pricing: combination does not necessarily imply price stacking. The principles of reimbursement will need to change, leading to different, dynamic pricing models.

Third: The shift from treatment of life-threatening diseases, e.g. cancer, to chronic disease management, e.g. of dementia. When life-threatening diseases can be treated effectively, age-related diseases will become more prevalent. This will shift and increase the costs of healthcare systems significantly. In the long term, dementia and other age-related diseases will be treatable and curable, just like cancer. This will prolong life expectancies with overall higher costs for the system.

What capabilities (e.g. bioinformatics, genome sequencing, data-analytics) will a Life Sciences company need to master the digitization of medicine successfully?Modern medicine will be a combination of diagnostics and therapy, with patients’ molecular information and analytics taking center stage. Life Sciences companies require the support of IT companies which have to provide:- database systems to capture and store

enormous amounts of patient molecular data, also for longitudinal translational diagnosis and therapy support

- analytics capable of merging and interpreting text, image, biology and chemistry data to arrive at the right diagnosis and therapy

- integration platforms to connect EMR and other patient-related systems as, e.g., longitudinal data

- privacy systems to manage access to data

At the center will be a reference system of mankind’s combined biomedical knowledge. This is mainly the primary literature, allowing for the best possible interpretation of an individual molecular-diagnostic pattern.

Dr. Friedrich von Bohlen und Halbach on the future of Digital Medicine

Digitization of medicine and its impact on healthcare and the Pharma Industry

ImprintPublisher:Accenture GmbHCampus Kronberg 161476 KronbergGermany

Editor in chief:Philip Freyp.frey@accenture.com

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Digitization in Life Sciences

Winning or losing in the digital transformation of Life SciencesPharmaceutical companies that stand by and watch as digitization transforms the Life Sciences industry will pay a high price. A new Accenture study shows that embracing digital spells the difference between losing approximately 10 percent of profitability, or gaining more than of 60 percent in the next five years. In 2020, the global potential for disruptive business models exceeds US$100 billion, fueling over one-third of growth in the pharmaceutical market.

Mass digitization is not a far-off vision for the future. It is right at the doorstep, and its potential in the short term is quantifiable. In an extensive research project, Accenture identified the opportunities that digital presents for the pharmaceutical industry in the upcoming five years.

For a typical top 25 pharmaceutical company (measured by global sales), this includes profit improvement potential of up to 27 percent through partial digitization across the value chain. Approximately three-quarters of this is fueled by digitizing operations, and one-quarter from digitizing the customer experience.

More importantly, however, are the developments outside of the classical pharmaceutical business models. Global successful startups have shown it in various industries: Digital’s real transforming force lies in the disruption of established businesses and enabling of new business models. That means watching from the sidelines is not an option – there is no time in the digital age to catch up.

For a pharmaceutical company, such negligence could cost up to 10 percent of current profitability in the next five years. Worse yet, it means missing out on the opportunity to share in the US$100 billion market expected from these new business models by 2020. By taking action instead – expanding past partial digitization to new, digitally enabled business models like Personalized Healthcare and Predictive Health – fast movers can expect profitability improvement of more than 60 percent.

Digital is going to have a big impact on the industry. To be part of the transformation, pharmaceutical companies need to:

• Provide clear guidance from the top. Every executive needs to make digital a priority.

• Address the market as a whole – seek to create value for the entire health ecosystem.

• Look for market growth, but think disruptively and build new markets and revenue streams.

• Learn, share and partner to create new business opportunities.

• Foster a digital culture and build required skills. Attract talent that challenges the status quo.

Positioning to win in the outcomes-driven Life Sciences markets of the future will be challenging. But it’s possible, and now is the right time to get started.

Data cited here is based on Accenture research on digitization in Life Sciences, which will be published shortly. For more information, please contact Jan Ising, jan.ising@accenture.com

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 358,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$31.0 billion for the fiscal year ended Aug. 31, 2015. Its home page is www.accenture.com.

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